Arch Capital Group, the Bermuda headquartered insurance and reinsurance specialist, has sponsored the issuance of two new series of preferred shares from its Voussoir Re Ltd., collateralized reinsurance sidecar style special purpose insurance (SPI) vehicle.
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.
Preferred shares have become increasingly popular for quota share reinsurance partnerships with large investors and these also enable the sponsors to issue the shares prior to the underlying transaction occurring, in some cases.
Now, Arch Capital’s sidecar SPI Voussoir Re has issued two more series of preferred shares, which will be used as the investments to enable third-party capital providers to back a proportional book of 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 both Series 2022-1 and Series 2022-2 preferred shares.
Voussoir Re issued 500 Series 2022-1 preferred shares, using a segregated account Voussoir Re Ltd. 2022-1, with each of the shares having a nominal par value of $0.01.
In addition, the vehicle has issued 1,000 Series 2022-2 preferred shares, using a segregated account Voussoir Re Ltd. 2022-2, again with each of the shares having a nominal par value of $0.01.
The two series of preferred shares have been privately placed with qualified institutional investors.
As we’ve explained before, it’s impossible to know whether the underlying is a quota share reinsurance arrangement, or an excess-of-loss, while Arch has also used Voussoir Re to issue notes that some investors consider to be akin to catastrophe bonds, as there are a number of cat bond funds that have held Voussoir Re Ltd. notes within their portfolios.
As ever with these ILS transactions, details are scarce, so we can’t be sure of the exact structure and underlying risks associated with this latest Voussoir Re issuance.
For more details on reinsurance sidecar investments and transactions view our list of collateralized reinsurance sidecars.
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