Hudson Structured Capital Management Ltd., the insurance-linked securities (ILS), reinsurance- and transportation- focused investment manager, is expected to take majority control of windstorm focused primary insurance group Weston Insurance Holdings Corporation, after a recent capital restructuring and increased investment in the carrier.
Hudson Structured, which undertakes insurance and reinsurance investment business as HSCM Bermuda Management Company, has been a Weston investor for some time and has worked with the company through a recent refinancing, it transpires.
As we explained recently, the windstorm and coastal focused primary insurance carrier Weston Insurance Company had its rating withdrawn by Florida focused rating agency Demotech Inc. recently, as too had another insurance company it had recently acquired, Anchor Specialty Insurance Company.
Now the ratings have been reinstated and it looks as if the reason for their removal was for Demotech to reassess the companies following the financial changes that have taken place in recent months.
Demotech said that it has assigned Financial Stability Ratings (FSRs) of A, Exceptional, to both Weston Insurance Company and Anchor Specialty Insurance Company.
Weston Insurance Holdings Corporation (WIHC), the parent to Weston Insurance and Anchor Specialty, has revealed a change in control recently, Demotech explained.
Hudson Structured is now expected to assume majority control of Weston, Demotech explained, since it has worked closely with Weston management and the carriers current ownership, as a result of a significant capital restructuring plan and investment on behalf of its clients through HSCM Bermuda.
The capital restructuring and refinancing is expected to “significantly reduce WIHC’s group leverage and improve group balance sheet strength” Demotech said.
The leverage levels at Weston had been cited as a concern in the past by A.M. Best and it was understood that a recapitalisation was likely required to reduce that and enable the company to achieve the ratings it needed, with Weston having been in financing discussions over the last year.
Demotech further explained that Weston worked with it to reduce concerns over leverage at the holding company level, since its acquisition of Anchor Specialty.
Demotech also noted that the WIHC managing general agency Weston Insurance Management LLC is expected to benefit from the restructuring and capital injection.
Joseph Petrelli, President and Co-founder, Demotech, Inc., commented, “Michael Millette and HSCM Bermuda’s clients assuming majority control of the holding company to provide oversight and guidance to WIHC’s insurance company subsidiaries is a game changer. The operating subsidiaries were sound and now the holding company is catching up.”
Hudson Structured invests (via HSCM Bermuda) across the balance-sheet and range of return opportunities in reinsurance, including debt, reinsurance and other capital injections through financing arrangements.
In this case, the ILS manager now has a significantly strengthened relationship with Weston Insurance Holdings that could ultimately assist it in gaining preferential access to sources of catastrophe exposed property risk to suit its ILS portfolios as well.