Aspen Insurance Holdings Limited, the Bermuda headquartered insurance and reinsurance group, has expanded its use of third-party sources of reinsurance capital and insurance-linked securities (ILS) structures to include activities in specialty and casualty lines of business.
Aspen’s dedicated unit, Aspen Capital Markets, manages third-party capital and ILS funds or sidecars, connecting investors and funds with portfolios it has created, or to mandated specific risk portfolios or transactions.
The third-party capital business has been growing in importance for Aspen, with third-party assets under management at Aspen Capital Markets reaching almost $800 million at the end of 2020.
At the same time, management fee income earned through the Aspen Capital Markets operations more than doubled in 2020, rising by $16.9 million year-on-year to $32.6 million.
Aspen cedes business to investors using its Peregrine Re special purpose vehicle, which serves as a home for fully-collateralized reinsurance quota-share business with investors, alongside enabling investor access to private managed ILS funds, such as the Aspen Cat Fund Limited.
Historically, the Aspen Capital Markets business was almost solely focused on property catastrophe reinsurance business.
But, like many other reinsurers that have third-party capital units, Aspen has steadily been expanding that remit in the last couple of years.
This expansion is likely a result of investor demand, as third-party allocators to ILS strategies have found partnerships with established underwriting franchises a good way to gain access to a broader range of classes of risk.
In its latest annual report, Aspen reveals that the expansion of its Capital Markets business now sees the company ceding to investors, through sidecar type transactions or in its managed ILS funds, property insurance and reinsurance related risks, specialty reinsurance, and also casualty insurance and reinsurance business.
That marks a significant expansion over the last couple of years, making good on promises the company had made a few years ago that it would look to develop new ILS products.
Traditional re/insurers like Aspen are well-positioned to help investors access a broader range of insurance and reinsurance risks, as they already have access to the underwriting business and can bring third-party capital alongside their own, finding the most appealing risk/return opportunities to meet specific investor demand for diversification.