Kinesis growth continues, limits deployed up 50% in last year

Kinesis Capital Management, the collateralized retrocessional reinsurance unit of specialty re/insurer Lancashire Holdings Limited, has continued to grow its assets under management, taking advantage of opportunities to deploy more limits in the second-quarter.

At the January 1st reinsurance renewals this year, the Kinesis unit stood with assets under management that had grown 20% year-on-year.

That left the Kinesis unit with just over $500 million of deployable assets under management for use in 2019 in our ILS Fund Managers Directory, a figure that has likely risen a little further by the middle of this year.

The rate of growth after the mid-year renewals accelerated to a now 50% uplift in limit deployed year-on-year, Lancashire’s Chief Underwriting Officer Paul Gregory explained today.

Speaking during the specialty insurance and reinsurance firms half-year earnings call, Gregory explained, “We were able to grow Kinesis at the mid-year.

“We grew it by 50% in the last 12 months and it’s now 80% larger than this time two years ago.

“We’ve been able to grow in the ILS market through a challenging time, which demonstrates that our disciplined approach has given us room to improve.”

That’s impressive steady growth from the Kinesis Capital Management team and also underscores the continued attraction protection buyers have to its unique multi-class, specialty and property catastrophe focused product which is used as a retrocession protection by major reinsurance firms.

The collateralized reinsurance and third-party capital management arm of Lancashire will have found additional demand a factor given the disappearance of some retro capacity, such as that typically deployed in pillared products by Markel CATCo, as well we imagine.

Commenting on the market in relation to Kinesis, Gregory said, “We’re really pleased with where we are from an underwriting perspective and in most cases this is the second year of rate increases.

“Market conditions have allowed us to grow and build out Kinesis in appropriate market conditions, and we will look to grow with the opportunity, while always remembering the low base that rates have come from.”

That means Kinesis aren’t set to replace lost retro capacity, preferring to focus on the underwriting opportunity at hand and providing incremental limit for deployment when the returns it can earn support raising it from the units third-party investor base.

“We have put out decent levels of growth, not just this year but also over two years. Not the level of some competitors, but then a number of other funds are not growing at all,” Gregory continued.

Adding, “There were a number of opportunities at mid-year that made sense for us, others that didn’t hit the return hurdles that we and our investors required.

Which meant for Lancashire and Kinesis that, “We are doing what we’ve always done with it. If opportunities meet our return hurdles we will take advantage, but will also walk away from business,” Gregory explained.

Also read: Lancashire “encouraged” by improving discipline & pricing: CEO Maloney.