Schroders Surpasses $5 Billion in Insurance-Linked Securities Assets Under Management... "Rising Demand for Cat Bonds"

Schroder Investment Management announced on the 15th that the assets under management (AUM) of Schroder Capital, its private asset specialist brand, in insurance-linked securities (ILS) have surpassed $5 billion (approximately 6.75 trillion KRW). This represents a 14% growth compared to $4.4 billion at the end of March last year.

ILS are a type of alternative investment asset created to transfer insurers' risks to the capital markets, with catastrophe bonds (Cat bonds) accounting for the majority of the ILS market. Cat bonds are bonds structured so that insurers and reinsurers sell products related to natural disasters and then distribute the associated risks to investors in the capital markets.

As unexpected disasters increase due to climate change, insurers' potential losses grow, leading to higher cat bond yields and an increase in bond issuance volume. Consequently, the expected returns on cat bonds are rising, with the ‘Swiss Re Global Cat Bond Performance Index,’ a representative yield indicator of the cat bond market, recording a 19.69% return in 2023, the highest in the past 20 years.

The Schroder Capital ILS team manages products such as the ‘GAIA Cat Bond,’ one of the world’s largest open-ended UCITS cat bond funds, targeting global investors. The AUM of this product reaches $2.7 billion (approximately 3.65 trillion KRW). The ILS team consists of 37 investment professionals and has delivered industry-leading performance for about 15 years.

Stefan Ruoff, Head of Schroder Capital’s ILS division, stated, "Diversifying portfolios is crucial to reduce concerns about inflation and navigate the prolonged high-interest-rate environment. Investors are positive about adding assets like ILS, which are less affected by the global economy, to their portfolios."

He emphasized, "The demand for insurance risk transfer remains high, maintaining both attractive yields and risk premiums, making it a highly appealing investment."