Validus raises $404.4m for new AlphaCat2013 sidecar and insurance-linked securities funds

Bermuda based insurance and reinsurance group Validus Holdings has announced the successful raising of $404.4m of capital, largely from third-party investor sources, by its investment and asset management subsidiary AlphaCat Managers Ltd. The third-party capital injection is to be put to be invested in collateralized reinsurance and insurance-linked securities (ILS) by capitalising a new sidecar and adding capacity to its ILS funds.

The news underscores Validus’ commitment to the third-party asset management strategy as a source of underwriting capital. Its CEO Ed Noonan said back in July that with over $1 billion under management Validus felt as though it was just scratching the surface in this segment of their business.

The new sidecar from Validus is AlphaCat 2013 Ltd., the latest in the AlphaCat series, a special purpose vehicle formed to invest in collateralized property catastrophe reinsurance and retrocession on a worldwide basis. AlphaCat 2013 launches with $230m of capital, with third-party investors having contributed $185m and Validus providing the balance.

Validus has also raised $219.4m of third-party capital as subscriptions for its ILS funds. The AlphaCat ILS funds invest in instruments which provide returns across the property catastrophe reinsurance, retrocession, catastrophe bond and ILS market.

Ed Noonan, Chairman and Chief Executive Officer of Validus said; “AlphaCat 2013 and the third party investment in the AlphaCat ILS funds reflect the continued importance of Validus’ franchise in the global property catastrophe reinsurance market. We are pleased with the significant level of investor support which reflects on the scale of Validus’ operations, the skill of our underwriting team and the AlphaCat infrastructure we have developed to manage third-party capital.”

Validus has put significant time and efforts into its AlphaCat arm, which enables it to underwrite collateralized reinsurance business largely using external investors capital, and it clearly see it as a growing portion of its overall operations. As more focus is placed on this growing area of the reinsurance market Validus, as one of the largest reinsurance groups, is sure to continue to grow the contribution third-party capital makes to its underwriting and profits.

Validus’ AlphaCat investment advisory group was formed in 2008 and manages a number of property catastrophe-linked sidecars, ILS funds and the Bermuda Class 4 reinsurer which it launched in partnership with the Paulson & Co. hedge fund, PaCRe, Ltd.

Other recent sidecar launches include: Lancashire with the launch of Saltire Re I, Alterra increasing the capitalisation of New Point V, RenaissanceRe with Upsilon Re II and Argo Group launching the innovative Harambee Re.