Enstar acquired Class 3B property cat reinsurer for ~$46m in recent ILS legacy deal

Enstar, the legacy and run-off reinsurance specialist, has said that it acquired a Bermuda based Class 3B reinsurer in its most recently announced legacy transaction focused on property insurance-linked securities (ILS), for approximately $46 million.

Notably, that price represents a roughly 30% reduction compared to the latest book value of the reinsurance entity, that Enstar had reported at the time of announcing the deal.

Early in November, Enstar announced that its Cavello Bay Reinsurance Limited (Cavello Bay) entity acquired a Bermuda-domiciled Class 3B insurer and segregated accounts company that had been underwriting property reinsurance business through the years 2020 to 2023 on behalf of third-party investors.

The Class 3B reinsurance vehicle had been assuming its risks through retrocession agreements with a fronting carrier.

It represented the second ILS legacy deal from Enstar, following one announced in July when the company provided a loss portfolio transfer (LPT) for prior-year insurance-linked securities (ILS) reserves.

The most recent ILS legacy arrangement provides finality for the ILS investors that had been backing the risks, held by the Class 3B reinsurance entity in the more recent arrangement, freeing up capital and providing certainty, at a valuation that had been agreed upon by all sides.

At the time of the acquisition of the Class 3B property catastrophe ILS reinsurer being announced, Enstar revealed that as of the end of July 2024 this reinsurance entity had a book value of $66 million, based on its shareholders’ equity.

Now, Enstar’s latest quarterly filing reports that the company paid a purchase price roughly 30% below that last book value figure.

Enstar reported that it entered into an agreement on September 6th 2024, to purchase 100% of the voting and non-voting shares of the Class 3B Bermuda-based reinsurer and segregated accounts company within the property catastrophe ILS market.

The estimated purchase price is reported by Enstar as having been $46 million, which now provides a clearer idea of the discount to book value the legacy specialist agreed with the parties involved.

With Enstar a specialist in acquiring and managing legacy and run-off books of insurance or reinsurance business, the company looks to provide its clients with finality in return for a chance to manage down the claims exposures and generate a profit above the acquisition price it has paid.

This second ILS legacy transaction marks the continued expansion of Enstar’s run-off portfolio to reinsure property catastrophe risks written by third-party capital platforms which are funded by insurance-linked securities (ILS).

Enstar also announced a further expansion of its activities in the ILS space this year, when it revealed its first Forward Exit Option (FOE) transaction, where it delivered an option for investor exit, liquidity and finality from the Starwind Specialty sponsored Fractal Re reinsurance sidecar.

Enstar is carving out a niche for itself as a provider of legacy solutions to the insurance-linked securities (ILS) market, which we discussed in more detail in a recent interview with Anguel Zaprianov, Executive Vice President, M&A.