The Healthcare of Ontario Pension Plan (HOOPP), a large Canadian institutional retirement fund, has expanded its investment allocation to insurance-linked securities (ILS) by approximately 39% in 2024, lifting its investments in the ILS market to approximately US $1.32 billion.
The $123 billion pension fund has been allocating to insurance-linked securities (ILS), including catastrophe bonds and private reinsurance opportunities, since late 2019.The ILS allocations are made via dedicated ILS manager strategies, as well as some direct reinsurance arrangements, we understand.
A year ago, HOOPP’s annual report showed that the pensions’ insurance and reinsurance investment fund allocations had reached C$1.366 billion (US $1bn) at the end of 2023, which was a 40% increase on the prior year’s C$973 million (approx. US $718.7m), which was in turn up from C$721 million (approx. US $575m) at the end of 2021.
Now, at Dec 31 2024, the Canadian pension plan has reported that its ILS allocation reached C$1.898 billion, an increase of 39%.
Which, at the reporting date, converted to roughly US $1.32 billion, a new high for the pension fund’s activities in the ILS market.
Growth of the ILS allocation at HOOPP has continued to outpace the overall pension fund size, which grew 9% from C$112.6 billion to C$123 billion in 2024.
Which means that, as a share of the pension plan’s overall assets, ILS investments have grown to 1.54% of the fund as of the end of 2024, up from 1.2% a year earlier.
HOOPP highlighted that its insurance-linked securities (ILS) investments delivered strong performance in 2024, being a stand-out within its other capital market strategies bucket, in particular as part of the uncorrelated alternatives.
“The alternative investment programs have historically been a strength at HOOPP and benefit the Fund by generating positive returns that have low correlation to traditional asset classes such as stocks and bonds,” HOOPP said.
Adding, “The credit portfolio is included as part of the other capital market strategies in 2024, resulting in a total net investment income of $915 million. The 2024 returns are attributed to strong performance of credit and insurance-linked securities portfolios and positive performance within the foreign exchange overlay program, as HOOPP benefited from exposure to a rising U.S. dollar.”
HOOPP’s 10-year annualised return sat at 7.5% at the end of last year, while the 2024 return for the pension fund was 9.7%.
Given how the cat bond and ILS market performed in 2024, it’s safe to assume HOOPP’s ILS investment allocation will have outperformed for the fund.
The Healthcare of Ontario Pension Plan (HOOPP) began allocating to insurance-linked securities (ILS) in late 2019, largely via insurance-linked funds, as well as some direct investments into other reinsurance-related securities.
HOOPP then hired Bernard Van der Stichele in 2020, an experienced ILS and reinsurance sector executive, as a Portfolio Manager for its Insurance-linked Securities allocation.
The steady growth in ILS allocation size has clearly benefited the pension fund, as a welcome diversifier, especially over the last two years of very strong returns.
The Healthcare of Ontario Pension Plan (HOOPP) is just one of the numerous pension fund and major ILS investors we track in our directories here.
