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Xactanalysis Insights and PCS

SiriusPoint planning a “sidecar-like” retrocession program

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SiriusPoint, the new international insurance and reinsurance firm that will be launched out of the coming together of Third Point Re and Sirius Group, is planning for its retrocession program to be “sidecar-like”, the company said.

siriuspoint-logoSiriusPoint came about after Bermuda headquartered, once total return focused reinsurer Third Point Re and re/insurer Sirius Group reached an agreement back in August 2020 to combine in a cash and stock transaction.

Both of the companies have worked with third-party reinsurance capital in their time, Third Point Re having operated a dedicated catastrophe focused ILS fund and Sirius through its Capital Market operations which focused on collateralized quota share reinsurance transactions, like sidecars.

The incoming SiriusPoint CEO, Sid Sankaran, previously told us in an interview that insurance-linked securities (ILS) capital, from third-party investors, could be used by the combined entity, depending on its need for capital and how it would align with its underwriting priorities.

Now, the company has explained, that it intends to operate as a global franchise, underwriting insurance and reinsurance across multiple-lines, but with its portfolio protected using what it terms a “sidecar-like” retrocession program.

One of the benefits of merging together the two firms as SiriusPoint is expected to be less reliance on property catastrophe reinsurance to drive underwriting profits, but this also could be an opportunity for the enlarged reinsurer to access new sources of capital, perhaps.

SiriusPoint could enhance its catastrophe reinsurance underwriting, while leveraging third-party investor appetite through quota shares, or a sidecar-like arrangement, which would not only provide retrocessional protection, but also boost its capacity for these types of risks while also earning the company a source of fee income as well.

The company will have ample capital markets expertise and experience to shift its operating model in this manner and access to risk to feed the appetite of investors, as well as its own balance-sheet capital shouldn’t be a problem either.

With around $2.5 billion of gross written premiums forecast, SiriusPoint expects that to be around 35% in property lines, 34% specialty and casualty, 24% accident and health, with the remainder from run-off and other lines of business.

The combined entity will also have a global underwriting platform, with operations in the U.S., Bermuda, Europe, at Lloyd’s and also in Asia.

Which presents SiriusPoint with an opportunity to build a broadly diversified book of business that would appeal to certain capital markets investors.

The more balanced SiriusPoint entity that emerges once the merging of Third Point Re and Sirius Group is complete should be an interesting platform to watch and if the ambition to operate a retro program in a sidecar-like manner holds true, opportunities may emerge for ILS capital providers and investors as a result.

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