Arch Capital’s Voussoir Re sidecar in another preferred share issuance

The Arch Capital Group sponsored collateralized reinsurance sidecar style special purpose insurance (SPI) vehicle Voussoir Re Ltd. has made another issuance of shares, the third so far that we’ve seen during 2022.

Bermuda headquartered insurance and reinsurance specialist Arch Capital has been making steady use of Voussoir Re in recent years, as a sidecar and structure that enables the company to welcome third-party capital investors into its business as risk capital partners.

Voussoir Re has become Arch Capital’s main structure for sharing risk with third-party or insurance-linked securities (ILS) style investors, we understand in both quota share and excess of loss formats.

Arch Capital registered Voussoir Re Ltd. in Bermuda in 2019, since which the special purpose insurer (SPI) and segregated accounts vehicle has been used both as its main quota share sidecar structure and for collateralised reinsurance arrangements and issuance of insurance-linked notes to investors.

In 2019,  we reported on the first $74 million issuance of notes from Voussoir Re Ltd., which was a quota share based reinsurance sidecar style arrangement for Arch Capital.

Arch returned in 2020 with a second, $76.5 million issuance from its Voussoir Re sidecar vehicle, featuring a $20 million Class A tranche of Series 2020-1 notes and a $56.5 million Class B tranche, again a sidecar like quota share reinsurance arrangement.

For 2021, Arch sponsored a third transaction, which represented a nearly $70 million renewal for the Voussoir Re sidecar structure.

Then, in late 2021, we reported on the first preferred shares issuance to come to light from Voussoir Re, with the previous issuances having featured participating notes.

In March 2022, Arch Capital used Voussoir Re again, with two more series of preferred shares issued.

Preferred shares are an increasingly popular option for quota share reinsurance partnerships with large investors and these also enable the sponsor to issue the shares prior to the underlying transaction occurring, should they choose. They can also enable access to books of business on an excess-of-loss basis, we understand.

Arch seems to use Voussoir Re more frequently than the few transactions we see, as while the issuances in March were of Series 2022-1 & 2022-2 shares, this latest issuance that has just come to light features Series 2022-9 preferred shares.

So, Arch Capital’s reinsurance sidecar SPI Voussoir Re has now issued another series of preferred shares, which will be used as the investment structure to enable third-party capital providers to back reinsurance business, we assume.

Preferred shares can sometimes be used for more perpetual issuances from sidecars, as well as fixed-term, or to facilitate private quota share arrangements between a cedent and a single insurance-linked securities (ILS) fund or investor.

In this latest case, Voussoir Re Ltd. has issued 550 Series 2022-9 non-voting and redeemable preferred shares, using a segregated account Voussoir Re Ltd. 2022-9, with each of the shares having a nominal par value of $0.01.

This series of preferred shares has been privately placed with qualified institutional investors.

It remains a challenge to understand whether the underlying transaction arrangement is a quota share, or an excess-of-loss.

It also worth highlighting that in the past Arch has also used Voussoir Re to issue notes that some investors consider to be akin to catastrophe bonds, as there have been a number of cat bond funds which have held Voussoir Re Ltd. notes within their portfolios.

As ever with this kind of private ILS transaction, details are scarce, so we can’t be sure of the exact structure and underlying risks associated with this latest Voussoir Re issuance for Arch.

For more details on reinsurance sidecar investments and transactions view our list of collateralized reinsurance sidecars.