Liberty Mutual in $240m Limestone Re reinsurance sidecar transaction

U.S. primary insurer Liberty Mutual has completed another transaction using its collateralized reinsurance sidecar vehicle Limestone Re Ltd., with a $240 million issuance featuring listed and privately placed sidecar notes.

This is the fourth placement that Liberty Mutual has completed using its Limestone Re reinsurance sidecar vehicle and also the second this year, the first year when two Limestone Re placements have been made.

This reflects Liberty Mutual’s growing relationships with third-party and ILS fund investors, as well as its increasing use of collateralized sources of capital markets backed reinsurance capacity.

This new 2019-2 Limestone Re sidecar transaction sees Liberty Mutual securing $240 million of reinsurance capacity from capital markets investors for its U.S. property catastrophe program and global treaty property reinsurance business.

The transaction has been completed through the issuance of $135 million of Limestone Re Ltd. Series 2019-2 exchange listed notes ($14.305 million of Class A notes and $120.695 million Class B) as well as an unspecified number of private placements directly with investors that makes up the rest of the $240 million issuance.

The $135 million of Series 2019-2 notes have been listed on the Bermuda Stock Exchange (BSX) and sold to investors, while the remaining $105 million was secured through private bilateral transactions with certain investors.

“This result reaffirms the quality of risk which insurance-linked securities (ILS) investors can access via Limestone Re.  The risk quality, matched to the Company’s global reach and excellent track record, continues to differentiate Limestone Re as a partner of choice for ILS investors,” explained James Slaughter, Executive Vice President and Chief Underwriting Officer of Liberty Mutual’s Global Risk Solutions strategic business unit.

“Third-party capital will continue to be a growing presence in the (re)insurance market, and the Limestone Re platform remains an integral component of Liberty Mutual’s strategy for accessing this capital,” Slaughter continued.

This transaction is seen as a replacement for the maturing $278 million Limestone Re 2018-1 sidecar transaction.

While the 2019-1 deal is smaller, Arno Gartzke, Vice President and Director of ILS, Liberty Mutual, said this new deal had a lower target size due to Liberty Mutual’s revised portfolio composition.

“The continued support from our key capital markets partners enabled a successful placement despite a challenging ILS market, and provides a robust foundation for the Limestone Re platform going forward. The strong performance of previous Limestone Re placements relative to the broader ILS market through 2017 and 2018 is reflected in this solid base of support,” Gartzke explained.

It’s encouraging to see Liberty Mutual persist with its Limestone Re sidecar vehicle, which provides it with a flexible way to access capital markets sources of reinsurance capacity.

The company has also adjusted the profile of the risks ceded with each transaction, as it establishes the most attractive routes to cede its business when purchasing a reinsurance program. Here a flexible sidecar program adds significant optionality, allowing the company to access capacity as and when desired in formats to suit its investor partners.

For more details on reinsurance sidecar investments and transactions view our list of collateralized reinsurance sidecars.