Aspen to introduce “new and innovative” capital markets structures

Aspen Insurance Holdings Limited, the Bermuda headquartered insurance and reinsurance group, aims to attract increased levels of third-party investor capital to its Aspen Capital Markets unit, through the introduction of “new and innovative” structures.

The company announced its half-year results on Friday, revealing that the COVID-19 pandemic drove it to an after tax operating loss of $48.2 million and a combined ratio of 109.2%, due to coronavirus related claims reserves of $187.3 million or 15.7% on the combined ratio.

Absent COVID-19, Aspen would have reported an operating gain of $139.1 million after tax and a combined ratio of just 93.5%, while it also reported a 14.2% increase in gross written premiums for the period.

Reinsurance premium growth was the main driver of Aspen’s expansion in 2020 so far, as the company reported an increase of 27.3%, largely due to expanding its specialty reinsurance, property catastrophe reinsurance and casualty reinsurance books.

Third-party capital is playing an increasingly important role for the re/insurer and this was acknowledged in its results statement.

It was noted that the Aspen Capital Markets unit, where third-party capital management through insurance-linked securities (ILS) allows the company to bring institutional investor capital directly into its underwriting business, is playing an important role in helping it manage its probably maximum losses (PML’s).

Aspen CEO Mark Cloutier said that the Capital Markets unit is “becoming ever more important to both PML management and product offerings” for the company.

Aspen aims to grow this business, bringing more capital under the management of this specialist unit, which will help it as it expands its reinsurance book in the improved rate environment.

“We continue to build on its contribution to our group wherein we expect both AUM and fee income will grow over the prior year through a combination of renewal and expansion of existing structures and the introduction of some new and innovative structures,” Cloutier explained.

Aspen has been making increasing use of retrocessional sources of reinsurance capital, leveraging the appetite of third-party ILS investors to manage its probable maximum losses (PML’s) in recent years.

In 2018 the company expanded its use of the Peregrine Re special purpose vehicle, which serves as the home for Aspen’s fully-collateralized reinsurance quota-share business, following the sun setting of its Silverton Re sidecar.

Read more on Aspen’s half-year 2020 results over at our sister site Reinsurance News.