Insurance company returns will be boosted by the growing trend towards personal injury litigation, a...
Insurance company returns will be boosted by the growing trend towards personal injury litigation, according to the manager of the S&F Hiscox Insurance Portfolio fund.
The Oeic, the second best performing unit trust or Oeic over the year to 28 June across all sectors, now has a 75% exposure to the property/casualty sector.
Alec Foster, group investment officer at Hiscox, said: 'What is happening in the US is starting to occur in the UK market. We are in a very strong cycle at the moment and investors should be in play when the property/casualty rates start to head upwards.
'We still like the life sector but we have reduced our exposure there to 12% as there is more to go for in property/casualty.'
The S&F Hiscox Insurance Portfolio fund has risen on the back of a favourable market for financials. The fund, beaten only by Merrill Lynch Gold & General, has returned 34.2% over the year to 28 June.
While the fund has outperformed at a time when old economy sectors have been favourable, Foster sees further opportunities for growth in the sector.
He said: 'Insurance is a commodity with pricing power. We see this going on for another two years. This current cycle will be deeper and wider than previous cycles. The level of rates has been too low for 10 years, cushioned by strong markets, and this needs a correction.'
Rates will need to rise to meet not only today's concerns but also the issues of the past, he said, noting that litigation is continuing in the US concerning the use of asbestos in workplaces. The S&F Hiscox Insurance Portfolio fund invests from a global universe of 100 insurance companies and is not restricted by market cap, although 70% of the portfolio is invested in the more liquid large-cap end of the market. The portfolio holds between 30-35 companies and, Foster said, weightings can get as high as 7%-8%.
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