Sirius third-party capital activities to transfer to China Minsheng

by Artemis on August 12, 2015

The third-party reinsurance capital and collateralized quota share reinsurance business at Sirius and White Mountains will be transferred to Chinese investment group China Minsheng Investment Corp., Ltd. as part of the sale announced recently.

The recent announcement revealed that White Mountains is selling its Sirius International Insurance Group, Ltd. unit, which underwrites P&C insurance and reinsurance, to Chinese investment group China Minsheng Investment.

Sirius Capital Markets LLC, the ILS and third-party reinsurance capital asset management arm of White Mountains Insurance Group, Ltd., shifted focus to accessing third-party capital through strategic partnerships such as pro rata facilities late in 2014, shuttering its ILS fund in favour of quota share type arrangements. More information on the change in strategy can be found in a previous article here.

Following the change in strategy Sirius had been working on relationships with investors, we understand ceding a little business through quota share type arrangements, some of which was being managed within the White Mountains Solution unit.

Sirius and White Mountains elected to follow a partnership approach to access third-party capital, creating quota shares to suit the appetites of a select group of third-party investors. At this time it’s unclear what amount of third-party or ILS capital the company had partnered with.

Sources told Artemis that China Minsheng Investment will inherit the embryonic third-party reinsurance capital activities of Sirius Capital Markets as part of the acquisition, as well as the more established White Mountains Solution units legacy portfolio management operations, which will receive Sirius branding.

It will be interesting to see whether China Minsheng has an appetite to continue that type of business, or whether it would rather keep risk on its own balance sheet as much as possible in order to extract as much value from it as possible.

For China Minsheng, a broadly diversified investment conglomerate type organisation, it may make sense to continue to leverage third-party capital alongside the Sirius balance-sheet, particularly if it can augment underwriting capacity and bring in additional fees.

As more of these types of investor groups enter the reinsurance space it adds a new dimension, of companies which can seek to be more efficient in their use of underwriting capital as the overall investment group diversification allows them to operate at lower returns, if they choose.

Adding third-party reinsurance capital to that mix could help Sirius, under its new ownership, to reduce its cost-of-capital further, which could make it a more competitive player with the backing and support of China Minsheng, alongside third-party investors.

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