Global insurance and reinsurance firm Aspen’s collateralized reinsurance sidecar Silverton Re has seen the value of its long-term debt, which was issued to third-party investors, grow by approximately 11% in Q3 2015, from $76.2 million to $84.5 million.
Aspen renewed the Silverton Re collateralized reinsurance sidecar for 2015, raising $70 million of third-party investor capital with the remaining $15 million contributed by Aspen itself. The $70 million of third-party capital was allocated Silverton loan notes, through which we can gain some visibility of the sidecars performance through the changes in value reported by Aspen in its results.
The Silverton reinsurance sidecar loan notes were worth $70.7 million at the 31st December 2014, increasing in value by 7.8% to $76.2 million at the 30th June 2015. The notes increased in value by just under 11% during the third-quarter, reaching the $84.5 million by September 31st.
With Aspen’s $15 million investment in Silverton Re as well, which could have increased at the same rates, so to $16.17 million by mid-year and then to approximately $17.9 million by September 31st 2015, that would put the Silverton Re sidecar at roughly $102.4 million by the end of the third-quarter.
We should note that it’s not possible to confirm these figures entirely, as it could be that Aspen has other tranches of private notes within Silverton Re. Being a special purpose insurance vehicle Silverton could be doing more business than this, but the details from Aspen’s report at least provide some detail on it.
Silverton Re clearly sees its loan notes appreciate in value much more rapidly during the U.S. wind season, from seasonality, hence the much stronger performance in Q3.
It’s possible to see this in mutual ILS fund manager Stone Ridge Asset Managements reporting. Stone Ridge purchased $14 million of Silverton Re 2015-1 sidecar loan notes in December 2014. By the end of April 2015 these notes had appreciated in value to $14.97 million, a 6.4% increase (from cost) over the first four months of the year.
At the 31st July, the next time Stone Ridge reported its portfolio breakdown, the value of the Silverton Re 2015-1 sidecar notes had increased again to just over $15.67 million, so almost a 12% increase in value over the first seven months of 2015.
Based on the increase in value reported by Aspen in Q3 it’s safe to assume that a further jump in value will be reported by Stone Ridge at the end of October, when the asset manager next reveals its portfolio mix.
At the start of 2015 Aspen Capital Markets, the re/insurers third-party capital and ILS unit, was managing around $185 million of third-party investor capital, a figure which is sure to have grown in recent months.
The continued increase in value of the Silverton Re sidecar loan notes will be a further draw to investors looking to access ILS and collateralised reinsurance returns.
It’s worth noting that this is not the pure underwriting return, rather it is the performance in the value of the debt notes issued to investors by Silverton Re.
For more on reinsurance sidecar investments, view our list of collateralized reinsurance sidecars.