Given the growth in assets under management at global insurance and reinsurance underwriter Everest Re’s dedicated Mt. Logan Re Ltd. collateralized reinsurance sidecar-like vehicle, executives from Everest discussed the benefits of the strategy to the parent firm yesterday.
Mt. Logan Re began 2021 with $900 million of assets under management at January 1st thanks to success in raising capital from third-party investors, an increase since the middle of last year when the figure was closer to $800 million.
Speaking during the Everest Re quarterly earnings call, CEO Juan Andrade explained that at the company, “We manage our capital to fuel long-term profitable growth, while continuing to expand our third-party capital capabilities.”
He insisted that Everest Re is focused on “sustained profitable growth, a more diversified mix of business and superior risk adjusted returns,” a focus which the third-party reinsurance capital platform Mt. Logan Re is anticipated to support.
John Doucette, CEO of the Reinsurance division at Everest Re, also discussed the growth of the Mt. Logan Re platform.
“We have increased the AuM in Logan and continue to look for ways to increase that. We look to have that continue to be a very strategic part of our volatility management and capital management,” Doucette said.
Continuing to explain, “It’s part of a holistic suite of what we’re doing on the growth side, capital management side, and the hedging side. It’s clearly a core part of how we’re thinking of capital management and volatility management going forward.”
CEO of Everest Andrade further explained how Mt. Logan Re supports the group with protection, saying, “We grew AuM in our Logan book and our Logan vehicle at the beginning of this year and that certainly helps us well in essentially protecting our net position within the company.”
Everest Re’s use of third-party capital has always been tied to the broader management of its business and with Mt. Logan Re the company is leveraging investor appetite for access to the returns of its underwriting to deliver growth capital that can support expansion into peak peril catastrophe regions and other compatible risks, a capital management tool that forms part of its overall approach to managing its balance-sheet, as well as a buffer against severe losses.
It speaks to the benefits of accessing pools of third-party capital and bringing the structures within your own business model, as Everest Re has with Mt. Logan Re.
In this way they become about much more than just hedging capacity, demand an aligned approach and deliver benefits to both the sponsor and the investors, who all gain from expansion and growth funded in part by third-party capital sources that are able to take on the shorter-tailed, severity type risks, as well as increasingly a broader range of exposures.