Collateralized reinsurance contributes to premium growth at Montpelier Re

by Artemis on May 1, 2014

Bermudian Bermuda short-tail and specialty reinsurance firm Montpelier Re has reported an increase in its premiums written during the first quarter of 2014, with some of the increase attributable to its growing collateralized reinsurance operations.

Collateralized reinsurance business is growing in importance at Montpelier Re as its third-party reinsurance capital management focused Blue Capital Management unit grows its assets under management and collateralized premiums written. Blue Capital was reported to have grown its collateralized reinsurance assets under management to $600m in the first quarter, so it is no surprise that this is now making a positive contribution to Montpelier’s overall growth.

Montpelier Re reported net premiums written in the first quarter were up 5% compared to a year earlier. The company said that this growth was primarily due to an increased level of business underwritten at its Montpelier at Lloyd’s and Collateralized Reinsurance segments.

To give you an idea how big a deal the introduction of Blue Capital is at Montpelier Re, consider the fact that the reinsurer has total shareholder capital of $1.657 billion, so its third-party assets of $600m (or so) is more than a third as large as its shareholder supported funding.

Montpelier Re reported its loss ratio for the first quarter as 18%, which included $35m of favorable prior year loss reserve developments. The combined ratio for the reinsurer was 50% for the quarter.

Christopher Harris, President and Chief Executive Officer, commented; “We had an excellent first quarter with underwriting, investments and capital management all contributing to book value per common share growth of 5.8% for the period. Each of our platforms delivered strong profitability as we continue to focus on executing our specialist underwriting approach.”

The contribution made by third-party capital and collateralized reinsurance underwriting at Montpelier Re, through Blue Capital, should be expected to grow in quarters to come. The unit is still relatively new and its assets under management grew considerably during 2013, meaning that its deployment of capital at renewals through 2014 should bring in more earnings and profit than in was seen last year.

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