Rachel Bardon, Chief Underwriting Officer (CUO) at Compre, said its recent participation in George Street Re, QBE Re’s debut casualty sidecar, represents a repeatable and well-diversified book of business, exemplifying the company’s broader strategy as it looks to pursue similar transactions in the future.
She said: “If there are other investors whose fund life doesn’t match up with the term, I think in the past they would not have participated or been considered, whereas now they can, as long as we’re part of that solution.
“This is a very well-diversified book of business. It consists of long-tail liabilities across North American and International casualty reinsurance. It’s a defined block that we like.”
Bardon explained that the arrangement sees Compre take a slice of the sidecar from day one for the prospective underwriting year, while also providing an exit solution for the other investors in it.
“This works particularly well when the other investors in the sidecar might be a closed-end fund with a target date for the return of capital, whereas we are a permanent balance sheet and can provide that solution, holding those liabilities for the next 30 years as they slowly wind down. So, we have a lot more flexibility in this space.
“By being in the sidecar from the outset, we can take an active role in shaping the contractual terms and how the collateral will be structured at the time of exit. This allows us to help steer things so they’re aligned with our needs when we assume control in five to seven years”, she explained
She pointed out that through this transaction, Compre is gaining a repeatable deal, to which it can add a new year of account annually.
“We’re collaborating with the other investors involved and each year we can take on their future liabilities. It functions effectively with that kind of package. We’ve conducted multiple legacy trades with QBE in the past and remain open to exploring additional partnership transactions with them. This approach reflects our commitment to working with strategic partners and delivering effective capital solutions,” stated Bardon.
She said that, assuming the deal performs as expected, Compre aims to continually renew it, while also pursuing additional sidecar opportunities.
“We could possibly add one or two new sidecars a year. We’ve been approached to provide the forward exit only, which is possible, but it’s less compelling than being involved in both aspects of the package deal. I do hope we continue to work on more opportunities like George Street Re.
“Through conversations with brokers, they expect this market to grow, with ongoing conversations and existing sidecars lacking exit mechanisms. A sidecar doesn’t have to be new; we can look at sidecars from previous years to support investors or participate alongside them. I’m planning to do more deals like this,” said Bardon.
Read all of our interviews with ILS market and reinsurance sector professionals here.
