Global insurance and reinsurance group Everest Re ceded more premiums to its Mt. Logan Re Ltd. collateralized reinsurance sidecar-like vehicle in 2019 than losses, the first year since 2016 when catastrophe impacts have been far outpaced by premium growth.
While 2019 saw its fair share of major global catastrophe loss events that hit the reinsurance industry, Everest Re’s third-party capital vehicle Mt. Logan Re came out ahead, with its premiums far outpacing losses.
The Everest Re Group annual report details underwriting premiums ceded to the Mt. Logan Re vehicle, with the figure rising to its highest level so far, signalling the important and core role that the third-party reinsurance capital vehicle plays in the firms operations.
For the full-year 2019, ceded written premiums reached almost $292 million, their highest figure ever, while ceded earned premiums neared $295 million.
Both figures are up on the 2018 and 2017 totals, but more important than the premium growth is the fact losses ceded to Mt. Logan Re have fallen signfiicantly.
Everest Re passed on ceded losses and loss adjustment expenses of just over $187 million during 2019, down significantly from the almost $320 million ceded to Mt. Logan Re in the prior year and just over $320 million ceded in 2017.
This despite a spike in the losses ceded that we reported after Q3 2019, which included exposure to the typhoones in Japan and other events.
While the premium growth demonstrates the increasingly core nature of Mt. Logan Re within the Everest Re Group operations, this is also shown by the vital role it plays within the reinsurers own retrocession.
Of some $1.764 billion of reinsurance recoverables reported at December 31st 2019, Everest Re said that a huge 38.7% or $682.8 million was receivable from the segregated accounts of Mt. Logan Re.
That reflects the significant amount of business that Everest cedes to Mt. Logan Re, but also the core role the structure pays in bringing efficient capital into its business that would respond to major catastrophe losses.
For comparison, the next largest reinsurer of Everest Re Group is Munich Re, with 8.4% of recoverables receivable from the global reinsurance giant.
In the current uncertain climate, investors may be looking to vehicles such as Mt. Logan Re as a way to align themselves with well-regarded underwriting houses and while the initial uncertainty related to the current coronavirus crisis may dent appetites, these ILS vehicles operated by top-tier reinsurers, such as Everest Re, are likely to garner favour in months to come.