China Re-owned insurer Chaucer has applied to the Bermuda Monetary Authority (BMA) to launch a Class 4 reinsurer on the island, The ReInsurer can reveal.

Chaucer

The London-headquartered carrier has made the application through its Ireland subsidiary Chaucer Insurance Company DAC and is awaiting regulatory approval for the vehicle.

Chaucer will use the vehicle to principally target US catastrophe business, this publication understands.

Class 4 (re)insurers are vehicles underwriting direct excess liability insurance and/or property catastrophe reinsurance risks and are required to maintain minimum capital and surplus of $100mn.

The addition of a Bermuda platform would add to Chaucer’s operations in Dublin, Copenhagen, Singapore, Dubai and Miami.

At Lloyd’s Chaucer operates through syndicates 1084 and 1176. 

Syndicate 1084 is the 11th largest syndicate at Lloyd’s and writes specialty aviation, casualty, energy, marine, political and property insurance and treaty reinsurance worldwide.

Syndicate 1176 is Chaucer’s nuclear focused syndicate. 

In 2019, Syndicate 1084 delivered a profit of $101.5mn, compared to a loss of $30.1mn the previous year and a combined ratio that improved 8.4 points to 95.2 percent.

Chaucer’s planned Class 4 is not its first foray on the island. In 2017 the carrier launched a reinsurance sidecar with support from third party capitalty to provide collateralised reinsurance capacity for its Syndicate 1084, Thopas Re.

Thopas Re entered into an exclusive quota share agreement with Chaucer to reinsure a share of Chaucer’s US and international property catastrophe portfolio from 1 January 2018.

In 2018, Chaucer was sold by its owner US specialty carrier The Hanover to China Re in a $950mn deal. Following the transaction, Chaucer also became the managing agent for China Re’s Syndicate 2088. 

A timeline of Chaucer

Since then, Chaucer – which is led by CEO John Fowle – has made a number of strategic hires as it looks to build out its international footprint.

Earlier this month, this publication revealed Chaucer had hired Axa XL’s former head of Latin America reinsurance April McLaughlin to lead its own treaty operation in the region.

In April, the carrier named former XL Catlin executive Paul Jardine as non-executive chairman.

Chaucer follows fellow Lloyd’s carrier Ark in looking to set up shop in Bermuda and capitalise on the hardening specialty (re)insurance market.

As first revealed by this publication in June, Ark is looking to raise $750mn to $1bn and form a Class 4 Bermudian reinsurer.

The carriers join a growing list of incumbents who are seeking to scale-up since the outbreak of Covid-19, with the period of distress brought about by the pandemic – as well a sustained period of catastrophe losses and issues surrounding casualty reserves –  creating opportunities not only for scale-ups but for new entrants as well.

Fellow Lloyd’s carrier Ark is currently raising ~$800mn which would see the firm convert its existing Class 3 Bermuda carrier into a Class 4 carrier while 2019 start-up Convex is currently undergoing a capital raising exercise which will likely see additional capital injected into its Bermuda operating subsidiary. 

The ReInsurer Comment:

The industry’s post Covid-19 fund-raising and expansion continues with news of Chaucer’s application.

Lloyd’s focus on limiting its cat business – a key factor in rating agencies’ scrutiny of the market after the 2017-18 losses – may have also been a factor in its move…

Bermuda remains market of choice for cat opportunities