Leadenhall Capital Partners helps Amlin into the top-tier of reinsurers

The combination of insurance-linked securities (ILS) and reinsurance-linked investment manager Leadenhall Capital Partners offering with Amlin plc’s traditional reinsurance proposition has lifted the firm into the top-tier of reinsurers.

The half-yearly results statement of Amlin plc, the non-life insurance and reinsurance group, highlights the increasing importance that access to third-party reinsurance capital through Leadenhall plays in the firms results. Some of Amlin’s recent growth and success is directly attributable to having a partner like Leadenhall, helping it to diversify its underwriting capital sources, to increase line sizes and better serve clients.

The combination of Leadenhall’s third-party reinsurance capital and ILS strategy alongside Amlin’s traditional reinsurance offering has strengthened the re/insurers client proposition and placed it “firmly in the top-tier of reinsurers gaining market share at the expense of smaller players,” according to the firms results statement.

This is exactly what a partnership with third-party ILS capital should be achieving for a traditional insurance and reinsurance player. Amlin was among the first to strategically partner with third-party capital, something that many reinsurers have only initiated in the last year. It’s early venture into ILS and reinsurance linked asset management has proved its worth, hence the recent announcement that Amlin would deepen its relationship with Leadenhall by increasing its stake in the ILS manager to 75%.

Amlin clearly sees having access to a diversified capital base as vital to its continued success in the currently competitive, perhaps soon to be rationalised, reinsurance market. Chief executive Charles Philipps said that smaller, weaker market participants may not be able to remain sustainable businesses over the longer-term.

Creating a reinsurance platform which is sustainable now means having access to multiple kinds of capital (alternative and balance sheet), with different return and risk appetites as well as costs-of-capital. The capital Leadenhall Capital Partners provides alongside the relationship with Amlin helps the firm to preferential signings, gives it access to business which is not always available on the open market and some times better pricing as well.

Amlin expects that; “Over time, LCP’s growth, and its ability to supplement Amlin’s reinsurance capacity, will help us to grow our share of the global reinsurance market.”

Leadenhall Capital Partners grew to $1.8 billion of insurance linked assets under management by the 30th June, a number Amlin clearly expect and want to grow.

Amlin says that the growing Leadenhall asset base has helped the firm to differentiate its re/insurance product offering from its competitors, at the same time as strengthening Leadenhall’s market position. Amlin expects the synergistic relationship will continue to flourish as the two firms deepen the relationship and move forwards.

“As alternative capital becomes an increasingly prominent feature of (re)insurance markets, we expect Amlin’s increased interest in LCP to support its continued growth and further enhance co-operation and synergies between our businesses,” the firm explained in its results statement.

Simon Beale, Group Chief Underwriting Officer at Amlin, commented during the firms results call; “Our highly respected traditional reinsurance offering is being further strengthened through our increased collaboration with Leadenhall Capital.”

CEO Philipps clearly agreed; “I am particularly pleased with the synergies we are seeing between Leadenhall and our traditional reinsurance business. This has firmly put us in the upper tier of reinsurers, making us more relevant to our clients who treat us as a long-term valued partner. As Simon said, this is really benefiting the business in this more competitive environment, enabling us to hold on to business better, increase lines sometimes at better pricing than our weaker competition can achieve.”

The Amlin – Leadenhall story has a long way to run. As Leadenhall’s assets under management continue to grow and once Amlin has taken the 75% stake in the ILS manager, it will see Amlin becoming a balanced, capital agnostic source of re/insurance capital, with the ability to service clients with third-party capital as easily as with its balance-sheet.

What will be most interesting to watch is how this develops over five years or more. How Amlin leverages the mix of balance-sheet and third-party capital to create new opportunities and build value for its clients could provide a case study for the developing ILS market.  One element of the future for ILS will be as part of a capital-agnostic reinsurance operation. Leadenhall and Amlin are showing the potential synergies achieved by providing a spectrum of risk capital should outweigh any concerns about this strategy.