German reinsurance giant Hannover Re has gained an interesting new business arm with the completion of its acquisition of Lloyd’s of London focused player Argenta Holdings today, as it now takes ownership of Argenta Private Capital which helps investors to access the returns of Lloyd’s underwriting business.
When the acquisition of Argenta Holdings was announced we said that it was a clear demonstration that even the largest reinsurance firms, like Hannover Re, need to continue building out their platforms with more options to enable efficient access to risk business, and that access to markets such as Lloyd’s remain a key piece of the reinsurance puzzle.
But as well as the enhanced access to London and international reinsurance business through the acquisition of Argenta, Hannover Re has also gained control of businesses that could provide the reinsurer with additional sources of fee income, some of which it could derive from institutional investors looking for insurance-linked investment returns.
The acquisition of the Argenta Holding company means Hannover Re takes ownership of a Lloyd’s managing agent in Argenta Syndicate Management Limited, so will benefit from the fees that unit earns by providing third-party managing agency services to other syndicates.
That’s interesting enough and a new source of fee income that will ultimately benefit Hannover Re, ensuring it can profit from more than just the enhanced access to underwriting returns of the Lloyd’s market. But perhaps more interesting is that the acquisition now sees Hannover Re as the owner of Argenta Private Capital Limited, an authorised insurance investment adviser that helps individual and corporate investors in accessing Lloyd’s.
Argenta Private Capital offers investors looking to access the returns of Lloyd’s underwriting a number of ways and vehicles that can facilitate entry to the market. It has worked with investors ranging from institutional investors such as pension funds, to the more typical Lloyd’s Name type high-net worth investors and even specialist insurance-linked securities (ILS) managers.
Most recently, we revealed that Argenta has been working with mutual ILS fund manager Stone Ridge Asset Management, on the establishment and readying of a limited liability Lloyd’s corporate vehicle named Point Dume LLP.
Accessing Lloyd’s through a private capital manager like Argenta is just another route to reinsurance linked returns for many investors and increasingly is seen as a way for ILS fund managers to begin underwriting at, or backing business underwritten at, Lloyd’s in a lower-friction way than seeking to establish a full special purpose arrangement or syndicate.
Hannover Re already benefits from fee income earned by working with ILS funds and investors, in its transformer work or as fronting capacity working alongside third-party capital backed underwriters.
The reinsurer also benefits from partnering with third-party investors on its own collateralized reinsurance sidecars as well, providing another source of fee income and benefiting from the growth of ILS.
The acquisition of Argenta will now enable Hannover Re to benefit even further from the continued expansion of the insurance-linked asset class and the increasing interest shown by major investors in accessing reinsurance underwriting returns, with the Lloyd’s market always seen as a particularly attractive option.
It’s another way Hannover Re can work in harmony third-party capital investors, gaining income and also perhaps mobilising the capacity alongside its own as it builds out its Lloyd’s of London platform.