Everest Re expanding use of ILS investor capital: Mt. Logan President Modin

Global insurance and reinsurance firm Everest Re is expanding its use of insurance-linked securities (ILS) investor capital, with its third-party capital venture Mt. Logan Re Ltd. a core component of the firm’s efforts to lower its catastrophe exposures, according to John Modin, President of Mt. Logan Re.

As we recently reported, Everest Re continued to take steps to reduce its exposure to property catastrophe related volatility in the first-quarter of the year, with its writings of catastrophe excess-of-loss reinsurance business falling to just 16% of its first-quarter book.

Key to the effort to lower its catastrophe PML’s is Everest Re’s third-party capitalised ILS structure Mt. Logan Re, which stands to benefit the reinsurer by providing a platform of complementary capital with an appetite for catastrophe risks.

Speaking with Artemis in a recent interview, Mt. Logan Re President John Modin, explained why this is important.

“As part of our work to manage and reduce catastrophe PMLs, we are expanding our sources of underwriting capital, optimizing our balance sheet capital structure, and expanding our utilization of ILS investor capital, particularly in our Mt. Logan vehicle,” Modin said. “These collective efforts will improve our risk-adjusted operating margin while reducing volatility. It also creates a proactive and scalable management model and results in an optimized capital structure that allows for dynamic capital allocation to the highest value opportunities.”

“Mt. Logan Re and our other third-party capital structures put Everest at a distinct competitive advantage by allowing us to provide meaningful capacity to our clients while managing volatility in our book and reducing our cost of capital. At the same time, we are able to provide competitive returns to our capital markets partners depending on their respective risk appetites through a suite of products. We’ve built Mt. Logan into an entity with a strong brand and we’re committed to the platform and have ambitious plans to grow AUM,” he continued.

Everest Re expects to deliver on this over the year ahead, partnering with new third-party capital sources through the Mt. Logan Re vehicle, while also leveraging catastrophe bond investor appetite through its well-established Kilimanjaro Re cat bond series.

Also evidencing the commitment to working with third-party capital, Modin highlighted his own hire by Everest Re to lead the Mt. Logan Re division, as well as the recent hiring of Greg McBride as Global Head of Marketing and Business Development and Clint Graham as Chief Underwriting Officer, as well as the most recent news of experienced pension investor Youssef Sfaif joining Mt. Logan Re as Chief Operating Officer.

This platform build-out comes amid the hardening of reinsurance rates and Everest Re’s optimisation of its catastrophe exposure, presenting a good opportunity for Mt. Logan Re to grow its asset base this year, it seems.

Modin sees traction building, saying that, “We added a new investor on January 1, 2022 and are in discussions with several others about future subscriptions.”

Adding that, “Everest, Mt. Logan, our core investors, and certain prospective investors all recognize the long-term return and diversification value in ILS / Mt. Logan and we are all committed to continuing to invest in it for the long term.”

Modin also believes the broader financial and capital market volatility that has been seen will play in favour of ILS as a diversifying asset class.

“The risk-off sentiment in equities and credit as well as the current hard market being enjoyed across all property & casualty lines have reminded investors of the unique diversification benefit the insurance-linked asset class introduces when added to a traditional investment portfolio,” Modin explained.

For Everest Re, Mt. Logan continues to be utilised in the same way, but its importance is perhaps building as the company looks to manage its catastrophe exposure more proactively.

“We continue to utilize Mt. Logan on the same long term, consistent basis as it always has – as a means of sharing a unique portfolio of risks underwritten by Everest with our capital partners, providing them with access to our global UW expertise, and in turn providing Everest with additional UW capacity and fee income,” Modin said.

Further explaining that, “Just like Everest shareholders, Mt. Logan investors have benefitted from the improvement during 2022 in the overall quality of the underlying portfolio as well as the strong rate environment.”

As we explained in a recent article, Everest Re’s CEO Juan Andrade recently said that as his company hones its underwriting portfolio it is finding that the trade of more profit, for less exposure, is an outstanding one.

Mt. Logan Re stands to be an important lever in maximising the benefits of this portfolio steering and cat exposure optimisation for the company.