Validus Holdings, a Bermuda based reinsurer, has announced the launch of a new special purpose sidecar reinsurer called AlphaCat Re 2011 Ltd. The sidecar has been set up to write collateralized reinsurance and retrocessional reinsurance, areas of opportunity in the market at the moment post-Japan and the other catastrophe losses experienced this year.
Validus says that AlphaCat Re will provide capacity through ultimate net loss, index based and reinstatement premium protection products. The sidecar was funded in May 2011 with $180m of capital from Validus, who have invested $50m, and other equity investors. They commenced deploying that capacity for the 1st June renewals and have underwritten a portfolio of contracts as of that date.
AlphaCat Re 2011 will write reinsurance business for an initial risk period of 1st June 2011 to 31st December 2012, which Validus say could be extended under certain circumstances. Validus Underwriting Services will underwrite and manage business for AlphaCat Re 2011 for which they will be paid commission for originating the business and a profit commission based on the sidecar’s underwriting results for the term.
Validus took a $50m stake in the sidecar with the rest of the $180m being made up from other common and preferred share investors. Funds and accounts managed by Serengeti Asset Management LP served as lead equity investor in AlphaCat Re 2011.