Euler ILS Partners is preparing to launch two new strategies in specialty and life ILS in 2025 and a third as-yet undisclosed new strand next year, CEO Niklaus Hilti has told Insurance Insider ILS.
The specialty ILS fund is pencilled to launch in June, and will build on the firm’s past participations in man-made property catastrophe risks in the specialty space, with cyber as a component of the coverage.
Hilti said the team has written cyber since 2016, across a mix of collateralised reinsurance and 144A securitisations.
He said: “We believe the cyber market is still not diversified enough to structure a standalone cyber product, but cyber risks can be sourced through a more widely-focused man-made specialty property catastrophe team.”
This would let Euler be selective and grow a diversified portfolio of risks as the cyber market grows, by pairing the cyber investment with man-made catastrophe transactions.
The cyber coverage involved will be “typical cyber risks covered under cat bonds,” Hilti said.
“We want to be selective and build a portfolio. However, we believe a standalone cyber portfolio is not a clever idea at the moment.”
In its prior iteration as Credit Suisse ILS, the manager participated in man-made catastrophe specialty risks from around 2004 to 2012. This included the period following the Deepwater Horizon rig explosion in the Gulf of Mexico, which caused the largest marine oil spill in history. The firm also backed Lloyd’s syndicate Arcus as a way of accessing specialty risks, though this was sold in late 2020.
Target areas included specialty risks in aviation, energy (onshore and offshore), marine and space, with the focus on short-tail lines, where the risk is “relatively binary,” Hilti noted.
The new strategy will build on and continue these elements, and also offer coverage directly to corporates, enabling them to hedge out some cyber risks in the form of a structured derivative product.
The direct-to-corporate insurance element of the strategy is being shaped as a structured derivative in its first iteration, to enable it to be flexible.
The coverage will be “tailor-made,” for example, for a cloud provider it will be based on cloud outage conditions.
Life plans
The new life ILS product, slated for a Q4 launch, will focus on the financing and hedging of life portfolio buyouts.
“In life buyout transactions – these are very, very big companies – there is a need for some financing and certain risk transfer,” Hilti said.
This would include hedging biometric risk, as well as capital relief transactions for aggregating entities that buy out portfolios of life insurers.
Underlying performance in the life buyout market had gone “incredibly well, especially in the low interest environment,” he said.
The focus of the new strategy will be unrelated to typical life ILS that has tended to focus on life settlements and life settlements financing, and value-in-force mortality/ longevity transactions, Hilti added.
“We are hoping to bring back innovation and new product into the market.”
Firms participating in the more conventional-type life ILS transactions were hit by losses in 2023 estimated at around $700mn across the segment.
Beyond buyout
The moves represent what was an ongoing ambition to expand the ILS platform, which was “significantly delayed,” by the takeover of Credit Suisse by UBS Group in 2023.
Hilti completed a buyout of the business from UBS on 1 October, with all of the core ILS team moving with it to new Zurich offices, and the firm was renamed Euler ILS Partners.
The team remains in post at Bernina Re in Bermuda, including Will Haddrell, chief underwriting officer, and CEO Michael Dennis.
Benjamin Baltesar continues as head of underwriting and pricing at the Zurich platform, including for the firm’s cat bond fund.
“This was a relatively simple separation, because the firm was since 2015 already set up as a standalone legal entity and had limited interactions with the Credit Suisse group,” Hilti said.
The firm is now recruiting for cyber underwriting and structuring expertise as it builds out the new product, and in due course on the life side, will source additional personnel in underwriting and structuring, and actuarial.