Northern Re, aligning institutional capital with cedent objectives via integrated reinsurance platforms

Northern Re’s recent $150 million capital raise marks a significant step in the expansion of its technology-enabled platform. According to the firm’s founding brothers, Anthony and Peter McKelvy, Northern Re is navigating a shift in the reinsurance landscape where investors are increasingly prioritising operational transparency over purely financial objectives.

As casualty portfolios become more complex and reporting requirements grow heavier, Northern Re is positioning its unified technology platform as a critical bridge between traditional capacity and the evolving expectations of the insurance-linked securities (ILS) market.

While the capital injection provides the necessary scale, the firm’s strategy is rooted in a fundamental shift in how institutional partners approach the market. Speaking to Artemis, Anthony McKelvy explained that for modern investors, understanding the operational side of reinsurance is now the primary starting point for any transaction.

“As recently as a few years ago, a lot of the conversations started with financial objectives. Now they start with operations. Investors want to understand how information moves through a transaction and is utilized to drive stronger outcomes,” Anthony McKelvy said.

“Portfolios have become more complicated, investors’ expectations have increased and the level of modeling and reporting required is heavier than it used to be, so operational experience is a differentiator. If transaction servicing is slow or disjointed, the underlying terms and conditions matter less because the overall deal economics suffer. This stems from issues with cash flow, overcollateralization and an inability to translate insurance metrics to key financial outputs.”

He continued: “As a result, we hear consistently that investors want clarity across the life of a deal. They want to know whether the reinsurance platform will stay involved beyond the upfront diligence and execution of a transaction. That expectation has continued to push us to build a company that can support these institutional relationships properly.”

A key focal point within both the reinsurance and ILS sector is the use of technology and how companies within the industry are using it.

Given this, Peter McKelvy outlined how technology shapes the way that Northern Re conducts its daily business.

“When people talk about technology in reinsurance, it is usually in generalities and not always in a practical function. For us it is simply the place where the real work happens. At Northern Re our operations sit in one system because we knew that to create the best outcomes, everyone and every tool needed access to the same data.

“This means the underwriting, pricing, finance, and capital modeling teams look at the same figures, run their specific analysis, and understand the impact without passing files around or waiting for someone else to run another model. Then they can come together to discuss whether a deal might work or how best to modify it to meet our thresholds. This unified system keeps the conversation moving and avoids delays or errors that otherwise might come up.”

The executive also explained that the value is realised further once the transaction is live.

“We can see how individual transactions and treaty years are developing, producing and evolving, especially within the context of a broader relationship – our platform automatically highlights unexpected trends early providing the ability to flag those shifts to management. Investors and cedents then benefit from the consistent feedback loop in our reporting out to them. This ongoing approach ensures that there is a close relationship over the many years it takes for casualty to play out. Since our platform is predicated on the approach that reinsurance program management is just as important as deal inception, Northern has always focused and invested into these components.”

Another key topic the executives also discussed with Artemis, was the fact that although structured solutions are becoming more common, building and implementing them is not so straightforward.

In regard to how Northern Re’s model shapes the company’s approach, Anthony McKelvy explained that when a cedent asks for a structured or portfolio solution, they may have several purchasing objectives in mind.

The executives noted that these could involve capital relief, optimising economics, longer-term capacity, smoothing earnings volatility, or just a more efficient way of managing their portfolio day to day.

“The first step we take is to work with that cedent to ingest and understand these goals before we start to design terms and conditions,” Anthony told Artemis.

He continued: “Northern then begins to contrast our own return expectations and variety of different investor relationships, to determine the best fit. These investor expectations and cedent goals can often pull in different directions so it requires human expertise and technology to bridge those gaps. That is why our approach matters – evaluating a deal through a variety of individual lenses only provides so much value, it’s critical that the data produced through those lenses is evaluated holistically across teams.

“The platform also allows us to scenario test, understanding how different structures react and subsequently allowing us to talk through the implications with the cedent without restarting the process each time. Terms and conditions which may look strongest for the capital team may have direct impact on underwriting, so finding the balance through data collaboration is key. It keeps the design stage practical and ultimately makes execution and outcomes easier.”

Looking ahead, both brothers shared with Artemis where they see this approach taking Northern Re in the near future.

Peter McKelvy, said: “I have a technology background so I’m a bit biased but we’re going to keep investing in the platform to develop a deeper integration between underwriting and the rest of Northern’s functions. As our systems improve, we have been able to measure and report on the positive impacts for our capital partners and cedents. When we can clearly improve outcomes, that is where we will continue investing.”

Anthony McKelvy, added: “As interest in ILS and sidecar structures continues to grow, Northern Re positions itself as a complementary hybrid to these and traditional reinsurance. We’re now seeing blue-chip (re)insurers approach us to understand how our products can support their needs. These companies in particular understand the marriage between ILS, traditional capacity, and Northern Re’s approach, which has afforded us several recent successes.”

Read all of our interviews with ILS market and reinsurance sector professionals here.