Starwind raises $270m Fractal Re casualty sidecar. Stone Point, Enstar, State National support

Starwind Specialty Insurance Services, LLC, a program management subsidiary of broking group TIH, has secured $270 million of collateralized reinsurance capacity for certain casualty risk focused programs, through the launch of Fractal Re Ltd., a multi-year collateralized quota share sidecar structure.

It’s the latest casualty insurance-linked securities (ILS) arrangement and like others, as we’ve been saying, demonstrates the market-wide response to the opportunity, as multiple players come together to deliver solutions that enable casualty risks to be transferred to the capital markets and backed on a collateralized basis.

In partnership with Stone Point Credit, the investment manager will manage the asset side of the Fractal Re sidecar, Starwind has secured a multi-year source of reinsurance capacity across a diversified portfolio of its casualty program business.

Fractal Re Ltd. has been launched with a capital raise of $270 million of equity, with institutional and industry investors participating, including minority investments from Nationwide, Enstar Group, the TIH investor group and the Starwind management team.

The sidecar has been in the works for some time, Artemis understands, with Fractal Re established in the fourth-quarter of 2023.

Fractal Re Ltd. has been registered in Bermuda as a collateralized insurer, so can enter into multiple collateralized transactions, while offering a segregated way to manage risks, assets and capital.

Fractal Re is set to participate across a diversified portfolio of casualty and specialty risks that have been underwritten by Starwind through its casualty MGA platform. A multi-year reinsurance agreement, a quota share we understand, is effective October 1st 2024.

Starwind said that the launch of Fractal Re, “reflects investors’ desire to partner with best-in-class underwriting teams and Starwind’s continued commitment to better serve its customers and distribution partners by expanding its capacity through third-party capital.”

Stone Point Credit will act as investment manager to Fractal Re, with a diversified portfolio of credit strategies set to be designed to be matched to the sidecar’s liability profile.

State National, which already has a strategic fronting partnership with Starwind, will serve as the fronting carrier for the Fractal Re platform.

Finally, and perhaps most importantly for any casualty ILS venture, investor exit and liquidity has been well thought through, with Enstar set to step in and offer its recently developed Forward Exit Option (FEO) solution to Fractal Re and its investors, delivering an option for finality.

This is critical, to provide investors with the confidence that there is an end-point to a casualty risk or reinsurance linked investment.

A subsidiary of Enstar Group has entered into an agreement to provide Fractal Re sidecar investors with an option to obtain finality through a novation transaction after a certain period of time.

Enstar has developed its FEO (Forward Exit Option) as a solution tailored specifically to provide finality to third-party insurance-linked securities (ILS) investors.

“The launch of Fractal Re demonstrates Starwind’s ability to meet the needs of our customers and distribution partners by expanding our casualty and specialty capacity,” explained Bill Goldstein, CEO of TIH Underwriting.

Matt Freeman, CEO of State National, further commented, “We’re delighted to support an innovative securitization of casualty insurance risk that delivers meaningful reinsurance capacity to Starwind, attractive risk-adjusted returns to investors, and reliable, high quality reinsurance security to State National.”

“We believe Stone Point Credit’s experience managing capital for the insurance industry, combined with Starwind’s market leading underwriting, will enable us to generate substantial value for all stakeholders,” Jim Carey, Co-CEO of Stone Point also explained.

J.P. Morgan Securities LLC was the sole placement agent for the Fractal Re Ltd. sidecar transaction. BMS Capital Advisory, Inc. acted as the financial advisor, while Willkie Farr & Gallagher LLP provided legal counsel.

Find details of numerous reinsurance sidecar investments and transactions in our directory of collateralized reinsurance sidecars transactions.