Insurance holding company W. R. Berkley Corporation has significantly expanded its use of the Lifson Re collateralized reinsurance sidecar vehicle during the first-half of 2022, ceding much more in the way of premiums to investors through the structure.
W. R. Berkley launched a Bermuda based special purpose insurer (ILS) named Lifson Re Ltd. in time for the January 2021 underwriting year, having raised $250 million in capital for the sidecar.
Lifson Re has operated as a kind of third-party capital backed property & casualty (P&C) reinsurance sidecar structure for the company, participating in its reinsurance cessions and bringing efficient capital market investor funding into W . R. Berkley’s reinsurance tower.
In 2021, Lifson Re was participating in the majority of W. R. Berkley’s reinsurance placements, but to a degree limited by the cession share it was taking.
In 2021, we reported that this share meant the Lifson Re sidecar could take up to a 22.5% share of the total amount placed, which resulted in roughly $245 million of written premiums being ceded to it over the course of the year.
The sidecar was recapitalised with the same $250 million for 2022, Artemis has now learned and the plan had originally been to continue writing the same up to 22.5% share in W. R. Berkley’s P&C reinsurance business.
But, we can also report that the cession share has now been increased, from July 1st 2022, with the Lifson Re sidecar now set to be able to take up to a 30% share in any and all P&C reinsurance or retrocession placements, as long as more than one open market reinsurer is participating as a counterparty to W. R. Berkley.
Lifson Re is running ahead of plan in 2022, which may mean additional capital has been raised to support increased risks being written by the structure.
By the mid-point of 2022, the Lifson Re sidecar had written $226 million of premiums, that were ceded to it by W. R. Berkley, which is up significantly from the $139 million it had ceded to the sidecar in the first-half of 2021.
So Lifson Re has become increasingly important for W. R. Berkley, taking a growing share of its business, that is only set to increase with the higher cession share percentage.
This will be delivering value to W. R. Berkley as Lifson is an efficient source of reinsurance capital to support its growth, while also helping to moderate peak risk exposures and delivering some form of fee income as well.
W. R. Berkley previously revealed that the Lifson Re sidecar only has two investors backing it, both institutions with experience in the reinsurance market.
It’s not clear whether any new investors have joined the sidecar, but with the platform becoming more useful for W. R. Berkley, it stands to reason bringing in more capital via the sidecar might be appealing in underwriting years to come.
Find details of numerous reinsurance sidecar investments and transactions in our directory of collateralized reinsurance sidecars transactions.