ICAT launches special purpose syndicate, alternative capital features

ICAT, a provider of U.S. property insurance in catastrophe-exposed regions, has launched a new special purpose syndicate (SPS) at Lloyd’s of London, capitalised by a range of backers, including alternative reinsurance capital.

SPS 6123 has received ‘in principle’ approval from Lloyd’s to further expand ICAT’s per risk capacity. Subject to completion of the application, the SPS is expected to go live on May 1, with a capacity of £8M (~$17M USD of gross written premium) for the 2015 underwriting year.

ICAT told Artemis that a portion of the capital backing the special purpose syndicate has come from alternative capital providers. With catastrophe insurance access in demand among alternative reinsurance and ILS capital players, it is no surprise that some of the financing was sourced in this way.

ICAT said that all of the backers of the SPS are professional Lloyd’s investors, with some traditional names, some corporate capacity and some from the alternative capital world.

SPS 6123 will provide additional capacity to ICAT’s Syndicate 4242, aiming to help the firm to accommodate the significant growth opportunities within the medium-sized ($25m – $100m in values) commercial property sector in the U.S.

Syndicate 4242’s Active Underwriter Megan McConnell commented on the launch of the SPS; “ICAT views the primary insurance market as attractive, and we continue to see more opportunity for superior priced business than can currently be accommodated within s.4242. The SPS enables ICAT to continue underwriting profitable new business into the Lloyd’s market.”

SPS 6123 will operate through a variable quota share facility for syndicate 4242 across certain accounts, rather than a whole account quota share. All of the underwriting for the syndicate will take place from ICAT’s Colorado office.

“The addition of SPS 6123 is a key pillar in ICAT’s strategy to deliver per risk capacity of up to $75 million to our wholesale partners and reduce the risk of non-concurrent terms associated with traditional “shared and layered” business to our customers,” said Gregory Butler, ICAT President. “Over the past several years, ICAT has developed complementary capacity to s.4242 to address this market risk and SPS 6123 is the latest example of this philosophy in practice.”

These Lloyd’s operations, like ICAT, that specialise in property catastrophe insurance or reinsurance risks have a great opportunity to grow their businesses with the help of third-party capital, be that alternative or otherwise.

The special purpose syndicate provides a useful structural tool that allows existing syndicates to set up a facility that can act like a sidecar, while keeping it all within the Lloyd’s framework and allowing them to incorporate the benefits of lower-cost alternative capital sources within their underwriting businesses.

With investors keen to access property catastrophe risks and access to the Lloyd’s market also attractive, it’s certain that ICAT could grow the support it receives from this new SPS considerably over time.