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Ace Launches $95 Million Vehicle to Write Collateralized Reinsurance

Posted on 17 Apr 2013 by Neilson

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AceAce Ltd. said it's launched a $95 million special purpose vehicle, Altair Re, to provide additional collateralized capacity for its global reinsurance business.

The capital will support Ace Tempest Re's global property catastrophe reinsurance portfolio, the company said.

"Altair Re gives us additional capacity to meet the diversified property catastrophe needs of our insurance and reinsurance company clients," Jacques Q. Bonneau, chairman of Ace Tempest Re Group, said in a statement.

Capital markets investors will benefit from Ace Tempest Re's proven track record of conservative underwriting and consistent profitability, while the additional capital will enable Ace to take advantage of opportunities in the global property catastrophe market, he said.

Attempts to reach the company for additional comment were not immediately successful.

Hedge funds and private equity groups are hungry to find investment returns unrelated to equity and bond markets, which has helped to spark a recent uptick in sidecars, A.M. Best said last month.

Sidecar growth has been considerable in recent months, A.M. Best Group Vice President John Andre said in March. "Given the lackluster investment opportunities, investors are attracted to the short-term nature [of sidecars] to gain investment return using existing reinsurance management teams' expertise in certain classes of business," Andre said.

Investments in reinsurers are unrelated to investments in the traditional equity and bond markets. Also, investors do not have to go through the hurdles of forming their own reinsurance company to tap into the market, he said.

For reinsurers, sidecars are an opportunity to earn fee income, Andre said. Although the additional capacity brought in by sidecars has helped to keep prices soft, he said.

AlphaCat Managers Ltd., the investment advisory subsidiary of Validus Holdings, recently raised $404.4 million of third-party capital for collateralized reinsurance and insurance-linked securities. The third-party capital was raised in connection with a new sidecar, AlphaCat 2013 Ltd., and Validus' ILS fund, the company said.

The insurance industry is also getting more creative with how sidecars are used. For instance, earlier this year, Aon plc teamed up with Berkshire Hathaway to launch a new sidecar that will write business where the Lloyd's market participates, the company said. Unlike most sidecars, which write reinsurance business, this sidecar is globally available across all industry segments to write primary business for retail clients, Aon said. 

In January, Argo Group International Holdings Ltd. launched its first sidecar, Harambee Re 2013-1 Ltd., which will write business for the 2013 accident year. Harambee Re supports both a reinsurance and an insurance portfolio, Argo said.