Casualty linked securities gain traction for MultiStrat

by Artemis on February 15, 2018

MultiStrat continues to close new casualty linked securities (CLS) transactions, with another deal announced this week taking the total capital invested in these unique casualty ILS deals to $60 million, covering estimated premiums of $230 million.

MultiStrat’s latest casualty linked security (CLS) deal features high-frequency low-severity casualty insurance or reinsurance business, which has been transferred to a global asset manager.

The transaction is backed by a $14 billion global alternative asset manager, which will invest $28 million in a Bermuda based segregated account to support total re/insurance liabilities associated with $160 million of estimated written premiums.

MultiStrat has now completed a number of casualty linked security transactions over the last year, totalling estimated premiums of $230 million and capital investment of $60 million.

The first such casualty ILS transaction was announced in June 2017, when insurance and reinsurance specialist investment manager Hudson Structured Capital Management allocated capital to a novel third-party liability, or casualty risk ILS transaction arranged by MultiStrat.

That transaction saw $35.3 million of seasoned workers’ compensation liabilities assumed by a MultiStrat owned reinsurance vehicle, which then issued preference shares into which Hudson Structured Capital Management could invest.

This allowed Hudson Structured to access the returns of casualty or liability reinsurance risks, in a controlled manner.

Commenting on the most recent CLS transaction, Bob Forness, CEO of MultiStrat, said, “We are pleased to expand our CLS offering with world class backers to cover both retrospective and prospective casualty reinsurance transactions. Delivering reinsurance opportunities to investors in a competitive market demonstrates the potential for CLS in the broader markets.”

“We are pleased to continue our innovation in the CLS market. The collateral backing these transactions will be actively and conservatively managed by investors to produce incremental investment income. This Total Return profile is appealing to a broader population of investors seeking yields with less volatile, non-correlated reinsurance results,” added Jim Robinson, CEO of MultiStrat Advisors Inc.

MultiStrat has transacted these casualty ILS deals with alternative asset managers, specialised insurance and ILS funds, as well as established reinsurance companies.

So far, MultiStrat’s casualty linked securities deals have featured classes of business including workers’ compensation and related healthcare liability, employers’ liability, professional liability and personal auto liability.

As a result, these deals can offer ILS investors a new source of diversification, which is often welcomed by those investors and ILS funds sophisticated enough and with a mandate allowing them to invest in casualty reinsurance risks.

MultiStrat Advisors Inc., and Multi-Strat Re Ltd. together arrange and conduct due diligence for these casualty ILS transactions. MultiStrat Re and partners in Bermuda service the deals on an ongoing basis and StormHarbour Partners LLP has acted as the placement agent.

Also read: Future of casualty linked securities is “very bright,” Robinson, CEO, MultiStrat Advisors.

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