Multi-Strat Re Ltd., the Bermuda based reinsurance venture that enables asset managers, such as hedge fund managers, to enter the reinsurance market with less friction, has a new Chairman and CEO in Bob Forness who was appointed to the roles recently.
Multi-Strat Re, a Bermuda special purpose insurer, operates as a master reinsurer for its participating reinsurers, which are standalone Class 3A insurers, licensed in Bermuda and each sponsored by an asset manager of some description.
Multi-Strat Re is then responsible for the underwriting of reinsurance business, the premiums for which are then ceded to the participating reinsurers, allowing the asset managers to invest the participating reinsurers equity capital and share of premiums. In this way the model works like a market with a central underwriting function and the reinsurers participating operate like a typical hedge fund backed reinsurer, investing the premiums earned, or float as it is often called.
Multi-Strat Re, the reinsurer, offers cedents a range of structured, low volatility reinsurance contracts covering high frequency, low severity risks. Multi-Strat Re identifies its clients as captive insurers, privately held insurers, and insurers and reinsurers under regulatory or ratings stress. The covers it underwriters allow its cedents to transfer and move risk off-balance sheet while allowing them to redeploy capital more efficiently or gain surplus relief.
Forness commented; “Our pipeline of sponsors is very strong, and we expect our aggregate capital to be comparable to a number of publicly traded reinsurers by the end of 2015. However, since Multi-Strat Re secures all of its obligations with letters of credit from highly rated banks, it does not need a large balance sheet in order to be competitive from inception.”
Multi-Strat Re sees its business model containing elements of both a Lloyd’s type re/insurance market and an investment focused reinsurance model, like hedge fund backed reinsurers or firms like Berkshire Hathaway.
Multi-Strat Re acts like the lead underwriter at Lloyd’s with participating asset manager owned reinsurers operating as the syndicates which support the underwriting capacity needs. This allows larger risks to be underwritten than a participating reinsurer might manage on its own, similar to the Lloyd’s syndicate model.
The participating reinsurers have been modelled to operate like a Berkshire Hathaway type reinsurer, able to leverage the premiums earned, or float, for investment purposes. The aim is for the investment skills of the asset manager to drive superior earnings to those achievable by underwriting this kind of reinsurance business alone.
Multi-Strat Re also likens itself to a fund of funds, with investments taken in by the main underwriter (the Multi-Strat Re SPI) and then allocated out to the underlying funds (the participating reinsurers in the Multi-Strat model).
Before joining Multi-Strat Re, Forness co-founded alTreo, a managing general agent with a specialism in underwriting and placing energy related risks. Forness is well-known in the Bermuda reinsurance market, from his time as Chief Underwriting Officer of the Imagine Group, a reinsurer with roughly $650 million in capital and surplus, over 100 employees, and operations in Bermuda, Barbados, Dublin, Lloyd’s of London, the U.S., Copenhagen, Sydney, Munich and Tokyo. Prior to his time at Imagine, Forness was COO of Odyssey Re’s London and Bermuda operations, part of Fairfax Holdings, and he was also an executive with Prudential Financial.
Joe Taussig, CEO of Multi-Strat Holdings, Multi-Strat Re’s parent, commented on the appointment; “We are thrilled that someone of Bob’s caliber and experience has joined us in our quest to revolutionize both the asset management and reinsurance industries. Bob and I go way back. I had a hand in his joining Imagine in 2002 and we were putting together a company similar to Greenlight Re with a world class asset manager when the financial crisis of 2008 interrupted the project”.
You can read more about Multi-Strat Re in our article from September 2012, Multi-Strat Re to make it easier for hedge funds to get into reinsurance, and view a video in which Joe Taussig explains the Multi-Strat Re strategy.