Leadenhall Capital Partners LLP, the specialist insurance-linked securities investment manager, has secured a loss portfolio transfer (LPT) arrangement covering portfolios from certain of its ILS funds from legacy acquirer RiverStone International.
It marks the first legacy reinsurance transaction RiverStone has provided to an insurance-linked securities market participant and also the first such transaction we’ve seen Leadenhall Capital Partners enter into.
Increasingly run-off and legacy reinsurance arrangements are finding relevance in the ILS market, as investment managers look to transfer legacy liabilities or secure finality on prior year portfolios of risk.
This allows managers to free up capital that may previously have been allocated to collateralising specific arrangements, or that could have been locked up under trapped collateral clauses.
As a result, entering into proactive transactions to unlock an amount of ILS capital through reinsurance with an established legacy market specialist can provide a solution that achieves the finality ILS fund managers and third-party capital providers may seek, allowing them to release capital and move forwards unencumbered by exposure to prior year losses and events. In this way it can act as a kind of secondary marketplace for older ILS portfolios.
In this case, RiverStone announced the deal saying it has entered into a loss portfolio transfer (LPT) reinsurance of portfolios associated with funds under the management of Leadenhall Capital Partners.
RiverStone noted it is the first such ILS sector legacy arrangement the company has completed underscoring its “continued focus on meeting the needs of counterparties globally”, while also noting that it sees the ILS market as “an important and growing segment of the global reinsurance industry.”
“The transaction demonstrates RiverStone’s ability to provide tailored legacy solutions across a broad range of counterparties and risk structures, while further broadening the range of solutions offered by the Group,” the company said.
David Rocke, Chief Executive Officer of RiverStone International Bermuda and Group Head of M&A, explained, “This is an important milestone for RiverStone as our first involvement in the insurance-linked securities market. It demonstrates our ability to provide tailored legacy solutions across a broad range of counterparties and risk structures.”
Aon was the reinsurance broker of record on the loss portfolio transfer for Leadenhall Capital Partner’s ILS funds.
Victor Nelligan, a broker who leads the Legacy desk for Aon’s Capital Advisory team in London, commented on LinkedIn, “Another LPT signed! It was great to work for Leadenhall Capital Partners on this LPT with RiverStone International. Excellent to see another legacy reinsurer offer these products to ILS funds and a pleasure to lead the team placing this deal.”
Legacy arrangements such as this allow forward-thinking investment managers in the ILS space to achieve greater certainty on and finality for prior year portfolios of risk, while efficiently managing and recycling capital, to be used again or returned to investors.
As the use of legacy deal arrangements expands in ILS, it affords specialist ILS managers an opportunity to gain greater certainty on exposures their ILS funds may have faced and to use their capital more efficiently, but importantly only where the economics make sense.
Also read this interview from September: Having ILS solutions available and ready in the legacy market is valuable: Creed, RiverStone International.
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