Brit grows third-party capital, expands investor base for 2019

Despite what the firm explains as a “more difficult environment” for fundraising, specialty insurance and reinsurance player Brit Ltd. said it has grown its third-party capital base and added new institutional investors for 2019.

Brit’s managed third-party investor backed capacity reached $400 million across its Sussex Capital collateralised reinsurance platform, Versutus reinsurance sidecar, and Lloyd’s syndicate 2988 for the 2018 underwriting year and the company has sought to expand that further for the coming year.

Brit has big ambitions for expanding its third-party capital activities, with its collateralised reinsurance venture Sussex Capital aiming to become a “leading ILS manager,” while its Versutus collateralised sidecar hit $187 million for 2018 and third-party capital backed syndicate 2988 at Lloyd’s of London also expanded for 2018.

All of this has helped the company grow the level of fee income it receives for managing third-party capital and also helped it by sharing in the performance of the vehicles, hence third-party backers of the vehicles are also sharing in Brit’s losses and helping it to manage its PML’s.

For 2019, Brit said this morning that it was pleased with the response from investors despite the fact that, “The fundraising for our ILS platforms took place in a markedly more difficult environment than previous years.”

Following the losses of the last two years, ILS managers have found fundraising more challenging in some cases entering 2019, as investors look for additional information to support their allocation decisions and seek comfort in the strategies behind the ILS funds or vehicles they invest in.

BUt despite this challenging environment for raising funds, Brit said that it has managed to grow its third-party capital activities.

“Against this backdrop, we were pleased that we were able to grow the capital base and secure two new US institutional investors for 2019, which we hope to develop into deeper relations in the future,” the company said.

Importantly, the re/insurer feels that it has delivered on performance, relative to some others, through the last two years, which has likely helped the firm when it comes to raising funds.

“Our track record has continued to be enhanced by our relative performance in 2017 and 2018 which has continued to underpin investor demand for our vehicles.”

Brit Limited CEO Matthew Wilson explained that the company continues to make “excellent progress” as it continues to “develop and enhance our capital markets participation.”

“For 2018, Brit’s total managed capacity across Versutus, Sussex Capital and Syndicate 2988 exceeded US$400m. We successfully launched Sussex Capital in January 2018, the open-ended fund which writes through Sussex Re, providing collateralised reinsurance direct to third parties and to Brit,” Wilson said, adding that, “In February, we announced the fourth annual expansion of Versutus, which now has invested capital of US$187m, offering access to Brit’s strong underwriting franchise. In addition, Syndicate 2988, which was launched in 2017, was expanded by 79% to a stamp capacity of £98.5m (c.US$130m) for 2018 and now offers broad access to Brit’s extensive underwriting capabilities.”

Wilson said that Brit’s results show the firms underwriting discipline, but also reflect its ability to deliver continued growth of its book, which he says has particularly been seen through its third-party capital platforms in 2018.

“We therefore enter 2019 with premium rates trending upwards and believe we are well positioned to benefit from this improving environment,” Wilson said.

“Our premium written grew to US$2,239.1m, reflecting the favourable development of prior year premiums, the impact of rate increases, our investments in Syndicate 2988 and Sussex Capital, partly offset by reductions in certain classes following the actions outlined below. It was again pleasing to see an increased contribution from our initiatives of recent years as we continue to expand our international presence,” he continued, saying that the company continued to see demand for its new products through 2018.

The company reported an 8.9% increase in gross written premiums, which it said was, “primarily driven by Brit’s share of Syndicate 2988 and Sussex Re.”

The third-party investors backing these collateralized reinsurance and other managed initiatives at Brit have also taken their share of the firms catastrophe losses in 2018.

Brit reported $214.5 million of major catastrophe losses for the year, but passed on almost 8.3% or $17.7 million to its third-party investor base.

The expanding third-party capital activities at Brit are reflected in rising fee income earned, with 2018 seeing the firm report $14 million of fee income from underwriting management activities, up 69% from $8.3 million in 2017.

With further expansion now expected to be reported in 2019, thanks to the successful fundraising and addition of new institutional investors, this important fee income boost to earnings is set to grow even more for Brit.