XL Catlin & Ventus partner to bring collateralized capacity to SME’s

Insurance and reinsurance group XL Catlin and Ventus Risk Management, a recently formed Managing General Underwriter, are partnering to bring commercial property insurance to small and mid-sized enterprises with backing from collateralized reinsurance funds.

Ventus and XL Catlin, along with some of their key distribution partners, will offer “unique property insurance solutions” focused on property catastrophe risks to the small and mid-sized enterprise (SME) market.

The commercial property catastrophe insurance products will be backed by both traditional and alternative capital, with XL Catlin explaining that support from collateralized catastrophe reinsurance funds will be included.

It’s not clear whether this is ILS funds under the management of New Ocean Capital Management, XL Catlin’s Bermuda domiciled insurance-linked securities (ILS) and collateralized reinsurance fund manager, or others.

Ventus CEO George Reeth commented on the partnership; “We are initially targeting select classes of coastal commercial property risks, leveraging our proprietary industry-leading catastrophe risk analytics with the combined strength of XL Catlin’s access to capital markets reinsurance capacity and strong balance sheet.”

Reeth is a co-founder and former President of Validus Re. The management team of Ventus is led by Stuart Mercer (President), a co-founder and former Chief Risk Officer of Validus Re and CEO of AlphaCat Managers, and Richard Goldfarb (Chief Underwriting Officer and Chief Actuary), the former CFO and Chief Actuary of CapSpecialty.

XL Catlin’s Head of Alternative Capital, Craig Wenzel also commented on the announcement; “We are excited to be partnering with this experienced team in bringing leading-edge modeling and distribution practices to the marketplace.  This builds on our history of developing innovative solutions in the re/insurance capital markets, and furthers our objectives in matching the right capital to each risk we underwrite.”

Ventus is launching with an experienced team that know the value of leveraging ILS capital and collateralized reinsurance products in order to increase capital efficiency.

The MGU looks set to emulate others such as the raft of MGA’s or fronting insurers that are helping to break down the barriers between insurance risk and ILS fund capital, increasing the efficiency of the value-chain from insurance product to ultimate source of risk capital.

Ventus will become a source of property catastrophe risk for the collateralized reinsurance funds it is working with, whether New Ocean Capital Management or others. The trend toward getting risk capital closer to the source of the risk continues to gain pace, with major players like XL Catlin clearly showing their interest in facilitating and being part of this development.