Enstar in second property ILS legacy acquisition. ILS a growth opportunity, says CEO
Enstar, the legacy and run-off reinsurance specialist, has announced completion of its second legacy transaction focused on property insurance-linked securities (ILS), acquiring a Bermuda based Class 3B reinsurer that underwrote business on behalf of third-party investors.
The company said that its Cavello Bay Reinsurance Limited (Cavello Bay) entity has acquired a Bermuda-domiciled Class 3B insurer and segregated accounts company.
This Class 3B entity underwrote property reinsurance business through the years 2020 to 2023 on behalf of third-party investors, Enstar explained, with the risk assumed through retrocession agreements with a fronting carrier.
As of the end of July 2024, this reinsurance entity had $66 million of shareholders’ equity.
The Class 3B entity will now be merged into Cavello Bay, while at the same time a consolidated and amended retrocession agreement between the unnamed fronting carrier and Enstar’s reinsurance company will become effective.
Through this acquisition, finality has been given to the investors that had been backing the Class 3B reinsurance entity, while the arrangement has also provided continuity for the fronting reinsurance carrier as well, with Enstar’s Cavello Bay stepping in.
This is the second ILS legacy deal from Enstar, following one announced in July when the company provided a loss portfolio transfer (LPT) for prior-year insurance-linked securities (ILS) reserves, to enable trapped capital to be released and to provide those investors that provided the collateral with finality.
As we later reported, that first ILS legacy transaction from Enstar saw the specialist taking on both property catastrophe and COVID-19 exposures, solving an issue that a number of ILS managers have faced where collateral has been trapped and held due to uncertainty over exposure to the pandemic.
More recently, Enstar also revealed its first Forward Exit Option (FOE) transaction, where it delivered an option for investor exit, liquidity and finality from the Starwind Specialty sponsored Fractal Re reinsurance sidecar.
Enstar has carved out a niche for itself as a provider of legacy solutions to the insurance-linked securities (ILS) market and it’s clear the company sees this is an opportunity, as Anguel Zaprianov, Executive Vice President, M&A, explained to Artemis in a recent interview.
Dominic Silvester, Chief Executive Officer of Enstar, explained that this latest ILS legacy transaction underscores the opportunity for his company.
“This acquisition is our second transaction in the property ILS space in recent months, which we see as a growth market for legacy solutions,” Silvester said.
He went on to say that, with this latest ILS legacy arrangement, “The deal structure eliminates collateral requirements, demonstrating the benefit of Cavello Bay’s strong balance sheet and financial strength rating.”
This transaction is another example of Enstar bringing its legacy and run-off expertise to assist in delivering insurance-linked securities (ILS) investors a mechanism that can provide welcome liquidity, release from trapped collateral and finality.
