Kuvare sets up $400m life & annuity reinsurance “sidecar” Kindley Re

Kuvare Holdings, a technology-enabled specialist in life and annuity insurance and reinsurance solutions, has become the latest company in this space to launch a sidecar-like venture, that will bring a complementary source of capital from third-parties to help it expand its underwriting business.

Kuvare has launched Kindley Re Ltd., a Class E licensed, Bermuda-domiciled life and annuity reinsurance company.

Kindley Re has been launched with $400 million of backing, that will be dedicated to invest into qualifying new life and annuity opportunities that Kuvare sources, co-investing alongside the company.

Kindley Re has been formed in partnership with global investment manager Davidson Kempner Capital Management LP and Kuvare and its affiliates, and has entered into reinsurance agreements with Kuvare to participate in qualifying transactions, including both flow reinsurance transactions and block reinsurance transactions.

Entities and investment funds managed or advised by Davidson Kempner have provided the initial equity capital commitment to get Kindley Re set up and running.

Kuvare is the sponsor of Kindley Re and will provide operational support to the reinsurance sidecar-like structure through a Bermuda-based service company.

Kuvare’s New York-based boutique asset management firm, Kuvare Insurance Services, will serve as investment manager to Kindley Re, while Davidson Kempner will also provide asset management support across select investment grade focused asset classes.

Kuvare Chairman and CEO, Dhiren Jhaveri, commented on the launch, “Kindley Re now provides significant additional capabilities for our enterprise as we continue to capitalize on attractive opportunities in the marketplace.”

Michael Stefan, Head of Corporate Development and Strategy at Kuvare, added, “Kindley Re now provides Kuvare with access to $400 million of additional capital with flexibility to increase over time. This co-investment vehicle provides a unique opportunity for investors seeking to deploy capital in this market segment, while supported by a range of capabilities across Kuvare and KIS.”

Kindley Re continues the trend for life and annuity re/insurers to launch sidecar like reinsurance vehicles, that both provide an investor with a way to tap into the returns of this asset class and augment the capacity of the re/insurance sponsor at the same time, Kuvare in this case.

Davidson Kempner is a $38 billion asset manager and just the latest to display an appetite for entering the life and annuity reinsurance space.

Other examples of annuity and life reinsurance sidecar type structures include the ACRA vehicles sponsored by Apollo / Athene, Ivy Re sponsored by KKR’s Global Atlantic, plus SkyRidge Re sponsored by Security Benefit and Eldridge.

There are other third-party capital backed life and annuity focused reinsurance vehicles, including RGA and RenRe’s joint-venture Langhorne Re.

With these vehicles re/insurers can effectively break apart some of the return drivers of their businesses, leveraging investor appetite for returns from the underwriting and investment side, while channelling third-party capital to support their reinsurance clout.

The life and annuity space is all about scale, as deal sizes can be incredibly large, so these structures can help life and annuity specialists to enhance their relevance with clients and give them access to deals they may otherwise have been able to enter into, all while sharing the rewards with third-party investors.

As a result they look and feel very like the property catastrophe reinsurance sidecars that are more familiar to ILS investors, although the risk-return profile is, of course, quite different.

But they are another example of investors partnering with underwriters, to source access to underwriting returns, although in the case of these vehicles tapping the investment float generated is another attraction it seems.