Insurance-linked investors in Bermudian insurer and reinsurer Everest Re’s collateralized reinsurance sidecar Mt. Logan Re Ltd. are set to receive returns as high as 20.2% from their 2015 allocations to the vehicle, according to data sourced by Artemis.
Everest Re launched Mt. Logan Re as a Bermuda based segregated accounts company in 2013. Since then the vehicle has been growing steadily to become one of the largest collateralized sidecar-type vehicles in the ILS and reinsurance market.
That represented 25% growth in AuM over the course of 2015, a growth rate which is a result of attracting new investors into the vehicle and existing investors upsizing their allocations to reinsurance through Mt. Logan Re.
Information on Mt. Logan Re’s returns have been difficult to come by, but now Artemis can report that in 2015 Everest Re’s vehicle made returns as high as 20.2% for its third-party investors, a significant figure in the softened reinsurance and ILS market.
For investors in Mt. Logan Re there are other lower risk options as well, with Mt. Logan Re being split into three main share classes at the moment.
The lowest risk and volatility share class, Series A-1 returned 7.4% to investors in 2015 and 25.9% since inception. The middle-risk Series B-1 share class returned 16.7% in 2015 and 56.5% since the vehicles inception.
But it is the higher risk and return share class, Series C-1, where the results are stunning, both in 2015 and since Mt. Logan Re launched. 20.2% was returned to investors in this share class for 2015 and over the two and a half years since launch in mid-2013, the Mt. Logan Re C-1 shares have generated investors an amazing 90.2% return since inception.
These net returns to investors are after deducting for management fees, profit commissions, and after any losses and reserves have been put in place, so of course there is perhaps the potential for adverse development to affect each year, but even so they remain among the highest potential returns in the insurance-linked investments sector.
The three share classes of investments in Mt. Logan Re all offer significantly lower volatility than assets such as equities, high-yield fixed income, stock indices or event-driven alternatives, which makes them even more attractive to investors.
Of course the benign catastrophe loss environment of recent years has helped investors to outsized returns from Mt. Logan Re to date, as all ILS investors have benefited from, but the lower volatility of directly investing in insurance and reinsurance risk should see investors in this type of vehicle enjoying many more positive years than negative, with double-digit returns frequently on the table at these kinds of risk levels.
The Mt. Logan Re sidecar has become an important companion reinsurance vehicle for Everest Re, helping the firm to better navigate the softened and competitive marketplace. With investors also benefiting, especially to this degree, it seems certain that Mt. Logan Re can only become more important to Everest Re and its third-party investors.
Mt. Logan Re remains the largest vehicle we have included in our listing of collateralized reinsurance sidecars.
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