Aspen’s Silverton Re sidecar nears $80m as third-party value grows

Global insurance and reinsurance firm Aspen’s collateralized reinsurance sidecar vehicle Silverton Re has increased the value of its long-term debt, which was issued to third-party investors, to $64.5m which is up 15% in the third-quarter.

Added to the $15m of Aspen’s capital which it contributed to the Silverton Re sidecar at launch, this would take the sidecar to approximately $80m in outright size.

The Silverton Re sidecar is managed, along with other third-party reinsurance capital vehicles, at Aspen’s alternative capital management and insurance-linked securities (ILS) focused unit Aspen Capital Markets. The unit had reached around $135m of ILS and reinsurance assets under management by the middle of the year.

Aspen’s Silverton Re fully-collateralized sidecar was launched in December 2013 with $50m of third-party reinsurance capital and $15m of capital from Aspen, taking it to $65m in size. Now the value of the long-term debt issued by Silverton Re has grown over the three-quarters of the year to stand 29% higher at $64.5m.

It’s worth noting that this is not a pure underwriting return, rather it is the performance in the value of the participating debt notes issued to investors by Silverton Re.

The value of the debt issued by Silverton Re, which is in essence the investors participation in the sidecar vehicle, has grown in value as follows. Starting at $50m at 31st December 2013 (at launch), then increasing by 6.8% to $53.4m by the end of the first quarter 2014, then growing in value again by 4.9% to $56m by the end of the first half and then by 15% in Q3 to $64.5m. That’s a 29% performance (increase in value of the debt) for the first six months of 2014, which is a very healthy increase.

The best publicly available measure of return for the Silverton Re sidecar available is in the portfolio disclosure of Stone Ridge Asset Management’s funds, which shows that its $10m allocation to Silverton participating notes was valued at $11.563,367m at the 31st July 2014, which suggests a near 15% first-half return. Nearly doubling that in one more quarter would be very impressive.

It should be noted that some of this could be additional capital raised, although it is more likely that it is predominantly the return on investment capital as it’s not huge numbers. It’s not surprising to see the increase in value of Silverton’s debt jump in Q3 as the seasonal returns flow in from contracts underwritten using the capital.

It will be interesting to see whether Aspen can significantly increase the capital managed in Silverton Re for the January renewals, when it will be looking to raise and deploy much of the sidecar capacity it can raise. With numbers like the above Silverton Re should be an attractive proposition for ILS and reinsurance investors.

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