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06 May 2021       SBAI

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The Standards Board for Alternative Investments (SBAI) announces its latest Toolbox publication on side-pocketing within Insurance Linked Strategies (ILS). The memo provides practical guidance on the side-pocketing methods that can be used, robust governance arrangements, the appropriate charging of fees, and provides detailed questions for investors to ask asset managers during their due diligence on ILS funds.

Following insurance losses from worldwide catastrophic events in 2017 and 2018, as well as potential insurance losses from pandemic related claims, the use of side-pockets within ILS funds has come under increased allocator scrutiny alongside valuation and risk reporting. This memo is part of the SBAI’s ILS Toolbox which also contains guidance on valuation in ILS funds and The Insurance Open Protocol risk reporting template.

Michael Hamer, Senior Analyst at Albourne Partners (Bermuda) Limited said, “While the use of side-pockets within ILS funds is typically an investor friendly practice, this SBAI Toolbox memo provides a very useful framework for considering the appropriate alignment of interests between the various groups of investors and asset managers as well as a toolkit for ensuring robust practices and governance of the side-pocketing process.”