$160m AlphaCat 2014 reinsurance sidecar launched by Validus Holdings

by Artemis on January 9, 2014

Bermuda domiciled insurance, reinsurance and third-party reinsurance capital management group Validus Holdings has launched AlphaCat 2014 Ltd. a collateralized reinsurance and retrocession sidecar for the 2014 underwriting year.

Validus announced that it has teamed up with third-party investors to capitalise AlphaCat 2014 and has fully deployed all of the accumulated capital at the January 1st 2014 reinsurance renewals. AlphaCat 2014 is a special purpose vehicle formed specifically to underwrite fully collateralized reinsurance and retrocessional reinsurance contracts.

The AlphaCat 2014 sidecar is capitalised with $160m of equity capital, with the majority being sourced from third-party investors who contributed $138m, or 86.25% of the total capital, while Validus itself providing the remaining balance.

Ed Noonan, Chairman and CEO of Validus, commented on the launch of the 2014 vehicle; “AlphaCat 2014 reflects the continued importance of Validus’ franchise in the global property catastrophe reinsurance market. We are pleased with the significant level of investor support which reflects on the scale of Validus’ operations, the skill of our underwriting team and the AlphaCat infrastructure we have developed to manage third party capital.”

Perhaps reflecting the slightly less attractive underwriting environment, with property catastrophe rates largely down at the January reinsurance renewals, Validus has not raised quite as much capital for its 2014 vehicle. The AlphaCat 2013 sidecar raised $185m of external capital and had $230m of total capital, AlphaCat 2012 meanwhile raised $70m at the mid-year renewals, while AlphaCat 2011 (also a mid-year launch) raised $180m.

This demonstrates Validus’ pragmatic approach to leveraging third-party capital within its underwriting and managing external capital for fee and profit share income. It is prepared to flex the amount of capital it takes to ensure it can deploy it all consistently into well performing business, to give its investors the returns promised while making its margin as well.

For AlphaCat 2014, Validus’ third-party capital unit AlphaCat Managers, Ltd. will underwrite reinsurance and retro business for, for which it will be paid a commission for the origination of the business as well as a profit commission based on AlphaCat 2014’s underwriting results.

Validus Holdings took its third-party assets under management to almost $1 billion at the end of the third-quarter of 2013, but at the same time acknowledged that it could have raised more and had turned capital away in 2013 to ensure it can meet investors return needs and deploy the capital raised effectively.

Other recent collateralized reinsurance sidecar launches:

- Aspen launches Silverton Re, collateralized quota share sidecar.

- SCOR launches $55.5m Atlas Reinsurance X sidecar.

- Argo renews Harambee Re collateralized reinsurance sidecar for 2014.

- ACE launches Altair Re II, $95m collateralized reinsurance sidecar.

- Munich Re launches $63m Eden Re Ltd. collateralized sidecar.

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