Global reinsurance firm Everest Re has reached a new milestone for its collateralized reinsurance sidecar type vehicle, Mt. Logan Re Ltd., reaching $1 billion of capital for the first time, $950 million of which is sourced from third-party investors.
Everest Re launched the Mt. Logan Re reinsurance sidecar in January 2013 with $250m of capital, $50m of which the reinsurer financed itself. Since then, Mt. Logan Re has grown to become the largest such vehicle in the insurance-linked investments market and now represents Everest’s third-party capital management play, rather than simply a quota share sidecar.
Mt. Logan Re is a much more active third-party reinsurance capital play, having its own underwriting team and even a CFO, but we still feature the vehicle within our collateralised reinsurance sidecar listing due to the nature of it being a companion source of underwriting capacity for Everest Re.
Artemis understands that around the time of the April 1st reinsurance renewal Everest Re accepted additional inflows of capital from third-party investors, helping it to bulk up Mt. Logan Re to $1 billion in size for the first time. At January 1st 2016 Mt. Logan Re was approximately $860m in size.
$50m of the capital still comes from Everest Re itself, demonstrating its alignment both through placing its capital at risk as well as through the underwriting synergies between itself and the Mt. Logan Re vehicle.
For 2015, insurance-linked investors in the Mt. Logan Re collateralized reinsurance sidecar were set to benefit from returns as high as 20.2% from their allocations to the vehicle. So it’s no surprise that Mt. Logan Re has continued to attract capital in recent months.
Returns of that nature are becoming harder to source in the ILS and traditional reinsurance market, so institutional investors looking to allocate capital to the space will be attracted to Everest Re’s strategy, we’d imagine.
With the key June and July reinsurance renewals fast-approaching, Everest Re may find it can upsize Mt. Logan Re even more if the opportunities to deploy capacity effectively can be found.
And it seems that deployment is likely to be the limiting factor for Mt. Logan Re. With its ability to attract capital clear it all comes down to whether it can be deployed into reinsurance business at attractive rates, which is ultimately a factor of the market environment.
Sourcing risks is clearly not an issue, when they are available, but with reinsurance market conditions remaining very soft Everest Re is likely taking a slow and steady approach to building scale for its third-party reinsurance capital vehicle.
When attractive reinsurance business does become more widespread, if rates turn at all or new opportunities emerge, we’d imagine Everest Re will take every opportunity to grow Mt. Logan Re even further.
At $1 billion Mt. Logan Re remains the largest vehicle we have included in our listing of collateralized reinsurance sidecars.