Kelvin Re Ltd., the rated reinsurance vehicle operated by Credit Suisse Insurance Linked Strategies Ltd. and backed by an investment from the Abu Dhabi Investment Council, has increased its gross premiums written in 2016 to over $150 million of catastrophe reinsurance cover.
Kelvin Re was launched in late 2014 by Credit Suisse Asset Management’s ILS unit, as the insurance-linked securities (ILS) and reinsurance linked asset manager established its first rated reinsurance vehicle in Guernsey.
Kelvin Re is backed by an investment from the Abu Dhabi Investment Council and operates with a hedge fund style asset strategy as well, making it a total return reinsurance vehicle that is efficient and can enhance returns using both sides of the balance-sheet.
In 2015 Kelvin Re underwrote over $120 million of gross reinsurance premiums, but thanks to the distribution reach and origination ability of the Credit Suisse Insurance Linked Strategies team it has outpaced that in 2016, writing over $150m of gross premiums.
The business underwritten is solely sourced from the Credit Suisse ILS team and Kelvin Re has a mandate to underwrite short-tail property and specialty lines of reinsurance business.
Rating agency A.M. Best notes that Kelvin Re “has been able to secure top-line revenues in line with its original targets, and is expected to report a profit for the year.” However the rating agency notes that the reinsurer is exposed to headwinds from lower reinsurance pricing and its more volatile, hedge fund focused investment portfolio.
However, while headwinds, the fact that Kelvin Re is a sole investor backed reinsurance company, operating with the assistance of an ILS fund manager and using a total-return strategy managed by third-party investment advisors, it perhaps has more ability to navigate market headwinds successfully, than a more traditional reinsurance vehicle.
The additional returns that can be generated on the asset side can offset some of the difficulties faced from reinsurance pricing, while the efficient manner in which it operates likely means it has a lower operating expense outlay than reinsurers with comparable capital.
A.M. Best notes that Kelvin Re maintains a high level of capital and surplus, at $643 million in 2015, to help absorb and offset the volatility of the hedge fund assets on the investment side.
The rating agency said that it has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Kelvin Re Limited (Kelvin Re) (Guernsey), both with stable outlooks.
The Kelvin Re reinsurance platform provides a way for a single investor to gain access to its own source of risk, enhanced by the total-return strategy and perhaps offering greater margin due to efficiencies, while also providing the Credit Suisse ILS team with a larger rated platform which can underwrite alongside its collateralised offerings and its other rated reinsurer Humboldt Re.
The additional flexibility that the rated reinsurance platform provides should position Credit Suisse for further growth in ILS. As the two rated reinsurers gain a profile in the market it should be possible to secure incremental business, allowing the ILS manager to raise new assets from investors to support the strategy.