Coca-Cola pension fund’s ILS allocation drops 9% to $330 million in 2021

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Global food and beverage giant Coca Cola Company’s pension fund allocation to insurance-linked securities (ILS) declined in 2021, falling 9%, which we believe is largely due to the impacts of losses due to natural disasters throughout the year.

The Coca Cola Pension Fund’s ILS investments are one of the easier to track insurance-like securities (ILS) pension funds and pension allocations have fluctuated in recent years, l disaster loss activity being one of the expected drivers.

The Coca-Cola Company’s corporate pension fund has had an allocation in insurance securities (ILS) for several years.

At its peak, it was equivalent to about 5% of company pension plan assets, demonstrating the company’s appetite for exposure to reinsurance-related investments.

Coca-Cola called the ILS asset class attractive because it represents a diverse source of investment returns and Coca-Cola focused on the uncorrelated nature of ILS or reinsurance assets, as well as the fact that they can be similar to stocks in their flow of returns. .

The Coca Cola US Pension Fund has made allocations to a number of ILS funds, we understand. These included allocation to London-based specialist ILS fund manager Securis Investment Partners, but we cannot be certain at this time with whom in ILS the pension remains invested. We understand that Coca Cola has had both catastrophe bond and private ILS fund allocations in its time.

Coca-Cola’s pension allocation to insurance stocks (ILS) had been affected by catastrophe losses in recent years.

The losses suffered by the ILS and the reinsurance market in 2017 and 2018 led to a reduction in the ILS allocation over the next few years. We believe this could also be the case after 2021.

By the end of 2015, the ILS allocation had reached $544 million, but then hit a new high of around $600 million invested in ILS by the end of 2016.

The Coca Cola pension fund’s ILS allocation then declined to $564 million at the end of 2017, which was likely due to disaster-related losses that year.

The ILS allocation declined more rapidly in 2018, with the value of the ILS allocation dropping around 30%, ending the year at just $403 million, likely due to continued growth from 2017 hurricanes, as well as new loss activity from 2018.

2019 saw another contraction, with Coca Cola announcing that its pension fund’s ILS allocation was 14% lower at $346 million at the end of that year.

2020 then saw the ILS allocation return to growth, ending the year at $362 million, an increase of just under 5%.

We assumed that 2020 growth was driven by ILS market returns generated by allocation, rather than by new investments being made.

That appears to have reversed through 2021, as the Coca Cola pension’s ILS allocation fell 9% to $330 million at the end of last year.

As a result, the pension’s ILS fund allocation fell to around 3.7% of assets, from 4.2% the previous year.

With the reinsurance rate environment having improved significantly for 2022, it will be interesting to see a year from now whether Coca Cola chooses to deploy more capital into the ILS market, which could offset the contraction seen in recent years.

The Coca Cola Company Pension is just one of many pension funds and top ILS investors we track in our directories here.

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