Multi-Strat Re Ltd., a special purpose insurer recently licensed by the Bermuda Monetary Authority, hopes to combine the operating structure of Lloyd's with the asset management of Berkshire Hathaway, said Bob Forness, chairman and chief executive officer.Multi-Strat Re functions as the "master reinsurer" for its participating reinsurers, each of which is a standalone Class 3A insurer licensed in Bermuda and sponsored by an asset manager who'll manages the assets of their sponsored reinsurer.
Like Lloyd's, Multi-Strat acts as the lead underwriter while the participating reinsurers act like syndicates. Like Berkshire Hathaway, which is known for harnessing the "float," or invested assets of its insurance business, Multi-Strat's participating reinsurers will also look to turn investment profits through asset management. Multi-Strat's participating reinsurers are backed by hedge funds, and like the reinsurers launched by well-known hedge fund managers David Einhorn and Dan Loeb (Greenlight Capital Re and Third Point Re, respectively), Forness expects the reinsurers will eventually go public.
"We're unique in the way we approach it, we operate like an incubator," Forness told Best's News Service. "These large groups invest significant capital and spend a lot of money to attract and secure management teams. They spent as many as one to two years to launch the company and begin to grow it. With Multi-Strat Re, a hedge fund can set up their reinsurer in 90 to 120 days."
Hedge funds can start a participating reinsurer with just $10 million to $25 million of initial capital, and additional capital will be raised to set the reinsurer on a course of one day becoming a public, stand-alone company, he said. "When the company goes public, it will have to hire its own team and fully position itself. We are the early support phase to get the company up and running and guide it along the way."
Multi-Strat Re offers structured, low-volatility reinsurance contracts covering high-frequency, low-severity risks from captive insurers, privately held insurers, and insurers and reinsurers under regulatory or ratings stress. These covers permit the cedants to transfer, shift, and redistribute risk and redeploy capital more productively or obtain surplus relief.
Multi-Strat Re secures all of its obligations with letters of credit from highly rated banks, so it does not need a large balance sheet in order to be competitive from inception, Forness said.
Before joining Multi-Strat Re, Forness was one of the co-founders of alTreo, a managing general agent that specialized in underwriting and placing energy-related risks. He was the chief underwriting officer of the Imagine Group, which had roughly $650 million in capital and surplus, a staff of more than 100, and had operations in the Bermuda, Barbados, Dublin, London at Lloyd's, the United States, Copenhagen, Sydney, Munich and Tokyo.
Before Imagine, Forness was the chief operating officer of Odyssey Re's London and Bermuda companies, part of Fairfax Holdings, and he was also an executive with Prudential Financial. Forness is both a Chartered Property and Casualty Underwriter and a Chartered Life Underwriter.
Multi-Strat's parent company is Multi-Strat Holdings.