Bermuda-based insurance and reinsurance firm Everest Re is “looking forward” to increasing the size of its third-party investor backed collateralized reinsurance vehicle Mt. Logan Re as it seeks to take advantage of ongoing investor interest.
Mt. Logan Re operates somewhere between an active reinsurance sidecar and a companion underwriting vehicle, underwriting largely peak catastrophe risks on a fully collateralized basis for third-party investors.
The vehicle has seen impressive growth, with assets under management of just under $1 billion we understand, and as Mt. Logan Re’s scale has increased the benefits felt by parent Everest Re and its shareholders have been increasing.
During the reinsurers third-quarter earnings call John Doucette, President & CEO of Everest Re’s Reinsurance Division, explained the benefits of its broadening alternative capital platform.
“With a suite of solutions to best match the risk capital, including our $8 billion of equity, Mt. Logan, our catastrophe bonds, and other internal and external sources of capital, we offer our clients meaningful capacity from a trusted partner,” Doucette said.
This multi-balance sheet approach, which is now so common among larger reinsurance firms, has enabled companies like Everest Re to better navigate the softening marketplace over the last few years.
Mt. Logan Re delivered extremely attractive returns to its investors, delivering as much as 20.2% in its higher risk strategies for 2015. Those sorts of return, alongside the track-record Everest Re has as an underwriter in the market, is continuing to attract investors who want to allocate capital to Mt. Logan Re.
“We continue to look for ways to broaden our value proposition to our clients with these various solutions,” Doucette said on the range of third-party capital offerings Everest Re now has.
“Mt. Logan in particular continues to draw interest from new investors, including various pension funds, and we look forward to increasing the scale and the scope of the benefit that Logan provides to Everest’s clients and shareholders,” he continued.
During 2016 so far Mt. Logan Re has been hit by some of the frequency and major catastrophe events that have hit the reinsurance and ILS fund market, resulting in a lower level of income being passed to parent Everest Re.
Craig Howie, CFO at Everest Re explained; “Other income also included $10 million of earnings and fees from Mt. Logan Re in the nine months of 2016 compared to $15 million of income for the same period last year. The decline essentially represents the higher level of catastrophe losses during 2016.”
Howie further explained that the reduction in fees is due to losses estimated or reserved for, which does suggest that some of this fee income could flow back once claims are settled; “The reason that it’s lower this year is because of the anticipated estimate for losses in the Logan book will lower the amount of fees that we get until those losses are settled.”
Mt. Logan Re is well-positioned to grow significantly as and when market conditions allow. It’s likely that, as with all the large ILS fund managers, Mt. Logan Re could raise new capital as and when it chooses, but the availability of profitable underwriting opportunities will dictate just how much and when that is.