Asia offers many opportunities for the ILS market
Asia offers many opportunities for the ILS market, according to Vittorio Sangiorgio, who serves as Head of Investment Solutions at the specialist catastrophe bond and insurance-linked securities (ILS) investment manager Twelve Securis. The firm continues to expand its footprint across the region, and Sangiorgio highlighted a distinct opportunity to attract institutional capital and broaden distribution for catastrophe bonds in Asia.
Sangiorgio outlined the key markets where the firm sees the greatest potential. The region includes South Korea, Japan, Taiwan, Hong Kong, Singapore, and Australia. While Australia is already a significant market for Twelve Securis, with mature investors who understand the asset class, Sangiorgio noted that interest is growing in Japan, particularly for catastrophe bonds. The Japanese market has been hesitant toward private ILS structures due to experiences in 2017, but that sentiment is shifting.
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He also pointed to Singapore and Hong Kong as areas of interest, specifically regarding family offices. Because this is a newer asset class for these investors, allocations are currently small, but there is a clear educational path to follow. To drive further ILS penetration in Taiwan, Twelve Securis recently established two new distribution partnerships with Concord Capital Management and Uni-President. Concord serves as a sub-distributor for a broad range of products, including multi-strategies combining insurance bonds, equities, fixed income, and mixed ILS. Uni-President provides a dedicated offering for a bespoke Cat Bond product.
When asked about the current sentiment among Taiwanese institutional investors, Sangiorgio described the market as having two distinct types of clients. Large institutional investors already have allocations to ILS, while wealth management channels remain at a younger stage of development. The complexity and high barrier to entry have limited commercial activity from ILS managers, but the potential is there. Sangiorgio emphasized that investors need time to familiarize themselves with the asset class, and the partnerships aim to provide that access.
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A fragmented market with high potential
Comparing Asia to European markets, Sangiorgio noted that Europe is fairly saturated with large, established players. Asia, in contrast, is fragmented and offers much lower penetration of ILS. Some countries have barely been explored in the ILS space. Sangiorgio believes the strategy for the market should be to be the first to reach clients and offer understandable products that provide an appealing complement to existing asset allocations. This approach minimizes negative surprises for investors who are less familiar with the sector.
To capitalize on these opportunities, Sangiorgio emphasized the importance of the region. Asian investors value partnering with trusted brands and companies with strong expertise in their respective fields. There is also heavy geopolitical uncertainty, which makes cat bonds attractive from a relative perspective. Even though spreads have tightened and corrected over the past few years, the asset class still offers very attractive returns compared to other options, given traditional fixed income markets have extremely tight spreads while equity valuations look full.
