Sompo steps into ILS with Blue Capital, as Endurance acquisition completes

by Artemis on March 29, 2017

Sompo Holdings has now completed its acquisition of Bermudian insurance and reinsurance group Endurance and as a result becomes the owner of specialist catastrophe insurance and reinsurance linked investment manager Blue Capital Management Ltd.

The acquisition of Endurance, for a total consideration of $6.3 billion, closed yesterday and Sompo has created a new subsidiary, Sompo International which will be based in Bermuda and provide an integrated global commercial insurance and reinsurance platform for the firm.

The existing commercial insurance and reinsurance business of Sompo will also be folded into the new Sompo International unit, which together with Endurance will make both parties a larger and more meaningful player in that space.

Blue Capital Management, it’s ILS funds and investment activities now all sit under Sompo, providing the re/insurer with an established catastrophe insurance and reinsurance investment management platform, with a number of strategies and private ILS investment vehicles at its disposal.

So Sompo, with its global insurance platform and it’s now Bermuda based commercial insurance and reinsurance platform, has access to the capital markets through established ILS investment vehicles. Blue Capital Management, meanwhile, has a larger parent re/insurance group that it can leverage for access to risk, and could also benefit from enhanced global reach.

Interestingly, Artemis is aware that Sompo’s Canopius division in London (which will retain its brand) had been having meaningful discussions about launching some kind of ILS vehicle or platform of its own in recent years, and Sompo itself had ambitions to enter the space, given its deep connections into Japanese investment markets.

Now with Blue Capital Management part of the Sompo machine, the group’s re/insurance subsidiaries have a ready-made way to access the capital markets and benefit from investor appetite for re/insurance linked investments.

Sompo Holdings has now become the ultimate parent holding company of Blue Capital Management Ltd., and as a result of its ownership of Endurance, Sompo now indirectly holds 28% of the ordinary shares of the London and Bermuda stock exchange listed ILS fund, the Blue Capital Global Reinsurance Fund Limited. A similar ownership stake will be transferred to Sompo in the Blue Capital Reinsurance Holdings Ltd. New York Stock Exchange (NYSE) listed provider of fully collateralized reinsurance.

Perhaps the most promising aspect of the acquisition for Blue Capital is the fact that the underwriting footprint in Bermuda has grown, with the bringing together of Sompo’s commercial re/insurance businesses with Endurance.

Blue Capital accesses risk through quota-shares and alongside the Endurance underwriting platform, which will now be through and alongside a much larger Sompo underwriting machine.

That should open up greater opportunities for Blue Capital’s investor base to enjoy access to the risks underwritten by the group and could mean Blue Capital has opportunities to increase its capital base, with more risk on tap through its group relationships.

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