Guernsey domiciled rated reinsurance company Humboldt Re Limited, launched by ILS investment manager Credit Suisse Insurance Linked Strategies Ltd. as part of its strategy to broaden its access to risk, is on track to beat its target for 2016 premiums underwritten.
Credit Suisse’s Insurance-Linked Strategies team established its first rated reinsurance company Kelvin Re for the 2015 underwriting year backed by an investment from the Abu Dhabi Investment Council.
The ILS manager then followed up quickly with another rated reinsurer, Humboldt Re, which it launched in late 2015 for the 2016 underwriting year, this time backed solely by capital from Credit Suisse managed ILS funds.
Adding rated platforms provides the Credit Suisse ILS team with a leveraged platform to access more risk, offering the ILS team’s underwriters a way to provide ceding companies with a choice of directly collateralised or rated balance-sheet backed reinsurance coverage.
At launch, Humboldt Re targeted underwriting around CHF 140 million of premiums in its first year.
In an update from rating agency A.M. Best, in which the agency affirmed Humboldt Re’s financial strength and credit ratings, it explained that Humboldt Re is on track to underwrite around CHF 156 million of gross written premiums for 2016, so beating the target from the initial business plan.
Humboldt Re accesses its business via the Credit Suisse ILS team, so really this is testament to the way Credit Suisse has developed its market facing reinsurance platform and the ability of its team to originate risk.
A.M. Best explains; “The company (Humboldt Re) has derived all of its business solely using the distribution reach of Credit Suisse’s Insurance-Linked Strategies.”
At the same time as getting on track to beat its target on Humboldt Re premiums underwritten, the Credit Suisse ILS team has also continued to grow its overall platform, taking its ILS assets under management to approximately US$7.4 billion as of the 30th September 2016.
Humboldt Re underwrites predominantly short-tail property and specialty lines of reinsurance. As a rated platform it also likely offers the Credit Suisse ILS team with a platform to test new underwriting products as well, given it offers a little more flexibility to take on slightly more tail risk.
A.M. Best said that it has affirmed Humboldt Re Limited’s Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of “a-”, citing the firm’s “strong risk-adjusted capitalisation, adequate risk management framework, and experienced management team.”
The rating agency does also note that offsetting that is the concentrated natural catastrophe reinsurance exposure and Humboldt Re’s “high level of dependency on Credit Suisse’s Insurance-Linked Strategies team.” However some would think that a positive, as evidenced by the growth experienced by the ILS management unit.
Of course the state of the reinsurance market remains a pressure, A.M. Best notes, saying; “Although the company so far in 2016 has been able to secure top-line revenues above its original expectations, and is expected to report a profit for the year, underwriting margins and investment yields remain subject to the pressure of the current challenging operating environment.”
However as part of an ILS platform and relying on the Credit Suisse ILS team, Humboldt Re is being operated in a lean manner and therefore can probably extract as much, if not more, margin out of the risks it underwrites as any other reinsurer can. That should position rated entities owned by ILS managers strongly for navigating the softened market.
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