Lancashire launches $250m Accordion collateralised property retrocession sidecar

Lancashire Holdings, the Bermuda and UK based provider of specialty insurance products, has announced the formation of Accordion Reinsurance Ltd. a fully collateralised sidecar reinsurance facility. Accordion will be flexibly capitalised up to $250m and will act as a quote share reinsurer of Lancashire Insurance Company Ltd.

The sidecar facility has been set up with a capital draw down feature that Lancashire are calling innovative. Elaine Whelan, CFO of Lancashire, said: “The capital draw down facility which we have developed for the Accordion facility is intended to ensure that capital is available as and when underwriting opportunities arise, and is only deployed once attractive business materialises. This is classic Lancashire, and fits perfectly with our capital management philosophy. We believe underwriting opportunities should always be the driver of capital needs, and the developing retrocession market fits well with this adaptable side car product. The draw down feature will improve the return on capital for investors in Accordion, whilst allowing Lancashire to take advantage of the best priced opportunities in the coming months.”

Richard Brindle, Group CEO of Lancashire, said: “This is another exciting chapter in the Lancashire story. This demonstrates our ability to act nimbly when excellent underwriting opportunities arise, and to manage our capital flexibly through the underwriting cycle.

The accumulation of International property catastrophe losses during 2010 and 2011, which in many cases were at or above companies’ disclosed RDS scenarios in the affected territories and elsewhere, combined with the expected impact of the new RMS version 11, have changed the perception of catastrophe risk. They have combined to reduce the amount of available reinsurance capacity and increase the demand for property retrocessional coverage. Lancashire is well positioned to take advantage of these developing underwriting opportunities, particularly in the event of an active US storm season. We have listened to our clients, brokers and investors and have moved quickly to establish the Accordion facility.”

There has been a lot of talk of specialist insurers setting up sidecar facilities to capitalise on expected rate rises and the need for capacity after the disastrous start to the year, Accordion Re has been established for Lancashire to capitalise on exactly these opportunities.