Aspen Capital Partners (ACP), a division of Bermuda-based Aspen Insurance Holdings Limited, increased its capital under management to $917.7 million in 2021, earning contributed total fee income of $61.4 million, compared with $680.8 million and $32.6 million, respectively, in 2020.
The dedicated unit houses Aspen Capital Markets (ACM), which offers investors a broad product suite, including actively-managed fund products and fully aligned sidecar investments. It also provides outwards reinsurance sources and services capital from the traditional reinsurance markets.
Mark Cloutier, group executive chairman and CEO of Aspen described Aspen Capital Partners as a core part of the firm’s global growth and innovation strategy. Regarding the unit’s 2021 growth, he said: “This is particularly pleasing, given the challenging renewal environment that many capital market vehicles have experienced recently, and it reflects the sophistication of our solutions across both property and casualty lines of business, the depth of our investor relationships and our established track record.”
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Brian Tobben (pictured) was appointed CEO of Aspen Capital Partners in May 2021, after serving as CEO for Aspen Capital Markets for eight years prior. Over that period, Tobben has seen “a lot of change” in the capital management space and how investors are looking to allocate assets across the full property and casualty (P&C) insurance landscape.
“Prior to any losses, it’s difficult for investors to fully understand the risks and rewards of the different approaches that are used to manage P&C portfolios,” said Tobben. “Nobody likes taking losses, but if losses do occur, this can give investors better perspective on the different [capital management] strategies and the behavior of asset managers and sponsors.”
Historically, Aspen Capital Markets was almost solely focused on property catastrophe reinsurance business, hence its strength in insurance-linked securities (ILS) structures like side sidecars, issuing natural catastrophe (CAT) bonds, and funds. In the past decade, there’s been a significant uptick in the frequency and severity of natural catastrophe losses, forcing investors to re-evaluate their support for alternative capital.
“The loss experience over the last few years has helped investors to better differentiate between the strategies they can invest in, and, as a result, good managers and well-structured transactions have seen growth in capital. Conversely, others have seen reductions in the capital support that they receive from investors,” Tobben told Insurance Business.
“At the same time, the loss activity and the learnings provided have triggered a natural evolution and maturity of the investment market. On the investor side, there’s a varying range of comprehension around the ILS asset class. Following losses, we’ve seen some rotation among investors in the ILS sector, which I think makes the market much more resilient.”
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In recent years, investors’ risk appetites have also changed. In the ILS market, many investors are now interested in structures linked to specialty and casualty lines of insurance business. That’s a big change from 10-years-ago, when ILS was “really a proxy for the natural catastrophe market,” according to Tobben.
“At times, these are different classes of business and different structures than we’ve typically seen in the ILS space,” he said. “But from our perspective at Aspen, we think tapping into this capacity really is key for insurers and reinsurers in terms of remaining competitive in this space in the future.
“That segment of the market is still relatively small compared to the catastrophe ILS market, but we really believe that developing investor support in these non-catastrophe segments will give us a competitive advantage, and it will allow us to offer a better value proposition to our brokers, our insureds, and our cedents on the reinsurance side.”
Aspen Capital Partners is on track for continued growth in 2022. Moving forward, the unit’s focus is on working with trading partners and investors to bring new and innovative capital markets solutions to the market, while also benefiting from a diversified portfolio and strong fee income.