The Canada Pension Plan Investment Board (CPPIB) has again shown the appetite that pension funds as institutional investors have for insurance and reinsurance investing, buying 1.9m shares in Enstar Group Limited.
Enstar is a specialist in the acquisition and management of legacy insurance and reinsurance businesses, as well as operating active underwriting firms through its Atrium and Torus brands.
The Canada Pension Plan Investment Board (CPPIB) invests funds on behalf of the $264.6 billion Canada Pension Plan (CPP). Enstar is not the first insurance or reinsurance linked investment that the CPPIB has made, buying life insurance and reinsurance from Wilton Re last year.
The stake in Enstar represents 1.9m shares, or approximately 9.9% of the group. The shares have been purchased from one seller, private equity specialist First Reserve.
Dominic Silvester, Enstar’s Chief Executive Officer, commented; “We are gratified by CPPIB’s interest in Enstar and are pleased that they have pursued the acquisition of a significant stake in our company. We have known the team at CPPIB for several years and have tremendous respect for their organization. I believe that they will be a valuable partner for Enstar, and we look forward to a long and productive relationship together.”
The purchase of shares will be sufficient to get the CPPIB a seat on the Enstar board, taking over from the board seat held by First Reserve.
Large Canadian pension funds continue to target the insurance and reinsurance sector as a source of long-term return as well as diversification for their overall portfolios. Recent financial market conditions have pushed pension funds to look to new areas of private equity and also direct investment in re/insurance through insurance-linked securities (ILS).
As large pension funds like the CPPIB gain an appreciation for the sector it is expected to result in more capital being made available to insurance and reinsurance firms, either through direct investment or third-party capital vehicles.