Home›Insurance›Reinsurance›Casualty reinsurance sidecars gaining traction as capa…

Casualty reinsurance sidecars gaining traction as capacity tightens

Howden Capital Markets & Advisory says insurers, reinsurers, and MGAs are increasingly using sidecars to convert underwriting income into more stable fee income as traditional casualty capacity remains constrained.

Reported · Written up by our desk · Reinsurance

Howden Capital Markets & Advisory executives say casualty reinsurance sidecars are emerging as a third pillar in the market, alongside traditional reinsurance and balance sheet capacity, as traditional casualty capacity remains constrained. In a recent roundtable, HCMA linked the growing momentum to sustained interest in casualty and long tail lines rather than any sign of a slowdown.

Artemis reports that HCMA’s capital markets and insurance-linked securities specialist unit said sponsors are being pushed to act, with clients increasingly exploring partnerships with investors to optimize capital structures. Executives said this includes converting some underwriting income into more stable fee income while supporting growth across areas including insurers, reinsurers, and MGAs.

The discussion also highlighted how different sidecar platforms are being used. HCMA said the surge is occurring mainly via Bermuda structures, and also through Lloyd’s, a market it focuses on.

According to Artemis, HCMA Managing Director Cate Kenworthy said investor interest is coming from credit-focused asset managers applying strategies used in life and annuity, taking on long-duration liabilities while managing assets conservatively around spread. She added that casualty premiums are collected years before claims are paid, creating a long-duration pool of capital, often around seven years, and that Bermuda and Lloyd’s sidecars allow managers to act as capital partners to cedents in exchange for access to the float and a defined forward exit.

More like this

Sources