Liberty Mutual in $50m Limestone Re 2020 reinsurance sidecar transaction

U.S. primary insurer and global re/insurer Liberty Mutual has completed another collateralised reinsurance sidecar placement for 2020, with a $50 million slice of the arrangement now listed on the BSX.

Liberty Mutual has become a regular sponsor of collateralised reinsurance sidecar transactions, using its Limestone Re vehicle to access third-party sources of capital since late 2016.

The insurer has returned each year with transactions, as it brings capital from insurance-linked securities (ILS) investors into its structure as reinsurance or loss bearing capacity, but also as growth capacity for catastrophe exposed risks as well.

Typically, the company places a much larger Limestone Re Ltd. reinsurance sidecar deal, some of which is listed as notes on the Bermuda Stock Exchange (BSX).

Hence, we expect the $50 million of notes listed so far are just the start of a Series 2020-1 Limestone Re Ltd. sidecar placement for Liberty Mutual and more may come to light in the coming days, either listed or privately placed as has been seen in the past.

The last Limestone Re was a $240 million issuance, featuring both listed and privately placed reinsurance sidecar notes last July.

Last January Liberty Mutual completed its third reinsurance sidecar transaction through its Limestone Re Ltd. vehicle, with a $150 million arrangement that was largely privately placed.

For 2020, Limestone Re Ltd., acting on behalf of its Limestone Re Segregated Account 2020-1, has issued two tranches of reinsurance sidecar participating notes that have both been listed.

The first tranche of Limestone Re Series 2020-1 Class A notes is $8.561 million in size and due March 1st 2024.

The second tranche of Limestone Re Series 2020-1 Class B notes is $41.439 million in size and also due March 1st 2024.

The Limestone Re reinsurance sidecar notes have been placed with qualified investors and admitted on the BSX.

It’s pleasing to see an insurer of the size of Liberty Mutual persist with its Limestone Re sidecar vehicle, as it signals the fact that it finds the sidecar a flexible way to access capital markets backed sources of reinsurance capacity.

Liberty Mutual tends to adjust the profile of the risks ceded with each Limestone Re transaction, as it establishes the most attractive routes to cede its business when purchasing a reinsurance program.

So we assume this latest deal covers U.S. and global catastrophe and property insurance or reinsurance business that has been ceded to investors.

A flexible collateralised reinsurance sidecar program can add significant optionality for an insurer like Liberty Mutual, allowing the company to access capacity as and when desired, in formats to suit its investor partners and to cover the areas of its portfolio where the reinsurance capacity support is most useful.

For details of many reinsurance sidecar investments and transactions over the history of the ILS market, view our comprehensive list of collateralized reinsurance sidecars transactions.