NEW YORK, Nov. 28, 2023 /PRNewswire/ — Northern Reinsurance SPC (the “Company”), the balance sheet reinsurer, has successfully tripled its committed capital by securing an additional $50M of funding to facilitate its continued growth alongside market tailwinds. The New York and Cayman-based group announced their second fundraise this week, bringing the total committed capital to $75M. The proceeds from the infusion will enable Northern Re to capitalize on favorable market conditions, providing the Company an opportunity to expand their partnerships behind leading insurance companies with a focusing on the high-frequency, low-severity casualty market.
Northern Re deploys capacity via what it refers to as a hybrid approach to the traditional collateral model, bifurcating the capital stack into company surplus, as well as risk capital. The latter is representative of Northern Re’s commitment to counterparty security, as it maintains Schedule F collateral in a trust account, held for the benefit of carrier partners. That collateral is posted as cash and then invested in qualifying, highly-rated fixed income instruments. By posting in cash, Northern Re ensures liquidity and simplifies the process through which carriers can access the collateral. ‘This was an important decision we made early on in our lifecycle as we continued to evaluate how we could make the process with our counterparties easier and more secure. We are extremely comfortable trading within the guidelines of a trust, according to the state statutes or Credit for Reinsurance Model Act, and determined that cash would better meet the needs of our partners’, says Co-Founder Peter McKelvy.
The Company further differentiates itself through the existence of an onshore balance sheet, Northern Reinsurance Segregated Portfolio Holdings (“Northern Holdings”). Owning each of the individual segregated portfolios of the Company (the “SPs”), Northern Holdings maintains unencumbered capital to provide another layer of financial security in the event of adverse development within any one of the SPs. ‘This distinction is important’, says Co-Founder Anthony McKelvy, ‘because it allows our carrier partners the visibility into additional risk protection relative to our overall portfolio size, while providing them assurance that this capital is not committed to any individual premium trust.’ Further, the Company deliberately targets low premium to capital leverage, such that Northern Holdings’ balance sheet remains well positioned to manage any unexpected volatility or liabilities which may arise from the historically stable portfolio. Northern Re is committed to providing its partners with transparency and continuously evaluates surplus needs against the size and actuarial analysis of the overall book.
Having officially commenced operations in January of this year, Northern Re already counts as partners several of the most sophisticated MGAS and largest fronting insurers in the market, including many who were critical to the development of the platform. Beyond the MGA segment, the Company has also supported mutual and regional insurance company opportunities as the market continues to harden. These partnerships will be critical as the Company expands, targeting total committed capital over $100M for the 2024 year to further establish Northern Re as a longstanding provider of stable reinsurance capacity.
SOURCE Northern Re
