Ambac targets ILS partnerships with Everspan program / fronting launch

Ambac Financial Group, Inc. has launched a new program and fronting focused specialty insurance company named Everspan Group and targets participatory fronting and transformation for select risks, with the insurance-linked securities (ILS) market a potential reinsurance capacity partner it seems.

Everspan Group calls itself a “specialty, participatory fronting program insurance business” saying that it may retain up to 30% of underwriting risk per program it underwrites.

That’s a little different from many of the program and fronting specialists, which tend to retain only a small amount of risk and largely at the extreme tail.

Everspan Group has high-profile leadership, with Wyatt Blackburn, formerly an early employee of program and fronting specialist State National taking the role of President.

Everspan has received the necessary A.M. Best issued Financial Strength Rating (“FSR”) of ‘A-’ (Excellent) for its core insurance carriers, Everspan Indemnity Insurance Company, an excess and surplus lines insurer and Everspan Insurance Company, an admitted carrier.

The Everspan Group boasts capital in excess of $100 million for its launch and expects to begin writing new specialty property and casualty programs in the first half of 2021.

Ambac said today that it has formed Everspan Group “in response to market dynamics and demand for capacity.”

The new program and fronting company aims to follow “a sustainable, long-term property and casualty, participatory fronting strategy by underwriting diverse classes of risks.”

Business will be sourced primarily through managing general agents, program administrators, brokers and regional insurers.

The Everspan model will look to connect insurance distributors with global capital providers, which are presumably going to be the mentioned reinsurance companies and the insurance-linked securities market.

Everspan wants to be a risk-bearing, modern take on the fronting relationships that have become so important in the US insurance marketplace.

This model of working with originators and distributors, to connect them with the most appropriate reinsurance capital sources, traditional or alternative, is one key signal of greater efficiency in the market and an ability for primary risks to be more directly ceded to capital markets sources of reinsurance.

The fact Everspan is willing to take up to 30% of each program itself may be appealing to some insurance-linked securities (ILS) investors or ILS funds, as there can be a significant alignment of interests there, while also making it possible to ensure only the appropriate, or desired, risk and return profile of insurance business is ceded through to the reinsurance capital provider.

Connectivity is key for ILS funds and investors, as too are strong partnerships with sources of risk that can be matched with their capital. As such, it’s not surprising to see Everspan mentioning ILS players as potential partners within its launch kit.

Wyatt Blackburn, President of Everspan Group, commented, “Everspan Group’s strong capital position and focus on underwriting results, measured risk retention, long-term relationships, and avoidance of channel conflicts, will differentiate our platform in the specialty program market.” Mr. Blackburn continued, “Everspan Group’s experienced executive team, with an established track record in the specialty program industry, combined with public company support, including deep operational and credit expertise, will allow Everspan Group to provide financial strength, stability, commitment, and continuity to our business partners.”

Claude LeBlanc, Ambac’s President, and CEO of Ambac and Everspan Group, added, “The launch of Everspan Group reflects a milestone event and the core foundation for Ambac’s specialty program insurance strategy. Everspan Group’s advanced participatory fronting model positions us to be a leading market for insurance distributors. Our broader specialty insurance strategy is focused on establishing and acquiring targeted best in class businesses with quality growth-oriented business models and proven management teams. With the launch of Everspan Group and the recent acquisition of Xchange, Ambac is progressing its goal of developing capital efficient specialty insurance businesses that we believe will create long term value for our shareholders.”