Liberty Mutual in $160m Limestone Re collateralised sidecar deal

by Artemis on December 21, 2016

Global insurer Liberty Mutual Insurance has announced the creation of the Limestone Capital Markets platform and a first deal using the new Bermuda segregated accounts vehicle, Limestone Re Ltd., a $160 million multi-year collateralised reinsurance sidecar-like transaction.

Limestone Re Ltd. will act like a sidecar for Liberty Mutual, taking risks from the insurers U.S. and Lloyd’s of London platforms and sharing them with third-party investors, enabling the company to benefit from a fully-collateralised source of third-party supplied reinsurance capacity.

This inaugural Limestone Re transaction from Liberty Mutual features U.S. property catastrophe, U.S. homeowners and London Market specialty insurance risks from the insurers businesses.

This deal sees the newly formed Bermuda domiciled segregated account company, Limestone Re Ltd., capitalised with $160 million from third-party investors to provide Liberty mutual with a multi-year source of multi-class collateralized ‎reinsurance.

James Slaughter, Senior Vice President and Director of Global Reinsurance Strategy at Liberty Mutual, commented on the announcement; “The creation of the Limestone platform is a key strategic initiative for Liberty Mutual.  This transaction demonstrates investors’ interest in both traditional property catastrophe reinsurance risks as well as insurance risks including homeowners, marine and other global specialty insurance lines. 

“The Limestone platform demonstrates Liberty Mutual’s ability to leverage our unique global underwriting and distribution platform as we bring capital markets investors as close as possible to the underlying risks.”

Liberty Mutual was a regular catastrophe bond sponsor for many years, but had stepped back from that market with its last issuance being in 2012. The insurer had cited cost as a factor, but also the effort involved in structuring and complexity of issuing a cat bond as reasons for its move back to a more traditional reinsurance placement.

With the capital markets offering an increasingly competitive alternative to reinsurance, it’s good to see the insurer returning to ILS with a dedicated sidecar-type vehicle, as this could herald a repeated use of collateralised capacity in the future.

Artemis understands that Liberty Mutual’s Lloyd’s syndicate has looked at a number of other options for bringing third-party capital in to support its London underwriting platform over the last year. A Bermuda sidecar vehicle provides the group with the flexibility to cede risks to investors from across its global platform, so likely offers more utility across the group than a Lloyd’s SPS alone could have.

Limestone Re will provide Liberty Mutual with a way to bring efficient third-party capital from institutional investors within its underwriting business, both to benefit from the reinsurance aspects and to augment its own capacity with low-cost capital market financing.

For more details on reinsurance sidecar investments and transactions view our list of collateralized reinsurance sidecars.

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