ABR Reinsurance Capital Holdings Ltd., the parent company of Chubb’s strategically important total return reinsurance and third-party capitalized reinsurance joint venture, ABR Re, has raised an additional $210 million in capital through an equity investment in a new investment manager who will also manage part of the reinsurers’ assets.
The move brings ABR Re’s equity to nearly $1.12 billion, while adding additional total return investment resources to manage its growing investment asset stack (north of $2 billion). dollars).
ABR Reinsurance Capital Holdings Ltd., the parent company and ABR Reinsurance Ltd. (ABR Re), the reinsurance underwriting company, were launched in 2015 by Chubb (then ACE) as a total return or investment-focused reinsurance joint venture. vehicle.
ABR Re also represents something of a third-party capital play for global reinsurer/insurer Chubb, having launched with approximately $800 million in capital from third-party investors and joint venture partners, which are Chubb and the asset manager Black rock.
Blackrock provides an investment strategy for the reinsurance vehicle, while both parties derive a revenue stream from ABR Re, in terms of commissions and profit shares.
Now it has emerged that another party is joining, in the form of an anonymous private investment company.
ABR Re successfully raised $210 million in capital through a primary common stock offering, with the shares being issued to a public limited company.
This investment company will now manage part of the assets of ABR Re, thus assuming a role similar to that of Blackrock.
The private investment firm is a multi-strategy manager that invests in both private and public markets and has over $80 billion in assets under management.
Insurance Advisory Partners acted as exclusive financial advisor to ABR Reinsurance Capital Holdings Ltd. as part of its capital increase and share issue.
Now, with an additional $210 million of primary common stock issued, ABR Re’s share capital has passed the $1 billion mark. Aggregate shareholder equity is now around the $1.2 billion mark at present, we are told, thanks also to retained earnings from ABR Re.
ABR Re has been incredibly useful to Chubb, as a source of third-party funded reinsurance capacity, in which Chubb owns a stake and earnings, with additional leverage to help capital go further through active management of investments in a total-return style.
Previously, this active investment management was solely provided by Blackrock, but now this second asset manager has joined the partnership and will also take over part of ABR Re’s growing asset stack.
ABR Re underwrote approximately $464 million in gross premiums for Chubb in 2021, up significantly from $350 million in previous years.
The reinsurer now has more than $2 billion in investable assets, which were previously only managed by Blackrock.
Now, this additional equity will allow ABR Re to take even more risk vis-à-vis Chubb, further develop its assets and thus bring in an additional investment manager at this time in the market cycle. current situation where reinsurance has become much more expensive, makes perfect sense.
Chubb benefits from the efficiency of the reinsurance market that ABR Re presents, as it allows the company to take advantage of a low cost of capital and a dedicated source of reinsurance, which is provided by a third party and therefore adds to its own scale in terms of the limit it can deploy, against which it collects commission income and likely pays minimal intermediation or brokerage fees.
ABR Re is an internal reinsurance vehicle and has a strict mandate to only underwrite risks ceded to it by Chubb and is said to also follow market conditions in this business.
Make ABR Re a highly efficient capitalized third-party source of next reinsurance capacity, in which Chubb owns an interest and earnings.
ABR Re’s role for Chubb is an attractive approach to a third-party reinsurance capital strategy, offering the efficiency of a dedicated source of reinsurance capacity, along with the flexibility and leverage of a investment-oriented underwriting offering additional benefits through participation and ownership of underwriting and investment income.
For its third-party investors, ABR Re offers a way to leverage Chubb’s underwriting acumen to generate insurance-linked returns, while tapping into Blackrock’s investment acumen at the same time and now also from this additional investment manager.
By developing ABR Re now, Chubb can better control its reinsurance costs in a challenging market environment.
There is, of course, a chance that ABR Re is also considering underwriting open market risk, which could also be attractive in today’s tough market. But it seems more likely that raising new capital from ABR Re will simply allow the reinsurer to be even more useful to Chubb, as a dedicated, third-party capitalized total return reinsurer.