Obsidian launches as fronting conduit to reinsurance & alternative capital

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Obsidian Insurance Holdings, Inc., has been launched as a new fronting insurance holding company with $100 million of capital, that aims to become a conduit to connect risk with reinsurance and alternative capital.

HandshakeLaunched by private equity specialist investor Genstar Capital in partnership with management, Obsidian Insurance will be run by industry executives William Jewett and Craig Rappaport and will work with property, casualty, and specialty insurance programs, reinsuring the majority of the business to select reinsurance capital providers.

Obsidian’s insurance carrier, Obsidian Insurance Company, has now been given a financial strength rating of A- from A.M. Best to issue policies that are underwritten by Managing General Agents, Managing General Underwriters, and program managers.

Obsidian will work to connect these originators of risk with reinsurance capital providers, including alternative capital sources such as insurance-linked securities (ILS) funds.

The Obsidian senior management team features well-known insurance and reinsurance industry executives that have a track record of in launching, building and growing profitable companies.

Obsidian will be led by William Jewett who has more than 35 years of industry experience at senior levels. Jewett will be Chief Executive Officer of Obsidian and was most recently with Bermuda-based re/insurer Endurance Specialty, holding the positions of President and as a Member of the Board of Directors

Craig Rappaport will join as Chief Operating Officer, bringing 20 years of industry experience focused on building and managing program focused insurance companies. Most recently Rappaport served as Chief Operating Officer of Specialty Property & Casualty at the Hanover Insurance Group.

Emily Canelo becomes Obsidian’s Chief Legal Counsel, having previously served as Chief Counsel & Executive Vice President for Reinsurance and Insurance of Endurance Services Ltd.

Ryan Clark, President and Managing Director of Genstar Capital, said, “We are thrilled to be backing such an experienced, dynamic, and well-rounded team in the formation of Obsidian. One of the trends we have been following is the emerging need for insurance companies that underwrite program business and act as a conduit to reinsurance and alternative capital.

“Our formation of Palomar Specialty Insurance in 2014 was a successful investment based on this theme and we think there is opportunity for new players.

“Obsidian will be an unconflicted partner to its program and reinsurance relationships and we are excited to be open for business with such a terrific team.”

Jewett added, “Fronting companies currently write a small fraction of the premiums of the rapidly evolving property and casualty industry. This will markedly grow, however, as a direct result of the increasing market share and influence of managing general agents and the inherent advantages of the fronting model.

“Obsidian will provide value to program managers by delivering solutions that offer greater stability, control, and revenue than traditional carriers, and support long-term relationships and greater access to a wide range of reinsurers.

“Our experienced management team and business model as an independent, technology-forward program carrier with the willingness and capabilities to take underwriting risk are unmatched in the fronting industry.

“We see tremendous opportunity ahead and look forward to our partnership with the team at Genstar. They have extensive experience successfully building and growing companies like ours, and we are very excited to be one of their portfolio companies.”

Obsidian Insurance Holdings board will feature Jewett of Obsidian; Clark of Genstar Capital; Scott Niehaus, Principal of Genstar; Richard Taketa, a member of Genstar’s Strategic Advisory Board and former CEO of York Risk Services and; Jeremy Hitzig, former CEO of The Distinguished Programs Group.

Genstar has a strong history of investing in the insurance and reinsurance sector, including the formation of new company platforms.

Genstar previously partnered with Mac Armstrong and Heath Fisher in 2014 to form catastrophe focused underwriter Palomar and its current insurance sector investments include include Alera Group, AMBA, Worldwide Facilities, 2-10 Home Buyers Warranty, Acrisure, Insurity, Financial Horizons, Innovative Aftermarket Systems, and Confie Seguros.

Piper Sandler & Co. acted as placement agent for the Obsidian capital raising and BMS Capital Advisory, Inc. acted as co-placement agent.

Romulo Braga, CEO of BMS Capital Advisory, commented, “BMS Capital Advisory is pleased to have helped bring Obsidian’s dynamic fronting capabilities to market. Our firm has built its reputation as a nimble, insurance-focused capital advisory business, providing clients with tailored advice. We were pleased to work with Piper Sandler & Co. and an investor of Genstar’s reputation to help launch Obsidian and look forward to further transactions to come.”

Fronting and risk transformation carriers have become an important piece of the market chain for some ILS funds and investors, smoothing their access to reinsurance risk and earning service fees in return.

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