Specialist insurance and reinsurance linked investment manager Leadenhall Capital Partners has completed another financing of a start-up insurer that it hopes will secure it with access to attractive accident & health risks for its life portfolio.
Leadenhall Capital Partners is backing Sutton National Insurance Company, a program business focused property, casualty, life and health multi-line underwriting company that is being launched by investors along with the ILS fund manager’s support.
Sutton National Insurance Company, “the rebranded insurer previously owned by QBE” we were told by Leadenhall, aims to provide program fronting services to managing general agencies (MGA’s).
Leadenhall is investing through its life insurance-linked securities (ILS) fund strategies to support the launch of Sutton National Insurance Company, providing capital for the business and building a partnership that may help it to source risks for its funds in an efficient manner.
Leadenhall has completed similar financing transaction before, as a way to partner with growth businesses in the life and health space.
In 2017 Leadenhall Capital Partners backed a technology focused life insurance start-up named Gryphon and in 2018 invested in the launch of Australian life insurance start-up named Integrity Group Holdings Limited.
So Leadenhall has a track-record of backing potentially disruptive start-up companies that it believes can eventually become new sources of risk for its life ILS fund strategies.
We spoke with Dan Knipe, Deputy Chief Investment Officer, Leadenhall Capital Partners, who told us that he sees the investment in Sutton National as “business as usual” for the ILS fund manager.
“Our interest in Sutton National is for the accident & health exposure,” Knipe explained, adding that “It’s a way of providing capital to support life and health exposures, a way to get access to more short-tailed accident-type life insurance risks.”
Knipe said that the U.S. accident & health insurance market has become more interesting as it undergoes significant change, in part as it continues to adapt to the Affordable Care Act (ACA), making this business increasingly attractive for Leadenhall.
“We see transactions like this as a way for us to access the risk in a slightly different way, compared to how we might in Europe where life related insurance exposures tend to be from longer-term policies,” Knipe continued.
Adding, “This is another example of us providing capital to a life and health insurance start-up to access insurance risks for our funds.”
The arrangement means that Leadenhall will be positioned to access risk as Sutton National Insurance grows.
Knipe commented, “People want to partner with us for our capital markets expertise. Having done a series of these financing transactions now, with every new one we can lever off our experience from the prior transactions to deliver better solutions to counterparties.
“There is a potential added benefit overtime is from seeing additional new standalone investment opportunities with these partners.”
The founders and backers of Sutton National Insurance Company see a significant opportunity in program business including in the accident and health insurance space and Leadenhall has positioned itself to benefit from the growth the start-up achieves in future.
Update: Sutton National Insurance Company received a preliminary rating assessment from A.M. Best suggesting an A- rating will be achieved. The rating agency noted that the insurers business model will be to server as a fronting or transformer company for other capacity providers.