Bermuda-based insurer and reinsurer Everest Re Group continues to explore ways to evolve and develop its alternative capital play, according to John Doucette, Executive Vice President (EVP) and Chief Executive Officer (CEO) of the Reinsurance Division.
In the first-quarter of 2020, Everest Re reported that premiums ceded to its collateralized reinsurance sidecar-like vehicle, Mt. Logan Re, increased by 38% as the firm continues to expand the book of business within the vehicle.
This came after some impressive growth in 2019 when the re/insurer ceded a record amount of annual premiums written to Mt. Logan Re.
Clearly, alternative, or third-party reinsurance capital has become an integral part of Everest Re’s operations.
Speaking as part of a panel discussion held during the virtual Artemis ILS Asia 2020 conference (available to watch on-demand here), Everest Re’s Doucette commented on the firm’s alternative capital operations and specifically the development of its sidecar-like vehicle.
“It’s an evolution and we continue to iterate. We look at a lot of product development to see what the best structure is. We continue to do that. We’re in the process of doing a more beta-play offering within Mt. Logan, to provide even broader access to the Everest Re book for reinsurance,” he explained.
He continued to note that, so far, alternative capital has really been focused on reinsurance, explaining that if the company likes the risk enough for its own balance sheet, that’s part of the discussion with ILS.
“In terms of that they (investors) should also like it as well, since we’re using our experienced underwriters all over the world in looking at whether we want to take that risk or not and we participate in every risk that goes into Mt. Logan.
“We continue to look for ways outside, beyond property, how do we do things outside of that. We look at things in terms of the insurance operations. It has continued to evolve how we think about what we keep on our balance-sheet and what we look to put outside of our common equity on different capital structures,” said Doucette.
As well at Mt Logan Re, the Bermuda domiciled re/insurer also issues catastrophe bond transactions via its Kilimanjaro Re platform.
The company returned to the cat bond market in 2019 with a $850 million twin issuance and, Doucette told the audience that the addition of its cat bonds and Mt. Logan Re, means that its $9 billion of capital is really $13 billion.
“So that evolution and that development of alternative capital to back a broader portion of our book we’re continuing to work on that and look for efficiencies in that,” said Doucette. “Back to matching the best capital with the risk that we have in-place. I think we’re on a journey and we may be only in innings three of that journey.”
Looking forward, Doucette feels that the company is well placed in light of current market conditions, and in fact is “very bullish” on its potential.
“Heading into 1/1 we feel we’re in a very strong place. We continue to see a heightened flight to quality. It positions us very well, with our ratings and franchise, as well as underwriters all over the world.
“Not only is it a flight to quality, but we see more and more, because of the trapped capital, because of these concerns and some of the things about looking to isolate the risk that is coming into the ILS community, we also think there’s a flight back to the traditional model,” said Doucette.
As well as the on-demand playback, we will be archiving every session from our online and virtual ILS Asia 2020 conference over on our YouTube Channel in the coming weeks.
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