Specialty insurance and reinsurance player Brit Ltd. has begun to recognise an increasing benefit from managing third-party capital, as the firms managed capacity reached $400 million across its Sussex Capital collateralised reinsurance platform, Versutus reinsurance sidecar, and Lloyd’s syndicate 2988.
Brit is ambitiously growing its third-party capital activities, with the most recently launched collateralised reinsurance venture Sussex Capital targeting becoming a “leading ILS manager” while the firms Versutus collateralised sidecar and third-party capital backed syndicate at Lloyd’s have also hit record sizes this year.
Brit’s Sussex Capital unit launched at the beginning of the year, underwriting direct collateralised property catastrophe reinsurance and offering collateralised reinsurance to Brit’s Property Treaty portfolio, through its Sussex Re reinsurance vehicle.
The Sussex unit features an open-ended ILS fund, underwriting collateralised reinsurance through special purpose insurance vehicle Sussex Re, and Brit raised $102.5 million from investors for Sussex’s 2018 underwriting year, which the firm said is its “next step in Brit’s strategy to build long-term relationships with the capital markets.”
The company also expanded the size of its fully-collateralized reinsurance sidecar Versutus Ltd. to $187 million for 2018, as it sought to deploy more investor capital through its underwriting channels this year.
On top of the more alternative and ILS focused, fully collateralised activities, Brit has also expanded its third-party capital supported Syndicate 2988 to a stamp capacity of £98.5 million (c.US$130m) for 2018. The syndicate now offers broader access to the firms underwriting capabilities, including over 20 lines of business this year.
“These initiatives represent excellent progress as we continue to develop and enhance our capital markets participation,” Matthew Wilson, Group Chief Executive Officer of Brit Limited said.
In the six months ending June 30th 2018, Brit has turned its $400 million of managed capacity across the three vehicles into fee income of $5.8 million.
Mark Allen, CFO at Brit explained, “In the period, we have benefited from the growth of our third party capital vehicles, generating US$5.8m of fee income. The generation of such underwriting-related income is an important part of Brit’s strategy and has the benefit of assisting Brit in managing its expense base and enhancing shareholder return.”
These collateralised reinsurance and managed capital activities are likely to become increasingly important contributors to Brit’s profits in time and the promise of somewhere north of $10 million or so for the full-year, with profit commissions likely to come later, will be a significant boost for the firm.
With its ambitions to turn Sussex Capital into a leading ILS manager, Brit is clearly looking to upsize these activities and it will be interesting to see just how much third-party capital the firm can raise for the end of this year, to expand its trading at the January 2019 reinsurance renewals.