The latest insurer or reinsurer to express an appetite for moving further into the area of the reinsurance market where managing money from third-party investors to put to work underwriting becomes a significant part of a reinsurers business is international insurer and reinsurer Argo Group. The firm recently launched its first sidecar, an innovative Bermuda domiciled sidecar vehicle which aims to be the first to underwrite both insurance and reinsurance business.
Argo launched Harambee Re 2013-1 Ltd. at the start of this year and the sidecar will underwrite business for the 2013 accident year. It’s the first sidecar with a strategy to provide capacity for a portfolio of insurance and reinsurance risk, most sidecar ventures write reinsurance or retrocessional business. Argo is not a stranger to collateralized forms of reinsurance though as they have tapped the capital markets for catastrophe bond capacity before with its Loma Reinsurance Ltd. (Series 2011-1) and Loma Reinsurance Ltd. (Series 2011-2) deals.
Mark Watson, Argo’s President and CEO, expressed a desire to grow this side of the re/insurers business in years to come on a recent earnings call. He said he was encouraged by the firms first step into what he termed alternative capital management. “We anticipate becoming more active in this space over time as we look for additional reinsurance capacity for some of our catastrophe exposed business”, he continued.
Commenting more generally on the Argo Group platform, which includes insurance, reinsurance, a Lloyd’s syndicate and now the sidecar, Chief Financial Officer Jay Bullock said; “We’ve got a lot of enthusiasm and excitement about the platform and opportunities to invest capital in it”.
It seems that almost everyone in the reinsurance space is now seeing the value in taking on capital from external investors which it can put to work in underwriting, profiting both from the resulting premiums and capital management fees. It’s becoming an attractive option for many re/insurers looking to expand their operations in a flexible manner, with sidecars just one of the structures available to allow them to leverage current high investor interest in the reinsurance space. With Harambee Argo have an opportunity to offer investors a new opportunity through the vehicles strategy to write insurance business and that should help it to attract interest and grow its capital under management.
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