United (UPC) in 2018 Promissum Re collateralized reinsurance arrangement

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United Insurance Holdings (UPC Insurance) has renewed its Promissum Re collateralized reinsurance facility in 2018 at an unknown size and the firm has deepened a relationship with investors Amundi Pioneer Asset Management who have allocated just under $20 million to the arrangement.

Promissum Re is an innovative reinsurance arrangement for UPC, which the insurer first entered into back in 2015.

It adds capital efficiency in that it provides the benefits of a reinsurance sidecar, being fully collateralized by third-party capital (ILS) market investors, provides its reinsurance capacity directly to a primary insurer in UPC Insurance, but also acts as a kind of fully (third-party) funded captive and allows for a profit share to be paid back to UPC in loss free years.

Hence it is efficiently backed by third-party capital markets funding, removes the need for as much brokerage on that slice of the reinsurance tower (we imagine), while also lowering cost and raising efficiency by sharing profits with the ceding insurer if losses don’t hit these layers of its risk.

So UPC gets all the benefits of a sidecar or private collateralized quota share, while also benefiting from adding efficiency to a slice of its own reinsurance program.

It’s come to light that UPC has completed a further issuance of notes through the Cayman Islands sidecar reinsurance vehicle, the Class C company named Promissum Re SPC Ltd.

We assume that this was a June 1st renewal for Promissum Re, but we don’t know how large the issuance was at this stage.

However, we can tell that roughly $20 million of the Promissum Re 2018 issuance was invested in by Amundi Pioneer, in a range of its credit and fixed income investment strategies, including some in its dedicated ILS fund the Pioneer ILS Interval Fund.

We would assume that other allocations to the 2018 Promissum Re issuance for UPC will emerge in other mutual fund disclosures over the coming weeks, while there could also be allocations from ILS funds that do not have to disclose their portfolio holdings as well.

It’s good to see United (UPC) continuing to add ILS capital into its reinsurance mix and as the insurers’ operations expand, such as through the launch of the joint-venture Journey Insurance Company that the firm has launched alongside Tokio Marine Kiln, collateralized reinsurance vehicles like Promissum Re could grow their support for UPC in the future.

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