Humboldt Re being sold to a run-off specialist

Humboldt Re Ltd., one of the two Guernsey based, Credit Suisse Insurance-Linked Strategies supported rated reinsurance carriers, is being sold to a run-off specialist, with the deal expected to complete imminently.

Update: P&C run-off specialist Marco Capital has been revealed as the buyer of Humboldt Re.

As we explained in August, the signing of a sale agreement had been revealed, which would allow the main shareholder of Humboldt Re, which we assume was certain funds under the management of the Credit Suisse ILS team, or an entity related to the wider Credit Suisse group, to recognise the value locked up in the rated reinsurance company and its portfolio.

A sale would allow remaining capital to flow to the benefit of the company and any investors backing the funds or positions that underpinned Humboldt Re.

Humboldt Re and the other Credit Suisse ILS linked reinsurance company Kelvin Re, were both being closed down due to strategic decisions taken by the ultimate institutional investors behind them.

Humboldt Re and Kelvin Re both took their financial support from insurance-linked securities (ILS) investors and funds under the management of Credit Suisse Asset Management’s specialist ILS investment unit.

Humboldt Re was backed by capital from some of the insurance-linked securities (ILS) funds managed by Credit Suisse Asset Management (CSAM), while Kelvin Re’s backing came from investments made by the Abu Dhabi Investment Council, a sovereign wealth investor.

The Pension Fund of Credit Suisse Group recently reported that a CHF 357.1 million restructuring of insurance-linked securities (ILS) investments and also revealed an exposure to the running-off of the rated reinsurance company Humboldt Re.

So it’s anticipated that this pension fund may be a beneficiary of the sale of the rate reinsurer.

Now, in a rating update on Humboldt Re, AM Best has withdrawn the vehicles credit ratings, saying that “the company has requested to no longer participate in AM Best’s interactive rating process.”

AM Best has kept Humboldt Re’s Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of “a-” (Excellent) under review with negative implications, saying that this reflects uncertainty regarding the impact that the pending change in ownership will have on the company’s prospective financial strength.

On the change of ownership, AM Best revealed that the sale of Humboldt Re is to a run-off specialist, which is new information as previously the efforts to sell the company had included trying to sell the rated reinsurer as a going concern, while shedding its already in run-off portfolio through an arrangement such as a loss portfolio transfer.

But now it seems the entire reinsurer will be sold to a run-off specialist, which we understand to be one of the usual suspects in that marketplace and it’s expected the sale will be completed and perhaps announced imminently.

AM Best reiterated that the run-off continues to progress, saying, “Since Humboldt Re entered run off in December 2020, its underwriting exposures have reduced significantly and risk-adjusted capitalisation has increased. The company produced a small loss in the first half of 2021.”

A sale of Humboldt Re as an entire entity will unlock trapped value for the investors still exposed to the reinsurer, while also allowing this chapter to be finalised for Credit Suisse.