Chubb values ABR Re more highly, though premiums ceded to it decline in 2023

While total-return and third-party capitalised reinsurance joint-venture ABR Re remains firmly at the centre of Chubb’s reinsurance arrangements, the re/insurer ceded a little less risk premium to ABR Re in 2023, although the carrying-value of the JV increased over the year.

Chubb has been extracting significant benefits from the ABR Re strategy over the years, leveraging it as a source of aligned reinsurance capacity, akin to a sidecar, but with the additional lever of an investment return delivered through the maangement of joint-venture partner Blackrock.

ABR Reinsurance Capital Holdings Ltd., the parent company, and ABR Reinsurance Ltd. (ABR Re), the reinsurance underwriting vehicle, were launched in 2015 by Chubb (ACE at the time) as a total-return, or investment-oriented, reinsurance joint-venture alongside asset management giant Blackrock.

ABR Re is really Chubb’s main third-party capital, having launched with around $800 million of capital sourced from third-party investors and the joint-venture partners themselves.

Blackrock provides asset management services to the reinsurance vehicle, while Chubb cedes risk to ABR Re, and both of the JV partners earn a source of income from ABR Re, in terms of fees and profit shares.

ABR Re acts an internal reinsurance vehicle, with a strict mandate to only underwrite risks ceded to it by Chubb, while it is said to follow market terms on that underwriting business as well.

Chubb benefits from certain reinsurance market efficiencies that ABR Re generates for it, as it enables the company to leverage a lower-cost of capital and a dedicated source of reinsurance capacity, which is third-party investor supplied and so additive to its own scale, in terms of the limits it can deploy to clients thanks to this efficient reinsurance backing.

The asset management strategy of Blackrock further differentiates it and extends the benefits, as ABR Re’s assets are invested differently to Chubb’s own balance-sheet assets, providing additional leverage for that portion of its business operations.

Back in 2022, ABR Re raised an additional $210 million of capital thanks to an equity investment from a new investment manager that now also manages a portion of the reinsurers’ assets, so it’s no longer just Blackrock it seems.

Which will have helped ABR Re in writing more premiums, as Chubb ceded the joint-venture sidecar-like vehicle $507 million of premiums in 2022.

But, in 2023, the amount of business ceded fell slightly, which could be a function of ABR Re following market terms, with reinsurance prices having risen.

For full-year 2023, Chubb reported that ceded premiums written by ABR Re only reached $441 million, so quite down on the previous year.

Overall commissions received fell to $119 million for 2023, down on the $138 million reported for 2022.

But the importance of ABR Re is clear in the expanding reinsurance recoverable attributed to the sidecar like JV reinsurer, as it reached $1.241 billion at the end of 2023, up from $1.05 billion a year earlier.

Alongside that though, ceded reinsurance premium payable fell to $40 million for 2023, well down on 2022’s $110 million.

Chubb maintained its ownership stake in ABR Re at just under 19% for 2023, no change to the prior year.

But, ABR Re has been expanding, of course, helped by the premiums bulking it out, the investment returns generated and also the additional equity investment into the vehicle by the other as yet unnamed asset manager.

As a result, Chubb reports the carrying value of its stake in ABR Re at $151 million at the end of 2023, up on the end of 2022 figure of $137 million.

Chubb also reported $8 million of income from reinsurance and investment management performance related fees earned via ABR Re for 2023, which was up slightly on 2022’s $7 million.

ABR Re remains an efficient third-party reinsurance capital strategy for Chubb, offering it access to a dedicated source of reinsurance capacity, alongside the flexibility and leverage of an investment oriented underwriting approach, with fee income that can be earned an additional benefit.

For the third-party investors behind the reinsurer, ABR Re offers a way to tap into Chubb’s underwriting-linked returns on an aligned sidecar-like basis, while also providing access to total-return thanks to the asset manager investment strategies.