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Tangency Capital Ltd., an investment manager in the insurance-linked securities (ILS) space with a focus on reinsurance quota share instruments, has expanded its assets under management to $2.3 billion in 2025 and is seeing continued demand from its reinsurer counterparts, according to COO Dominik Hagedorn.
The increase in assets under management amounts to roughly $500 million in capital growth, due to new commitments raised and appreciation in values, over the second half of 2024, as investors continue to see the aligned quota share model as an attractive allocation.
Tangency Capital has grown quickly for a bespoke offering in the ILS sector, having managed $600 million in assets back at the end of 2022, which rose to $1.4 billion by January 2024, then reached $1.8 billion as of the middle of last year.
Tangency Capital has grown quickly for a bespoke offering in the ILS sector, having managed $600 million in assets back at the end of 2022, which rose to $1.4 billion by January 2024, then reached $1.8 billion as of the middle of last year.
Now, with an enlarged $2.3 billion of capital to deploy into quota share reinsurance investments in 2025, Tangency Capital has been growing its stature in that marketplace.
Dominik Hagedorn, COO of Tangency Capital Ltd., spoke with Artemis to provide his outlook.
On the counterparts Tangency works with, Hagedorn said, “Reinsurers appreciate sophisticated and stable quota share capital to back their portfolios and we see continued growth in the demand for our capital.”
While on the investor side he added, “As investors gain familiarity with the ILS asset class, a growing number of investors recognize the potential benefits of alignment, diversification and capital efficiency, which are difficult to match by conventional ILS strategies.”
Speaking about the quota share segment of the reinsurance market, Hagedorn believes this remains attractively priced, even while other instruments such as catastrophe bonds and industry-loss warranties (ILWs) begin to soften.
He explained, “We continue to view this market as attractive. Private reinsurance pricing is generally holding up better than the cat bond space and other smaller market segments with lower barriers to entry.”
Asked whether he expects the quota share capital deployment opportunity set to keep expanding, Hagedorn told us, “Yes, we expect to see a growing opportunity set, especially against the backdrop of some reinsurer balance sheets having eroded a lot of their 2025 net catastrophe treaty premium already. We believe some reinsurers are one small to medium sized event away from their catastrophe reinsurance portfolio being unprofitable for 2025. This makes underwriting discipline even more important.
“We select portfolio companies based on a wide range of considerations. The data repository that we have developed since 2017 allows us benchmark companies against peers and identify potential opportunities.”
Of course, the reason for the erosion of net catastrophe treaty premium in 2025 is due to the California wildfires in January and the magnitude of losses taken by the reinsurance sector.
We asked Hagedorn for his thoughts about what that wildfire event meant for the quota share segment of the market.
Hagedorn said, “Reinsurers saw a wide range of outcomes from the California fires for their catastrophe excess of loss treaty portfolios. Some had loss ratios in the low double digit percentage range, while others lost most of their net premiums for 2025. Similarly, quota share investments saw a wide range of outcomes. We believe that running a balanced portfolio of many quota shares can offer some portfolio stability.
“In general, investors might give themselves the best chance of generating expected returns by employing the law of large numbers. Along with the traditional reinsurance market, we think that being overly exposed to hurricane or earthquake risks creates unnecessary volatility. Within the secondary peril universe, the relative attractiveness varies.
“We generally see a broad set of opportunities and seek to capitalize on those as they present themselves.”
Asked about his and Tangency Capital’s ambitions for the rest of 2025, Hagedorn stated, “We hope to grow, but that always depends on a number of factors. The ongoing market turbulence shows that diversifying assets can add a lot of value to investment portfolios.
“However, we observe that the rolling 12 month return of the ILS sector has dropped back into the single digits – despite the market still ostensibly being in a ‘hard market’ over that period. The actual performance of ILS portfolios is therefore lagging expected returns.
“Despite this, we currently observe the market accepting rate reductions. For the market to remain appealing to investors, it needs to retain a complexity premium to other market segments. Rate reductions are putting this at risk, particularly in view of recent market turmoil which has widened spreads, reducing the relative appeal of ILS. Any such spread widening, equity market correction, fears of a private credit default or general valuation reductions can distract allocators as well. The reinsurance industry could really make a difference by maintaining underwriting discipline to retain its appeal.”
Tangency Capital is listed in our directory of insurance-linked securities (ILS) fund managers.
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Tangency Capital grows AUM to $2.3bn, sees continued growth in demand was published by: www.Artemis.bm
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