Global insurance and reinsurance player Everest Re ceded fewer premiums to its Mt. Logan Re Ltd. collateralized reinsurance sidecar-like vehicle in the second-quarter of 2020, although for the first-half cessions are still up by 13% compared to the prior year.
This represents a change in the timing of cessions to the Mt. Logan Re sidecar structure it seems, as previously cessions had been more balanced between first and second quarters of the year.
But in 2020, premiums being ceded to third-party reinsurance capital investors through the Mt. Logan Re segregated account and sidecar-like vehicle rose significantly by 38% to more than $110 million, in the first-quarter of 2020, suggesting more risk from the January renewal cycle flowed to the structure this year.
In the second-quarter of 2020, Everest Re ceded just over $48.5 million of premiums to Mt. Logan Re, down from almost $58.9 million in the prior year period.
This all follows a year of growth in 2019, when Everest Re ceded the highest amount of annual premiums written to the structure.
Still, 2020 is running ahead of last year, with ceded written premiums to Mt. Logan Re reaching $158.7 million at the end of Q2, up by 13% on the $140.45 million ceded in H1 of 2019.
The gap is less apparent in terms of ceded earned premiums, of which Mt. Logan Re took $71.14 million in Q2 2020, only slightly down on Q2 2019’s $74.32 million.
For the first-half, earned premiums ceded to Mt. Logan Re by Everest Re reached $161.7 million, up on the $140.6 million ceded in the prior year first-half.
It’s encouraging for the investors in Mt. Logan Re that it remains a key recipient of reinsurance premiums from parent Everest Re, with the growth also impressive considering the assets in the structure have shrunk slightly.
Mt. Logan Re ended the first-half of 2020 at just above $800 million in assets, having taken a small amount of inflows in the second-quarter.
Mt. Logan Re is now accountable for roughly 36% of Everest Re’s reinsurance receivables, as a retrocessionaire to the reinsurer.
But that is actually down on the prior year, when Mt. Logan Re made up 38% of the reinsurers’ retro arrangements.
That’s a sign that, while an attractive source of capital, Everest Re is using Mt. Logan Re in-line with its own expansion in the currently firming market.
This is notable, as some other reinsurers have seen their third-party capital provisions become a much more significant retrocessionaire to their business in the last year, while Mt. Logan Re has remained around the same level despite Everest Re growth. This shows it isn’t purely being used as a lever for growth, rather it is as an aligned pool of supportive underwriting capacity that shares in Everest Re’s underwriting earnings.
On the losses side, Mt. Logan Re took just over $40.9 million of losses ceded to it by Everest Re in Q2 2020, slightly up on the $39.4 million in the prior year quarter.
For the first-half, losses ceded to Mt. Logan Re were a little over $86 million, up slightly on H1 2019’s $85.4 million.