Pension fund thinking global with life insurance investments

by David Keelaghan01 Feb 2017

In purchasing a 21 per cent stake in Allied World Assurance Company Holdings for US$1 billion, the Ontario Municipal Employees Retirement System (OMERS) is extending its commitment to investing in the insurance industry, says the group’s head of insurance investment, Sharon Ludlow.

Ludlow came on board with OMERS last October to oversee insurance strategy for the $77 billion fund. She has a wealth of experience to call on, most notably as CEO of Swiss Re Canada and president of Aviva’s operations in Canada. 

The Allied Word deal is in conjunction with regular investment partner Fairfax Financial Holdings, which will take the majority stake in the Swiss firm. According to Ludlow, the insurance space has a lot of potential right now, with life insurance becoming a key focus with the fund’s investment strategy.

“We have significant investments in physical assets, real estate, infrastructure, private equity and the public markets,” she says. “We have specifically looked at the insurance sector as a sizeable opportunity globally where we can put our capital to work, investing in high-quality companies.”

The fact that OMERS has worldwide reach means it must navigate quite diverse regulatory environments. This is as challenge, but also provides the scope to find investment opportunities not always available in Canada.

“OMERS is looking to diversify and explore new investment opportunities that it hasn’t before,” says Ludlow.” In the last few years we have seen dislocation factors in different markets that provide opportunities. In Europe, Solvency II has been a catalyst for certain companies to divest and that provides opportunities for investors to acquire new businesses.”

In the life insurance space, Asia is an obvious target for OMERS. The huge population of the region means it remains an untapped marketplace, at least relative to the North American market.

“In the life insurance space we see opportunities globally, but for different reasons,” says Ludlow. “In Asia, the market penetration is quite light and consumers are not as insured as they could be. We see a big growth opportunity. In North America, our investments would be a little more select as that market is more saturated in terms of insurance penetration.”

Investing in Shanghai or Bangkok is somewhat different from doing business in New York or London, so finding a partner with local expertise is key. Similar to its alliance with Fairfax, OMERS will therefore be searching for an equivalent in the Asian market.

“Anytime we expand into a new market we do that with a partner that has experience in the marketplace,” says Ludlow. “We will ensure that we have the right amount of governance and oversight. We want to be very careful that the investments are safe.”

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