Expansive non-standard auto MGA Bluefire Insurance was able to secure additional capacity from reinsurers on its core quota share at 1 January and renew its alternative capital transaction with Axa XL, as it increased the amount of business it retains overall to 30 percent, The Insurer can reveal.

Bluefire Insurance

The Irving, Texas-based MGA retains 10 percent as part of the collateralised reinsurance transaction with Axa XL, and upped its retention through Bermuda captive Bluefire Re from 5 percent to 20 percent.

The move to increase its retention is in line with Bluefire’s strategy to assume a more meaningful portion of the risk it writes to demonstrate increased alignment with its carrier partners and reinsurance panel.

In an interview with this publication, Bluefire president Andrew Shrout said the firm – which is backed by Abry Partners – is looking to further increase the retention on its quota share treaty over the coming years.

“We believe most MGAs should operate similarly, where they are not only aligning risk with third-party capital, but in a meaningful way. Reinsurers and carriers should expect us to take a 30, 35 or 40 percent share,” he commented.

Bluefire-Insurance-documents

Bluefire’s head of strategy Jamie Pooley said the MGA aims to align itself with blue-chip reinsurers.

“Our aim is to become the best-in-class MGA in the non-standard auto space, but it’s about differentiating ourselves.

“We are supported by a blue-chip panel of reinsurance partners, we want to be partnered with them for a long period of time and be their main relationship in this space. If we deliver consistent returns to our reinsurance partners then we can be confident that their capacity will remain constant or grow,” he commented.

Bluefire’s non-standard auto programs are supported by half a dozen insurance carriers including Home State Group and Old American, which represent by far its biggest fronting relationships.

With around 10 percent of its quota share assumed by its fronting carrier partners, the quota share to reinsurers sees Bluefire cede 70 percent to the panel, which is led by Axa XL.

Collateralised structure renewed

As previously reported, last year Bluefire entered into an innovative collateralised reinsurance transaction with Axa XL which allowed it to effectively up its retention alongside its captive position.

The structure sees the MGA use a Bermuda segregated cell to act as a retrocessionaire of Axa XL Reinsurance in Bermuda.

As well as functioning as the fronting reinsurer for Bluefire to assume risk via the segregated cell, Axa XL Reinsurance provides a loss ratio cap and collateral release mechanism.

Last year’s transaction allowed the MGA to retain an additional 10 percent alongside the 5 percent it was already assuming via its Bermuda Class 2 insurer Bluefire Re.

That total has now been increased to 30 percent for 2021 on a book that is expected to continue strong growth momentum as the firm expands market share in some of the smaller states in its existing geographical footprint.

Shrout said that after meeting its top line budget plans in 2020 despite Covid-19, Bluefire has started 2021 strongly.

“In January we were well in advance of where we thought we’d be at mid-to-late February, so momentum from 2020 is carrying through more than we thought and we’re seeing better customer retention.

“We’re up about 10 percent compared to the same time last year. The book is growing at an accelerated rate,” he said.

Shrout said that the current growth trajectory supports a target of passing the $750mn mark in written premium in the next five years.

Bluefire was formed from the amalgamation of several different non-standard auto MGAs and operates in 10 states, with the lion’s share of its book stemming from business written in Texas, California, Louisiana and Alabama.