Securis Investment Partners has increased the size of its special purpose Lloyd’s of London syndicate 6129 joint venture so it can underwrite $130 million of U.S. excess and surplus lines property business in 2017.
SPS 6129 is a joint venture between Securis and specialist re/insurer Novae Group plc, with the target strategy being growth into U.S. excess and surplus lines property business, with the help and support of third-party capital under the management of Securis.
The special purpose Lloyd’s structure was launched for the start of the 2016 underwriting year, with stamp capacity of US$75 million to put to work.
After just one year of underwriting Securis is almost doubling the commitment its ILS investment funds make to SPS 6129, with the 2017 stamp capacity now lifted to approximately $130 million.
Neil Strong, Head of Global Origination at Securis Investment Partners, explained to us that while the stamp capacity at SPS 6129 has grown, it will not be increasing the number of MGA relationships dramatically.
“We’re upsizing the existing relationships, not increasing the number of them,” Strong said, adding that Securis works with around 8 or 9 key MGA partners, making the relationships more about the quality of the risk selection, rather than the volume of business that can be delivered.
Securis’ ILS funds provide about $90 million of the stamp capacity directly to the MGA’s, via Lloyd’s corporate member structures and the SPS 6129 itself. The remaining $30 million or $40 million is deployed via Novae’s Lloyd’s syndicate 2007, through a number of smaller quota-shares and the SPS takes a small share of the whole syndicate as well.
That provides a diverse book of U.S. property focused underwriting business, which is exactly the opportunity that Securis is looking for to deliver to its investor base.
Herbie Lloyd, Head of Insurance, Securis said; “This is a unique partnership and the synergy is clear: Securis benefits tremendously from the scale and experience of Novae’s delegated authority infrastructure (underwriting, claims and ongoing coverholder management) whilst Securis brings an ability to attract and analyse catastrophe exposed, new-to-Lloyd’s business by leveraging its expanding origination reach in both Bermuda and London.”
As SPS 6129 underwrites direct U.S. E&S property insurance it provides a platform through which Securis can get its capital closer to the ultimate source of risk, thus increasing the margins that can be achieved for investors.
The benefits of doing this through a Lloyd’s structure is the leverage that the market offers, enabling Securis’ stamp capacity to go much further than it would on a fully collateralized reinsurance basis.
Securis’ investor capital is funneled into the E&S business from Securis funds, via two Lloyd’s corporate member vehicles (Securis LCM Ltd. and Securis LCM 2 Ltd.). A smaller amount of capital also comes directly into the corporate member vehicles from larger investors who want to participate directly in just the Lloyd’s business.
Securis is also active on the risk side, originating a good proportion of the risks ceded into the SPS itself as well, so Novae benefits from the expertise of Securis’ underwriting and analytics, as well as the efficient capacity.
Novae retain a 20% share of the E&S business, while also ceding some of its Facilities underwriting portfolio to 6129, and a whole account quota share from syndicate 2007 as well.
So this truly is a symbiotic relationship, benefiting the partners and therefore we’d expect to see this stamp capacity continue to increase for future years.
Securis CEO and Founder Rob Procter, commented that the US E+S Insurance Portfolio has become an integral offering for Securis, enabling investors to access risk in a variety of different forms. Additionally it allows Securis to be more relevant to cedants, supporting their underwriting in a number of guises and not just offering commodity reinsurance capacity.