For institutional investors and allocators, when it comes to selecting an insurance-linked securities (ILS) manager the decision needs to be based on more than just performance, with a range of factors also critical to consider, according to Lorenzo Volpi, Deputy CEO of Leadenhall Capital Partners.Speaking to Artemis around the 2025 Monte Carlo Rendez-Vous de Septembre (RVS) reinsurance industry event, the Leadenhall Capital Partners Deputy CEO explained that operational factors, alignment issues and the track record of the team should also be taken into account in ILS manager selection.As the insurance-linked securities (ILS) market grows and expands its breadth across the range of reinsurance-linked investment opportunities available, the activity of ILS manager selection and due-diligence becomes increasingly important for investors seeking to make an allocation to the asset class.During the interview, Volpi explained some of the important considerations investors need to focus on.

Saying, “Assuming good performance as a baseline, investors evaluating deployment opportunities into the ILS market should look beyond headline returns and focus on several critical factors.” He believes the stability and experience of investment teams at ILS managers is one area for investor focus, highlighting that, “A proven, cohesive investment team with a long track record across multiple market cycles is essential.Stability not only signals organisational strength but also reflects an ability to navigate diverse loss environments, changing pricing cycles and evolving market dynamics.” Alongside this, it’s also important to look at independence and the alignment of that team’s underwriting with their institutional backing and strategic commitment to the space.Volpi told us, “The independence of the underwriting team is a key safeguard against conflicts of interest.

A clear governance structure that ensure underwriting decisions are made in the best interests of fund investors, but with the presence of a large (re)insurance institution in the ownership structure who considers the ILS outfit as strategic, is also very valuable for investors both in terms of governance and of support when the needs arises.“Large, well capitalised backers can provide governance oversight, risk management infrastructure and financial support during periods of market stress, which reinforces investor confidence.” Transparency is a hot topic in the ILS market, with participants calling for continuous improvement in this area and Volpi highlighted that this includes for the investors that are seeking a partner for their allocations to the asset class.“In assessing performance, investors must go deeper than nominal returns to understand the risks assumed to achieve those outcomes.

A hard market combined with a favourable loss environment can temporarily mask poor underwriting discipline, resulting in attractive but unsustainable returns.Diligence on exposure management, risk appetite and portfolio construction is therefore crucial,” he explained.Adding that, “The best managers will demonstrate a focus on underwriting quality and risk-adjusted returns over the medium to long term, rather than chasing near-term performance.

Investors should seek out managers with disciplined underwriting philosophies, robust scenario analysis and conservative reserving practices designed to weather market cycles.” In addition, operational factors must also be assessed and be a point of strong consideration for investors seeking an ILS manager to look after their investments into insurance-linked securities.Volpi stated during our interview that, “Beyond underwriting, operational strength, including collateral management, claims handling oversight and legal structuring, has become increasingly important in a more complex ILS market.“Managers who invest in risk analytics, data science, and operational resilience will be better equipped to deliver consistency over time.

“Ultimately, investors should view manager selection not just as a search for performance, but as a due diligence exercise in governance, risk culture and long-term alignment.“The managers who combine underwriting independence with institutional strength, operational sophistication, and disciplined execution will be best positioned to deliver stable returns in a market that is evolving rapidly.” ..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.