Lloyd’s investment vehicle VisionRe delays to 2014 on lack of opportunities

VisionRe Limited, a reinsurance-linked investment vehicle designed to offer high-net worth and institutional investors access to the Lloyd’s of London re/insurance market, is deferring its capital raising and capacity deployment until 2014 citing a lack of attractive opportunities.

VisionRe was launched in June by Argenta Private Capital Limited, a subsidiary of Argenta Holdings plc also the parent to Argenta Syndicate Management Limited which manages aggregate underwriting capacity of £310 million.

Argenta launched VisionRe as an unquoted Guernsey based company acting as an investment vehicle which would offer investors a way to access the returns of the insurance and reinsurance market by providing capital to insurance and reinsurance business which trade in the Lloyd’s market.

VisionRe hoped to simplify access to the Lloyd’s market for investors, offering a high yield potential while giving its investors a dual income from underwriting income and investment returns. At the same time an investment in VisionRe promises a similarly low correlation to other asset classes, as other insurance-linked investments such as insurance-linked securities (ILS) and catastrophe bonds offer.

Despite attracting a high level of interest and substantial commitments from investors, as well as being well received by managing agents at Lloyd’s, VisionRe has not secured enough opportunities for deployment of its capital on terms which are attractive enough and would allow it to create a suitably balanced investment portfolio.

Graham White, Chairman of VisionRe, commented; “We have been delighted at the high level of interest that VisionRe has attracted from investors and particularly at the universal support of Lloyd’s managing agents for our concept. We will continue to discuss quota-share and limited tenancy opportunities with the managing agency community in anticipation of a capital raising in the Spring of 2014 for which we have significant cornerstone investment commitment.”

Given the level of interest in insurance and reinsurance as an asset class right now we suspect that VisionRe will have had plenty of demand from investors. It seems that VisionRe has encountered the issue that often prevents ILS fund managers from being able to take on new capital, causing them to shutter investment funds, a lack of attractive deployment opportunities.

This has hit the ILS market over the last two years, with demand outstripping supply making capital deployment at times tricky and forcing even the largest ILS fund managers to close entry to new investors. VisionRe has likely been hit by similar factors in the Lloyd’s market.

Demand for risk is high and competition among different sources of capital also high at Lloyd’s. New initiatives such as the Aon – Berkshire Hathaway sidecar have also upset the markets equilibrium, perhaps reducing the amount of opportunities in the current underwriting year. As well the increasing interest of alternative and third-party capital in insurance and reinsurance has spread to the Lloyd’s market perhaps making competition for capital providers such as VisionRe higher than it had expected.