Alternative risk premia focused mutual fund manager Stone Ridge Asset Management has established, or acquired, a limited liability Lloyd’s corporate vehicle, which will in future enable the manager to access the reinsurance linked returns of the key specialty re/insurance hub in London.
Stone Ridge, which currently manages over $5.7 billion of insurance-linked securities (ILS) and reinsurance linked assets in its two main mutual ILS fund strategies, has been looking at ways to expand into new markets and to acquire risk more directly from the source, we understand.
Stone Ridge has established, or possibly acquired as it isn’t clear which, a UK registered limited liability partnership named Point Dume LLP that is being structured and positioned to act as a corporate member of the Lloyd’s of London reinsurance market, we understand.
Sources said that this initiative has been underway for some time, and from the filing documentation seen by Artemis Stone Ridge is working with Lloyd’s private capital specialist Argenta Group, which is named as a corporate officer for Point Dume LLP.
Point Dume LLP was first incorporated on the 28th Sept 2016, showing Stone Ridge has been pursuing Lloyd’s reinsurance market access for a while at least.
As a corporate member or limited liability vehicle, Point Dume could be able to provide capital to syndicates through their fund’s at Lloyd’s, which would enable Stone Ridge to benefit from the performance of Lloyd’s syndicates it chose to work with, or to underwrite in its own right as many limited liability vehicles now do.
By working with a specialist like Argenta, Stone Ridge will be able to focus on the underwriting or reinsurance of risk linked returns passing through the limited liability vehicle, rather than having to concern itself with the day-to-day running of a Lloyd’s of London business.
Stone Ridge has made a small $25,397 investment in Point Dume LLP from its largest mutual ILS fund strategy, the Stone Ridge Reinsurance Risk Premium Interval Fund.
Given the fact that risks from Lloyd’s and returns funnelled through a corporate member will not be particularly short-tailed, in terms of duration and time to finality, it’s likely that any risks channeled through Point Dume LLP will be better allocated to the Interval fund strategy, rather than Stone Ridge’s other ILS fund.
It’s not known when, or even if, Point Dume will begin bringing reinsurance linked returns from the Lloyd’s of London market to Stone Ridge’s investors. It takes time to establish such vehicles and to gain access to the Lloyd’s market, so we’d imagine the asset manager is having to be patient as the sometimes lengthy process to access the market is followed.
It signals that Stone Ridge is ready to move beyond just being an investor in cat bonds, quota shares and sidecars, to become a more active participant in the Lloyd’s market, although we’d imagine the mutual funds will remain a step removed and there will be reinsurance agreements between the fund and the Lloyd’s focused vehicle.
It’s also a sign that Lloyd’s remains a very attractive market for alternative capital to tap into and suggests that we’re going to see an increasing number of asset managers looking to establish a vehicle than can access some of the market’s reinsurance linked returns.
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