Lutece Holdings Ltd., the insurance-linked securities (ILS) and reinsurance linked investment fund vehicle start-up, is ready to begin underwriting a collateralized retrocession product at the January 1st 2018 renewals, with “a significant amount of committed capital” raised according to its founders.
Lutece Holdings was launched earlier this year, founded initially by Erik Manning, an experienced ILS structuring and broking specialist who had most recently been with Aon Benfield.
Joining Manning as a co-founder is Angus Ayliffe, who was most recent the Chief Financial Officer (CFO) at Ariel Re in Bermuda, but left the firm shortly after it was acquired by Argo.
Lutece Holdings will focus on the retrocessional reinsurance market and is ready for a January 1st renewal start to its underwriting.
Lutèce was a city that stood where Paris does today and we understand that the start-up has been named after this, but minus the accent. A reinsurance vehicle is being registered in Bermuda, to be known as Lutece Re and the firm intends to begin underwriting for 1/1, where opportunities are attractive.
The focus will be on retrocession opportunities in the near-term, and Lutece Re is ready for launch, “With a significant amount of committed capital and a business model that is highly aligned with its investors,” the founders said.
With the retro market expected to see the highest rate rises in the reinsurance sector, following the impacts of recent hurricanes and other catastrophe losses, a number of established players and start-up’s are now targeting the January renewals.
These will bring new traditional and alternative capital to the retro market and could have the prospect of dampening rates somewhat.
Lutece Re is going to be opportunistic in nature, the founders explained, saying the strategy is for Lutece to be, “A highly-disciplined underwriter and will only be looking to write business at 1/1 at pricing, terms and conditions that are sensible for its investors and sustainable as an underwriting strategy.”
As a result, Lutece Re will target operating under a long-term sustainable business model, with the ability to scale up quickly when opportunities are available and clients need capacity support, but also able to scale back down when other required as well.
Given the current market dynamic this could be important for any start-up, as the retro market is likely to be a complex environment at 1/1 and the dynamics of that could change over the course of 2018, especially if the market remains free of large losses.
Lutece Re will aim to change it strategy over time to suit market dynamics, with both its underwriting and investment focus likely to shift in tandem to make the best of available opportunities.
The founders said that Lutece Re has not been set up to have, “a single mono-line product focus or a focus on a particular area of the retro market.”
CEO Erik Manning added, “Our investors have given us a mandate that allows us to be disciplined and ‘keep our powder dry’ for future opportunities if the 1/1 renewals do not present the much-needed market correction that we nonetheless anticipate.
“As the full extent of the $100bn+ of 2017 losses crystallise and manifest themselves in the course of 2018 we expect to see opportunities and a continued retro market correction well into 2018 – 2019. Lutece stands ready to provide support to the market as and when required, and looks forward to building upon our market relationships by providing a stable and steady alternative to the retro market, with the support of our investors and partners.”
The question of whether there will be sufficient opportunities for all those targeting the retro market to deploy their alloted capacity at 1/1 remains and it’s a sensible strategy to be able to keep capacity back, rather than having to be fully-deployed.
With a number of major traditional reinsurers also said to be planning to underwrite more retro at 1/1, to take advantage of higher pricing, plus capital raises from existing collateralised retrocession providers and new ILS start-ups, the market may find the weight of capital softens the expected rate increases.
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