Parhelion targets $500m capital raise to become sustainable ESG insurer

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Parhelion, an energy and climate risk finance focused company specialising in non-traditional risk issues, is targeting a capital raise of $500 million as it seeks to become a “sustainable insurer” focused on ESG aligned underwriting and investment.

parhelion-logoLaunching its capital raise with initial backing from insurance and reinsurance broking group Howden today, Parhelion is designed to be “the world’s first fully sustainable insurer” the company explained.

Howden has itself seeded the business and it’s hoped that Parhelion will match the surge in institutional capital seeking sustainable or ESG appropriate investment strategies, with growing demand from corporates for an insurance provider that can help them in their transition to become more ESG aligned.

Studies suggest that there is a “persistently strong correlation between corporates with advanced ESG credentials and low insurance claims, enabling Parhelion to offer premium and cover at advantageous terms, whilst generating strong shareholder returns,” Howden believes.

Parhelion will focus on writing both traditional risk coverage and also create new ESG-specific products for risks of the future, so meeting both the needs of corporates that are already advanced on their ESG journey and those beginning the transition.

Parhelion will be led by experienced industry experts Julian Richardson (who has worked at Chaucer, the Department for International Trade and has run a climate finance consultancy named Parhelion for some years now) and David V. Cabral (former COO of Peak Re in Hong Kong) as Co-CEOs, both with significant expertise in climate finance, insurance and reinsurance.

In addition, reinsurance executive Chris Sharp (formerly of Dale, Ark and Aspen) will join Parhelion as Chief Underwriting Officer in September 2021.

The company aims to begin underwriting from January 1 2022.

Charlie Langdale, Head of Sustainable Insurance, Howden commented, “We’re delighted to offer a unique solution for our clients who are in need of a new and sustainable approach to the risks of the future. Parhelion will be an unencumbered highly rated ESG focused carrier backed by fresh capital that our clients can partner with and trust. Its launch is a step towards facilitating long-term industry change.”

Julian Richardson and David V. Cabral, co-CEOs, Parhelion, added, “Companies are transitioning to sustainable procurement and this should not be limited to physical good; it must also include financial services and products. Our vision is to support customers’ transition to a more sustainable and resilient future while creating a virtuous cycle of improved risk control and underwriting performance, irrespective of the market cycle. This vision will be supported by an ecosystem of services and shared data insights to support the overall customer ESG transition.”

What’s particularly interesting about a venture like Parhelion is how it could become an attractive partner to insurance-linked securities (ILS) capital looking for ESG aligned sources of returns.

Parhelion could easily launch the world’s first ESG reinsurance sidecar, for example, once it has gained some scale and has the need for that type of capital, which could provide it with an expansive source of ESG-focused and efficient capital from the institutional markets.

Of course, right now, private equity is likely the type of money that will back Parhelion for its launch, as has been the way of recent re/insurance start-up capital raises.

But that money does not always come with the longest horizon and does come with much higher return requirements typically, meaning other ESG focused insurer ventures could choose to tap the appetite of the world’s largest institutions with an ILS-aligned structure in future.

As a result, we suspect Parhelion may be the first insurer or reinsurer to launch aiming to be fully sustainable, but it certainly won’t be the last, given the appetites of investors.

Howden Capital Markets and TigerRisk Capital Markets & Advisory are both advising Parhelion on its capital raise.

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