Announcing its results today, Novae Group plc explains that its special purpose Lloyd’s of London syndicate 6129, which it launched in partnership with ILS investment manager Securis Investment Partners, has driven significant growth.
Novae has now started to term 6129 an SPA (special purpose arrangement), rather than an SPS (special purpose syndicate), which is likely a Lloyd’s-related technicality, but the strategy remains the same, growing Novae’s book into U.S. excess and surplus lines property business with the help and support of third-party capital under the management of Securis.
SPS or SPA 6129 went live for the start of 2016, with stamp capacity of US$75 million to put to work and by the end of the first quarter Novae had already called it a “significant contributor” to its growth.
“Growth was driven by targeted expansion in core specialty classes and strong relationships with distribution partners, which includes our partnership with Securis Investment Partners LLP to underwrite US Excess & Surplus lines business,” Novae Chairman John Hastings-Bass explained today.
Novae CEO Matthew Fosh further explained that the 6129 arrangement with Securis; “Leverages our agility and underwriting expertise within the ‘Excess & Surplus Lines’ market in the US.
“The innovative structure of SPA 6129 enables us to broaden the scope of business we write, allowing us to bring more business to the London market, while at the same time offering exciting new opportunities to forward thinking industry investors such as Securis.”
Securis gains access to an insurance focused specialty property market through the arrangement, and also benefits from the Lloyd’s platform and security of Novae and Lloyd’s central fund. It’s an effective way for Securis to source new types of risk, by helping Novae expand into E&S risks while providing its ILS capacity to back up the portfolio as reinsurance capital.
Novae is clearly pleased with the continued growth its been able to find using the third-party capital provided by Securis.
The company explained that much of its growth has been; “Concentrated in core classes within the property insurance portfolio and particularly in the US Property Facilities unit which benefitted from the SPA in partnership with Securis.”
While Securis benefits from access to a new source of risk and the Lloyd’s platform through the 6129 partnership, for Novae the benefits are meaningful helping to build out its U.S. property E&S unit significantly.
Novae now sees its E&S unit as an “established market leader of delegated authority business across North America” and explains that over the course of 2016 the unit achieved “growth of 75.9% at constant rates of exchange.”
With a full-year now behind it this partnership is clearly working for both parties. As partnerships with ILS capital go, this is an example of how bringing third-party capital into a traditional re/insurance business can drive growth and expansion, even in a more challenging market.
Securis will likely look to expand the stamp capacity available through 6129 this year, we’d imagine, meaning that the partnership will drive even greater benefits for Novae and for Securis’ third-party investors.