Marsh to match capital to the right risk with Cerulean Re vehicle

Marsh & McLennan Companies (MMC), via GC Securities and Marsh Captive Solutions, recently announced the launch of a new vehicle designed to support the access of capital markets-backed insurance-linked securities (ILS) protection, called Cerulean Re SAC Ltd.

According to Marsh, Cerulean Re SAC Ltd., a Bermuda registered segregated account company (SAC) and licensed special purpose insurer (SPI), offers support for governments and corporations looking to access long-term protection from the capital markets as well as typical re/insurance cedents.

David Priebe, Vice Chairman of reinsurance broker Guy Carpenter, commented; “The new enterprise provides an efficient and cost-effective placement process for collateralised reinsurance and private catastrophe bond deals that affords opportunities for entrée to new markets and relationships with investors. It helps new capital, entering the protection market and seeking non-correlated investments, to find the right risks.”

Priebe explained how GC Securities arranged the vehicle, working alongside Marsh Captive Solutions, which acts as an insurance manager to Cerulean. Stating that for clients, this partnership “will seamlessly and efficiently achieve standardised transaction documentation (with ability to bundle investor participation to streamline such documentation volume) in a continuous process that extends the traditional (re)insurance implementation process within Marsh & McLennan and reduce reliance upon external parties.”

Brendan Roche, Global Leader, ILS and SPV Management Services, Marsh Captive Solutions, added; “With the wide range of the combined Guy Carpenter/GC Securities and Marsh networks, Marsh & McLennan is able to bring unmatched group expertise to the placement process.

“Our advanced technologies and predictive analytics capabilities help clients understand and minimise risk and price accurately, ultimately providing competitive advantage. A wide range of trigger types is available to our clients through Cerulean: indemnity, industry index and parametric. These provide a superior method of acquiring the correct type and level of coverage.”

The new ILS solution offered by the Cerulean vehicle includes a number of additional features, which includes the investment of collateral held in trust in appropriate assets, which Marsh said removes credit risk, and this is promised to the benefit of the customer as to comply with credit-for-reinsurance needs.

In order to improve transparency and an efficient development of claims and collateral release process, the vehicle features a documented post-event collateral retention mechanism.

And, the vehicle supports a single company execution process for its clients, which goes from the risk identification to placement and then execution.

“As the largest global captive manager, our client base is already accessing the reinsurance markets and we have seen our clients use their captives to transfer risk through ILS structures, some of whom have used Guy Carpenter-developed trigger mechanisms,” continued Roche.

According to Priebe, the new vehicle brings a proven reinsurance tool to the ILS space.

“Tapping new sources of capital, it brings a broader and more diverse range of capital sources, better matching more efficient solutions customised to the unique risk profile of clients. Government entities and pools are likely to benefit from these solutions as they help close the protection gap and move the catastrophe burden away from the public sector to the private sector.

“Additionally, we expect that the expanded range of capital sources will facilitate new opportunities for capital markets-based protection around emerging risks, such as cyber and the ‘Internet of Things.

“In addition to its role in serving uninsured and underinsured risk, we see Cerulean as an important new vehicle for attaining capital market-based protection for clients and to expand the range of solutions that Marsh & McLennan affords its clients. We are excited about its launch,” said Priebe.