Aspen is rapidly evolving into a nimble specialty risk transfer platform with its own balance sheet and multiple third-party capital sources to allocate assumed risk to investor appetite, CEO Mark Cloutier has confirmed to The Insurer.
The Bermudian-headquartered firm currently has around $700mn of third-party capital under management but anticipates this growing beyond $1bn by 1.1 if investors support the group’s initiatives, Cloutier confirmed in an exclusive interview with this publication.
These include the renewal and upsizing of the existing Aspen sidecar Silverton Re and the potential launch of a new 1.1 retro fund and at least one other managed fund amidst the capacity crunch caused by the recent withdrawal of CATCo and reduction in capacity from other ILS and traditional participants.
Turnaround specialist and Lloyd’s board member Cloutier spoke to The Insurer shortly after welcoming the arrival of former Validus executive Jonathan Ritz to the organisation as president.
In an internal memorandum to staff seen by The Insurer, Cloutier explained that the arrival of the well-regarded Ritz will enable him to focus on “Broadening our relationships with both trading partners and sector investors to support our capital markets initiatives, as well as to potentially support us as follow on investors to Apollo Global Managers.”
Also joining from Validus is the well-regarded Mary Kotch as Aspen’s chief information officer and member of the executive committee. “She is integral to our vision for success,” explained Cloutier.
Speaking at Monte Carlo, Cloutier expounded on his vision of Aspen becoming an originator of business that with access to Apollo funds and other sources of third-party capital can allocate assumed risk across multiple balance sheets according to investor appetites and return expectations.
“We will always have a balance sheet and we will align our interests with investors by assuming risk but we will also increasingly position ourselves as a transformer of risk with multiple capital structures”, Cloutier explained.
In addition to at least one new managed fund at 1.1, Aspen anticipates launching a platform that can transform specialty risks “straight into the capital markets”.
“We have the toolkit, the people, underwriting pedigree and we also have the platforms to originate business”, he explained - adding that Aspen has admitted and non-admitted US carriers, a UK and Lloyd’s platform, a Bermudian reinsurer in addition to its capital markets arm, run by Brian Tobben.
The firm also confirmed it is looking to launch a retro focussed fund but declined to give more details.
Cloutier arrived at Aspen earlier this year, reuniting with Apollo after he led the turnaround of Lloyd’s carrier Brit Insurance on behalf of the firm and co-investor CVC which culminated in a transformed RoE, short-lived LSE re-listing and then sale to Fairfax Financial.
His arrival at Aspen has also given fresh momentum to the underwriting restructuring initiatives that saw the firm close offices and cut business lines last year following 2017’s outsized loss.
“Looking forward, we anticipate a blended combined in the region of 95. With specialty in the mid-to-late nineties and reinsurance loser nineties but accepting greater volatility”.
The firm also anticipates improving the yield on its $8bn float, using Apollo’s acknowledged investment expertise.
“If we can improve the return by, say, 120 basis points from 2.7 percent to 3.9 percent then this equates to an additional $100mn in our earnings”, he explained. “Combine with our identified efficiencies, improved underwriting and a clear vision to be a leading participant in organiting, underwriting and transforming risk, and Aspen will become a high RoE business within four to five years”, Cloutier predicted.
If Cloutier succeeds in his vision then Aspen will have clear parallels with fellow Bermudians RenaissanceRe and Validus.
In particular, the ‘class of 93’ carrier RenaissanceRe has been a pioneer of the flexible capital approach, with $17bn of total available capital that includes $7.4bn of owned capital on its balance sheet and $9.6bn of partner capital managed for investors via its various sidecar and joint venture vehicles.
The Insurer comment
Only yesterday, The Insurer revealed that former RenaissanceRe executive David Eklund was looking at launching a new retro-focussed platform so it is no surprise that other initiatives are also being explored. It is one of the obvious sub/themes of this year’s Monte Carlo. There is also a tangible flight to quality occurring among investors and cedants for ILS capacity, together with clear pressure on the stand-alone (re)Insurer business model. RenaissanceRe has tremendous pedigree as an underwriter and third-party capital manager. With Cloutier’s pedigree, Apollo’s access to capital and investment prowess and Aspen’s underwriting engine, it will be fascinating to watch the (re)insurer’s stated evolution into a nimble underwriter and fund manager…