Victor Insurance Managers LLC (Victor), a global managing general underwriter, has launched a third-party capital backed reciprocal insurance exchange to provide additional US property catastrophe capacity for policyholders of its subsidiary, International Catastrophe Insurance Managers LLC (ICAT).
The Victor Insurance Exchange (Victor Exchange) is third-party capitalised and initially the sole backer is US investment house and financial services specialist Gallatin Point Capital LLC.
Gallatin Point Capital has exhibited an ambition to source access to US property catastrophe reinsurance-liked returns through alternative financing mechanisms in the past, and this move sees it becoming the initial capitalisation source for a vehicle that could widen its reach to support ICAT policyholders, it seems.
As a reciprocal insurance exchange, the Victor Exchange is owned by its policyholders, with capitalisation from a combination of surplus notes, member surplus contributions, and any retained future profits.
The initial capitalisation is in the form of a surplus note wholly provided by Gallatin Point.
As a result, Victor Exchange joins ICAT’s existing panel of carriers, offering small commercial property catastrophe coverage in the 42 states in which ICAT operates.
Suggesting this new Victor strategy is likely to grow and perhaps require more third-party capital to support it, the company said that ICAT will immediately launch a coastal homeowners program, targeting states along the Gulf and Atlantic coasts.
Brian Hanuschak, CEO of Victor, commented on the news saying, “The impacts of increasingly frequent and severe storm activity has led to significant strain on property catastrophe insurance capacity globally and, in particular, the US.
“By forming Victor Insurance Exchange, Victor and ICAT are creating a new source of capacity for agents and brokers while providing more long-term stability for our small commercial and residential policyholders.”
Victor Exchange is licensed as a domestic surplus lines insurer in Delaware and neither Victor, nor any of its affiliates, are contributing any capital to it, nor will they have any direct exposure to underwriting losses suffered in Victor Exchange.
As a result, the Victor Exchange strategy appears to work similarly to a sidecar pool of efficient risk capital to support ICAT’s property catastrophe underwriting expansion, which in the hard market environment is likely a low-cost way to achieve this growth.
The Victor Exchange been assigned a preliminary credit rating of A-.pca (Excellent) by AM Best.
ICAT will act as the exclusive managing general agency and through its subsidiary, Boulder Claims, act as the third-party claims administrator for the venture.
GC Securities, the capital market and insurance-linked securities (ILS) arm of reinsurance broker Guy Carpenter, served as financial advisor on the structuring of and raising capital for Victor Exchange.
This launch from Victor and for ICAT is another innovative way of sourcing capital to support property catastrophe underwriting, providing a flexible and dedicated capital source that can also access open-market reinsurance, where it needs, and that could potentially bring in additional investors to boost the capacity available.