Insurance capital is moving from the fringes of fund finance into a more central role, as insurers seek short-duration yield, regulatory efficiency and broader access to private markets, panellists said during a panel session on the sector at Funds Europe‘s inaugural European Fund Finance Securitisation Forum held in London on Wednesday.
Moderator Nick Rusling of Investec opened by noting that insurance exposure to fund finance is “probably more common than people may realise”, with insurers now appearing “on every side of the fund”, from capital call facilities and GP lending to LP-side structures such as CFOs and rated feeders.
Matt Taylor of Legal & General said insurers have been most active in “shorter-dated capital facilities”, while increasingly considering NAV financing and continuation vehicles. However, he said he has “tended to steer clear of CFOs and feeder funds” because of regulatory issues.
Jules Koekkoek of Aegon Asset Management said the entry point for many insurers was simple familiarity. His firm began with subscription lines in 2018 because insurance clients were already LPs in private market funds and had “a lot of cheap liquidity in their treasury”. Subscription lines were “pretty low risk, very familiar to insurance companies”, he said, though appetite later expanded toward NAV opportunities.
John McGrath, a partner at the law firm Dechert, highlighted a divide between US and European structures. Rated feeders may be familiar in the US, he said, but from a UK or European regulatory perspective some structures can look like “toxic waste”. More recently, however, issuers have worked to address “key regulatory issues” including securitisation treatment and matching adjustment eligibility.
James Budenberg of Aberdeen said fund finance can solve an asset allocation problem for insurers. Subscription lines can function as “a super short duration” product, allowing insurers to earn yield while delaying longer-term origination decisions. He added that securitisation is a natural fit for insurance balance sheets because cash flows can be sliced into investment-grade tranches.
Morningstar’s Max Jost said ratings can help insurers, but Europe remains more complex than the US. “The divide between the US and Europe is very real,” he said, with some insurers placing particular emphasis on timely interest and principal payments.
Looking ahead, panellists expected further growth. Budenberg predicted more use of sub lines and expansion into NAV and GP finance. Koekkoek said demand for subscription lines is already rising from insurers and pension funds. Taylor said demand should continue across products, while McGrath pointed to growing activity in Europe, the UK and Asia. Jost added that international insurers, including Japanese and German investors, are showing increasing interest.
