Blue Capital Reinsurance Holdings Ltd. (BCRH), the New York Stock Exchange listed collateralized reinsurance subsidiary of Bermuda reinsurer Montpelier Re, has established a retrocession agreement giving it access to selected reinsurance business from within the group.
In an SEC filing, Blue Capital Reinsurance Holdings announced that its wholly owned reinsurer subsidiary Blue Capital Re Ltd. has entered into a retrocessional reinsurance agreement with Montpelier Re subsidiary Blue Water Re Ltd. Under the agreement, Blue Water Re has the option to cede up to a 100% cession of its reinsurance business written to Blue Capital Re.
Blue Water Re acts as the reinsurer which underwrites business for the Blue Capital Global Reinsurance Fund, the London listed reinsurance-linked investment fund operated by Blue Capital Management, the third-party capital and reinsurance-linked asset manager of reinsurer Montpelier Re. It may also underwrite some other business for other Blue Capital or Montpelier Re ventures.
The retrocession agreement is effective as of the 1st January 2014 and runs indefinitely in annual periods it appears, allowing it to enter into these retrocession agreements as appropriate likely around renewals, thus augmenting the capacity of Blue Water Re to underwrite more business itself.
With this agreement in place, Blue Capital Reinsurance Holdings will have access to a source of retrocessional reinsurance business, ceded to it from Blue Water Re, using the third-party capital it is financed with as collateral. That effectively increases the capacity of Blue Water Re, freeing it up to underwrite more risk. In this scenario Blue Capital Re Ltd. is acting as a type of sidecar vehicle for the Blue Capital and Montpelier Re third-party capital entities.