Specialty (re)insurer Brit is meeting with ILS investors as it looks to raise funds to upsize its third-party capital platform, including collateralized reinsurance fund Sussex Capital and sidecar Versutus, The Insurer can reveal.
According to sources, Bermuda-based Sussex Capital – which was launched in time for 1 January 2018 – started this year with around $100mn of assets under management.
Brit is thought to be visiting with potential investors in Asia, Europe and the US to raise funds for Sussex Capital, which underwrites through special purpose insurance vehicle Sussex Re.
Although the fundraising target is not known at this point, sources said the ILS fund could look to significantly increase the size of Sussex Capital to become a more meaningful player in the market.
The current AUM includes around $30mn from Brit, with the remaining balance coming from third-party investors.
Sussex Re currently writes a quota share of Brit’s Syndicate 2987 property cat treaty portfolio as well as third-party business.
It is part of a quota share strategy that has seen Brit cede 50 percent of its property cat portfolio, with 25 percent ceded to traditional capacity and 25 percent on an ILS basis.
Versutus has upsized in each of the last two years, from $112mn to $144mn for 2018, and then up to $157mn at the start of this year.
Sources said the composition of the underlying Brit book is unlikely to change significantly over the coming year, and that Sussex Re will continue to mirror Versutus, which itself mirrors the traditional quota share arrangement in terms of the portfolio ceded by Brit.
It is thought that Brit could increase its cession rate to Sussex Re as it looks to build a more balanced portfolio.
The vehicle and sidecar Versutus allow the carrier to offer larger line sizes on attractive transactions it is writing on its own balance sheet as it builds strategic relationships with reinsurance buyers as a more meaningful player in the space.
Its ultimate aim is for Sussex Re to also more significantly build out its portfolio of third-party property reinsurance business.
It is thought that Sussex Re’s portfolio is currently sourced 70 percent from the Brit quota share, with the remainder from open market transactions.
The fundraising comes at a time when several established ILS managers are also thought to be in the process of seeking additional investment, along with a number of proposed start-up vehicles that are largely focused on the tighter retro space.
Although meetings and road shows by a number of funds are currently taking place with investors, the expectation is that commitments are likely to be held back until at least the end of the hurricane season next month.
Some investors have undoubtedly become wary of the sector after the last two years of heavy losses and most notably the impact of significant loss creep from events including Hurricane Irma and Typhoon Jebi.
But others – both incumbents and those that have been sitting on the sidelines – are expected to see the opportunity of significantly improved pricing for cat business as an opportunity to achieve higher returns against a backdrop of stagnating interest rates.
Brit is likely to see the alignment of Sussex Capital with its own established underwriting franchise and track record as an advantage in its bid to attract interest from those investors.
Brit declined to comment on this article.