Kinesis relatively flat year-on-year, primed for market turn: Maloney

While Kinesis, the third-party reinsurance capital vehicle of specialist London and Bermuda insurance and reinsurance underwriters Lancashire Holdings, remains relatively flat in terms of growth, it is primed and ready should there be an opportunity to raise more capital.

Kinesis Capital Management, which underwrites through Kinesis Re, offers a unique product in the insurance-linked securities (ILS) and collateralised reinsurance market, with a multi-class reinsurance product and a niche but loyal set of clients.

As a result there is a relatively defined opportunity set in a soft reinsurance market as we see today, but Lancashire CEO Alex Maloney believes a chance to upsize the vehicle will materialise when any turn in the marketplace is seen.

Speaking during the Lancashire earnings call last week, Maloney explained that Kinesis remains “relatively flat” in terms of growth year-on-year, adding that “some of the deals have changed, but not materially.”

At renewals Kinesis has deployed slightly more limit in 2017, but at the same time the niche product it offers meant that Kinesis also hasn’t had to “give up too much rate,” Maloney explained.

With a product offering that meets the needs of some of the largest and more diversified reinsurers, providing multi-class coverage including catastrophe risk protection, Kinesis has a relatively unique offering both to its clients and investors.

That has likely helped to keep rates more stable for its capacity deployment, but also likely means that stability is more important in the current market environment where rates can be pressured if capacity becomes too abundant for a specific line of business or product set.

Maloney explained; “The product we sell is still relatively unique. The client base hasn’t changed much, and we’ve renewed about the same. We would like to have sold more but it’s hard in this environment.”

Kinesis has assets or limits to deploy of around $300 million currently, but Maloney is certain that any market turn or dislocation could provide opportunities for Kinesis.

“If the market changed we could raise more capital for Kinesis,” Maloney said, also highlighting that Lancashire would also expect to be able to raise more capital across its other channels on its balance-sheet and third-party capital at Lloyd’s of London as well.

Positioning companies for the turn, or any opportunity should their be a dislocation and rates not turn (but competitors may suffer) is an important trait of any players planning for success and having multiple balance-sheets and third-party capital funding, as well as niche product expertise, positions Lancashire and Kinesis well for such a time.