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At the annual reinsurance rendezvous in Monte Carlo, SCOR Global Investments SE in mid-September was celebrating the third anniversary of its insurance-linked securities fund, ATROPOS. SNL Financial met with Vincent Prabis, the manager of the fund and head of ILS strategies, to talk about the components of ATROPOS, where he thinks the ILS market is heading and his concerns about liquidity in the market.
Below is an edited transcript of the conversation.
SNL Financial: Tell us about the ATROPOS fund.
Vincent Prabis: SCOR has been participating in and using ILS for a very long time. It knows ILS very well and it has wanted to offer ILS investment and access to third-party investors for quite a long time. We wanted to offer access to ILS but with the view of the traditional reinsurer. What changed four to five years ago was the mechanism that allows us to provide collateralized capacity on reinsurance retrocession contracts and industry-loss warranties.
When that became available, we launched ATROPOS, our first ILS fund, with the goal of offering a diversified portfolio of risk to third parties. It's a monthly liquidity fund with a mix of cat bonds and what we would call OTC contracts -- [industry loss warranties], reinsurance, retrocession. We are not the underwriting arm of SCOR and not part of SCOR P & C; we are part of SCOR Global Investments. That was a very important decision initially, and it is important for investors to understand that there is no conflict of interest in what we do.
The SCOR group has invested heavily in the fund. Today we are managing $460 million across four funds, and $200 million comes from the SCOR group. It's not capacity we took away from P & C. It's money that comes from the asset side, which is a pretty good show of faith. SCOR group is basically doubling its risk from the liability side on the asset side, because it wants those projects to be successful. We have been fairly successful in our first three years of raising third-party capital, and with that landmark we seem to be able to access larger institutional investors.
Looking to the broader market,...