Velocity Risk Underwriters LLC, the managing general agency (MGA) operation established by reinsurance, catastrophe, climate and weather risk-linked investment manager Nephila Capital, has been acquired by funds managed by Oaktree Capital Management, L.P.
Nephila Capital is maintaining a minority stake in the managing general agent, which is largely focused on underwriting property insurance in catastrophe exposed regions of the United States.
Nephila launched its MGA Velocity Risk Underwriters LLC in 2015, as the largest insurance-linked securities (ILS) investment fund manager in the market sought out new routes to gain access to catastrophe exposed property risks more directly.
Velocity was constructed by Nephila as a pipeline for more direct access to primary sources of risk, to provide a more efficient way to deploy Nephila’s third-party investor backed reinsurance capital.
Oaktree Capital Management, L.P., a leading global investment manager specialised in private equity and alternative investments, has purchased a majority stake in Velocity Risk.
Oaktree has a number of interests in insurance and reinsurance, not least as the main backer for retrocession focused collateralized reinsurance investment manager Acacia Holdings Ltd.
Velocity Risk is headquartered in Nashville, Tennessee and underwrites insurance coverage for clients in catastrophe-exposed regions.
With Nephila Capital retaining a minority stake in Velocity Risk, it is likely the ILS investment manager’s reinsurance capital will remain a key source of capacity for Velocity’s continued strategy to disrupt the way traditional insurance connects risk and capital.
The sale will have enabled Nephila to recognise a lot of the value it has created in Velocity Risk, while also enabling it to step away from the primary market a little, while staying true to its mandate for providing its third-party investor supplied risk capital to risk originators and aggregators in the most efficient manner possible.
Oaktree clearly sees the growth and profit potential in a specialist catastrophe focused MGA that is backed by efficient reinsurance capital.
Having a new long-term focused investor is also good news for the Velocity Risk team as they continue to grow the business.
Phil Bowie, Velocity Risk’s CEO, commented on the news, “The launch of Velocity Risk was designed to disrupt the value chain between insurance and capital, through innovative underwriting and operational efficiency. We are thrilled to have received Oaktree’s support and believe we have the right investor in Oaktree to help us continue building out our business.”
“Velocity Risk has established itself as a leading property-focused MGA through the quality of its management team, its strong underwriting results and its investment in enabling technologies. We are excited to partner with the Company and support its track record of driving growth and delivering value for its stakeholders,” Greg Share, Managing Director in Oaktree’s Global Opportunities Group added.
Frank Majors, co-CEO of Nephila also said, “We’re delighted to be partnering with Oaktree and are confident they will help Velocity Risk continue to build on its past successes. We look forward to continuing to work with Velocity Risk through our ongoing minority shareholding.”
The acquisition saw Evercore acting as sole financial adviser and Willkie Farr & Gallagher LLP acting as legal counsel to Velocity Risk.
TigerRisk Capital Markets & Advisory worked as exclusive financial advisor and Debevoise & Plimpton LLP acted as legal counsel to Oaktree Capital Management.