Kinesis grows limit deployed by 30% at renewals: Maloney

The improved rate environment meant that specialty insurance and reinsurance player Lancashire Holdings took the opportunity to increase the amount of limit sold by third-party capital vehicle Kinesis Capital Management by roughly 30% at the renewals, according to CEO Alex Maloney.

While Lancashire and the Kinesis team have seen better rates and so increased the size of Kinesis’ deployment at January 1st 2018, the price increases witnessed have not been as significant as hoped for.

CEO Maloney commented, “I wouldn’t describe the market as a hard market, as there is enough capacity to serve all risks. But we are moving in the right direction.

“It’s not a hard market, if it was we would have raised more capital for the opportunity.

“It’s the first time we’ve been able to grow Kinesis for a few years. Not as much as we would have liked, but Kinesis has grown by around 30% at the January 1st underwriting cycle.”

Kinesis had around $300 million to $350 million deployed  a year ago, suggesting that with the 30% growth this may have risen to roughly $425 million for 2018.

Rate increases in property catastrophe risks and specialty lines will have been the driver for growth at the collateralized reinsurance and retro vehicle Kinesis, given its unique multi-class, specialty and property catastrophe, product is used as a retro protection by major reinsurance firms.

Following on from the high levels of losses in 2017 Kinesis faced its own losses, but will have benefited from demand for its product as a result of market conditions at 1/1.

Chief Underwriting Officer at Lancashire Paul Gregory commented saying the firm is, “Seeing rate increases in property catastrophe risks, an area underwritten by our third-party capital efforts.”

Gregory echoed Maloney’s comments on the state of the market, saying, “We’re positive about market conditions, but also realistic. We’re looking to match risk and return appropriately and won’t be looking to add net risk unless rewarded for it.”

But added, “The shift in demand and supply is not sufficient to put us into a hard market, just a better market.”

CFO Elaine Whelan said that trapped collateral will be an issue at Kinesis due to the 2017 losses, but that could result in releases in quarters to come as the magnitude of losses becomes clearer. In this respect, the allocation of profit commission from Kinesis can be lumpy and irregular, which should likely be expected during the year ahead.

Darren Redhead, CEO of Kinesis Capital Management, commented on the renewals and the fact rates have not risen as much as hoped for, “We grew the limit sold by 30%. We still have more money to utilise if we want, but at the moment we haven’t and we may even give some back to investors.

“Yes rates are up, but not as much as we wanted.”

Maloney said that as a company Lancashire did not raise any more capital for the renewals, feeling that rates were not going to rise as much as had been anticipated, adding that on the underwriting side, “We don’t think the market’s moved enough to retain more risk.”

Also read: Kinesis results resilient in Q4, as market turns a corner for Lancashire.