Lutece Re writes retro at 1/1, but rates still seen as challenging

by Artemis on January 15, 2018

Lutece Re, a collateralized retrocession underwriting start-up launched by insurance-linked securities (ILS) and reinsurance linked asset manager Lutece Investment Management Ltd. began underwriting retrocession at the renewals, but found that the rate environment was “still challenging.”

Lutece Holdings was launched earlier this year, founded by Erik Manning, an experienced ILS structuring and broking specialist who had most recently been with Aon Benfield, and Angus Ayliffe, who was most recent the Chief Financial Officer (CFO) at Ariel Re in Bermuda.

The pair quickly launched Lutece Re as their reinsurance underwriting vehicle and an investment manager in the form of Lutece Investment Management Ltd., as they formalised their start-up in time for the key 1/1 renewal season.

Lutece has received backing from Brazilian bank and global asset management firm BTG Pactual, which has backed Lutece Re with its own funds and those of third-parties, Erik Manning explained to Artemis.

BTG Pactual has been an investor in reinsurance for some time, with a number of forays into the ILS sector as well.

Manning said that BTG Pactual is acting as the sole-distributor for Lutece Investment Management, both at the recent 1/1 renewals and going forwards. The investment bank backed Lutece with its own capital, as well as with third-party investor funds.

Importantly, Manning said that Lutece benefits from BTG Pactual’s infrastructure and distribution capabilities, key reasons for partnering with the firm. He also said that the plan is for BTG Pactual to have a more permanent and strategic position in Lutece going forwards.

Manning would not be drawn on assets or capital deployed at the renewals, instead saying that the firm underwrote exclusively what would be viewed as traditional retro, although it may branch out into other areas in the future.

Manning said, “We underwrote what I would call the traditional, syndicated, 20-odd rate-on-line retrocession at the renewal. But we were very selective in what we underwrote as we found the rate environment challenging despite the rate rises at 1/1.”

However, Manning said that Lutece is, “very happy with what we deployed,” continuing to say, “we worked closely with our broker partners and got access to the business we wanted.”

He explained that the firm only accepted less than 10% of the business shown to it though, showing how selective Lutece has been.

As Lutece Re was bringing fresh capital to a market already under a significant focus, due to the expectations that rates would rise somewhat, Manning said it was important to be strategic at the renewals.

“We didn’t want to negatively impact the rate environment,” he said.

He said that there was a lot of competition on certain retro programs at the renewal, especially in the area where Lutece Re was focusing.

Manning felt it was vital to be disciplined at this renewal, as the competition for retro signings was so high.

Going forwards into 2018 Lutece is now focused on the future renewals of retrocession throughout the year, as it continues to build out its first-year portfolio. Manning said there could be expansion into other areas of retro, or even reinsurance, but it would be only based on opportunities being attractive and making sense to underwrite.

We’ve added Lutece Investment Management Ltd. to our directory of ILS fund investment managers.

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