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Flywheel Re sidecar gives Accelerant flexibility, funds growth: CFO Jay Green


Having launched a multi-year sidecar structure called Flywheel Re earlier this year, Accelerant now benefits from greater flexibility and the investor backing is supporting its growth, CFO Jay Green explained at the SIFMA ILS event in Miami last week.

jay-green-accelerant-sifma-ils-2023Speaking during a panel discussion about the multi-year commitments needed for investors to allocate to broader books of insurance and reinsurance business at the conference, Accelerant CFO Green said that the Flywheel Re sidecar has delivered what the insurtech was hoping for.

Accelerant helps its members exchange and transfer risk more effectively, while also connecting them with long-term capital and reinsurance capacity, so tapping the institutional markets using a sidecar structure was a natural step, Green said.

Green explained, “A big part of our business at Accelerant is sourcing risk capital. The three things that Accelerant provides to our members, are data, technology and risk capital, and we essentially operate as a risk exchange and the business that we write is typically that low-volatility specialty business.

“Our premium volumes are now in the billions of dollars, you know, we have over 100 members, so we’re writing a very diversified and global portfolio and we thought that that would be a perfect opportunity for institutional investors to participate alongside our, you know, our blue-chip re-insurers.

“We have a great panel of reinsurance support, but we think this is something that’s highly attractive as well to investors. So we wanted to make a push to expand that out to investors getting access, and also partner with investors that can help support our growth.

“We’re growing at a very fast rate and it’s about finding partnership capital in the institutional markets.”

He went on to explain that, for investors, partnering with a player like Accelerant can provide access to business that isn’t as easily accessible from the ILS market.

“A lot of investors, some existing investors in the ILS space and a lot of new investors, are looking for the broader opportunities that we can see,” Green said.

Adding that, “There’s a lot of great specialty and casualty business, but, it’s still about how we can create structures that can give investors access to that part of the business, that wasn’t there before, because frankly, the investors were looking for more.”

Importantly, Green highlighted that the Flywheel Re sidecar took commitments for the multi-year term, rather than being fully-funded from the off.

That gave investors more certainty in their ability to only deploy their capital as the opportunity allowed, while meaning Accelerant could take its time and deploy it as the business looked attractive to do so.

He explained, “We wanted investors who could partner and support our growth, and so the way that we set up our initial sidecar was more as a committed facility, where we brought in the capital as we need it.

“We’re not just taking a whole bunch of capital upfront and sort of leaving investors with a lot of execution risk. We’re saying, we’re looking for something that looks more like a fund commitment and then we will pull or draw on that capital as our business grows.

“So, it’s a multi-year commitment from investors, but they get the benefit of only deploying the capital as we need it to actually grow.”

On the longer-tailed nature of some of the risks involved in the specialty space, as well as the duration of a multi-year structure, Green believes investors are keen and that this aligns well with Accelerant’s strategy.

“I think the starting point is, there’s recognition amongst the investor base and certainly, the investors that we spend most time with in the market, that that’s a trade-off worth making. The reality is, I think a lot of investors are willing to make a longer commitment.

“It helps you go after the market opportunity, it gives our members more certainty in terms of their capacity, as one of the biggest issues we’re solving for MGA’s is that we’re alleviating that need to go back out into the traditional market every single year and find capacity.”

Finally, Green also said that investors are gaining access to a book of business that is growing in diversification, as Accelerant grows and that this is also improving the performance of the Flywheel Re sidecar over time as well.

“As we get bigger, we diversify more and that just drives better performance in the portfolio, better returns within the sidecar.

“Every year, we’re adding more business and so we’re getting more and more diversified, it becomes more attractive to investors,” Green explained.

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