ILS Fund
An investment fund that deploys capital into insurance-linked securities, including cat bonds, collateralised reinsurance, and sidecars.
An ILS fund is an investment vehicle that pools capital from institutional investors (pension funds, endowments, sovereign wealth funds, family offices) to invest in insurance-linked securities. ILS funds may focus on liquid cat bonds, illiquid collateralised reinsurance, or a combination.
Major dedicated ILS fund managers include Nephila Capital (now part of Gallagher Re), Twelve Capital, LGT ILS Partners, Securis Investment Partners, Leadenhall Capital, and Schroder Secquaero. Combined, the dedicated ILS fund sector manages approximately $100bn+ of assets.
ILS funds earn returns from two sources: the risk premium (spread above risk-free) and the yield on collateral. In the current rate environment, total expected returns from diversified ILS funds have risen significantly.
Example usage
“Twelve Capital's ILS fund returned 14.2% in 2024, benefiting from elevated cat bond spreads and a below-average North Atlantic hurricane season.”
Frequently asked questions
What is ILS Fund?
An investment fund that deploys capital into insurance-linked securities, including cat bonds, collateralised reinsurance, and sidecars. An ILS fund is an investment vehicle that pools capital from institutional investors (pension funds, endowments, sovereign wealth funds, family offices) to invest in insurance-linked securities. ILS funds may focus on liquid cat bonds, illiquid collateralised reinsurance, or a combination.
How is ILS Fund used in practice?
Twelve Capital's ILS fund returned 14.2% in 2024, benefiting from elevated cat bond spreads and a below-average North Atlantic hurricane season.
More Insurance-Linked Securities terms