The London Stock Exchange listed, Montpelier Re operated, Blue Capital Global Reinsurance Fund achieved a total net asset value return including dividends to investors of 11.8% in 2013, according to an update from the firm.
In an update published this morning Blue Capital Management, the third-party capital and reinsurance-linked investment management arm of Bermuda based reinsurer Montpelier Re, gave an update on the funds progress during 2013 and its portfolio after the key January reinsurance renewals.
William Pollett, President and CEO of Blue Capital Management Ltd., commented on 2013; “We are pleased to have successfully navigated through the first full year of operations, posting a total NAV return (including dividends) for 2013 of 11.8%, in line with the Company’s stated target return.”
Blue Capital felt the more competitive reinsurance market environment, created by a well-capitalised sector due to low levels of catastrophe losses in 2013 and high levels of new capital coming into the space from the capital markets, at the January renewals.
Pollett explained; “Overall, we witnessed a competitive underwriting environment with healthy competition from traditional and alternative markets over the important January 2014 renewal period.”
Despite the high levels of competition and abundant capacity available to cedents, Blue Capital targets area of the property catastrophe reinsurance market which are not receiving as much focus from capital market investors such as pension funds and ILS investors.
Pollett continued; “Blue Capital’s differentiated product focus on collateralized reinsurance transactions with smaller, regional insurance companies enabled it to sidestep the most competitive market segments.”
The declining trend in reinsurance prices, indicative of a broadly softening market, have had an impact on Blue Capital’s renewal portfolio. This is unavoidable in the current environment and a factor affecting all reinsurance market providers of capacity, whether traditional reinsurers or collateralized funds.
Pollett said; “Overall, the January trades were executed with an average risk adjusted rate decrease of approximately 12% compared to last year. Despite these rate decreases, we remain confident that we can deliver attractive returns for our Shareholders.”
The target return for the Blue Capital Global Reinsurance Fund is LIBOR plus 6% per annum on the original issue price of its shares and a net return to its shareholders of LIBOR plus 10% per annum, net of fees.