Sirius Capital Markets switch focus to reinsurance sidecars, shelve ILS fund

by Artemis on December 1, 2014

Sirius Capital Markets LLC, the ILS and third-party reinsurance capital asset management arm of White Mountains Insurance Group, Ltd., is no longer raising third party capital for its first ILS fund and instead switching its focus to accessing third party capital through strategic partnerships such as pro rata facilities.

The unit launched at White Mountains reinsurance subsidiary Sirius Group in mid-2013, hiring Michael Halsband, a well-known ex-Goldman Sachs and Deutsche Bank insurance-linked securities (ILS) industry exec, to lead the initiative from New York, while Deanne Nixon, a long-term Sirius employee was to lead the initiative from the reinsurers Bermuda base.

Sirius Capital Markets then prepared itself to raise third-party capital in late 2013, as it launched its first ILS fund to the investor community. This was to be an SEC registered ILS fund, but we’re told that the requisite operating restrictions and the Chinese wall separating the capital markets business from Sirius’ traditional underwriting operations dogged the effort leading to a change of strategy.

We understand that with the ILS initiative not going to plan that Sirius is to shelve the fund and change focus to accessing capital through other structures. The fund initiative has been seen as too segregated internally from Sirius’ established underwriting franchise, something that the firm had never wanted, so the change in focus may be a better play for the firm.

As a result, Michael Halsband is understood to be preparing to leave Sirius and a new president of Sirius Capital Markets will be named at year-end. Sources told Artemis that this will be Kip Oberting, a managing director at White Mountains Capital currently.

Halsband will no doubt emerge at another ILS initiative or venture in due course, given his significant experience in the space and clear expertise.

We understand that Sirius sees reinsurance sidecars as more complementary to its overall business, where it can leverage the relationships with White Mountain and Sirius, as well as the firm’s track record, more strongly.

It’s understandable that some traditional reinsurance firms will struggle when establishing ILS and third-party capital units, until the appropriate strategy is found. For Sirius that has proved not to be as an ILS fund manager, at least yet, with an expectation that the firm will open up more quota share type business to third-party capital in due course.

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