New $2bn reinsurer to set up on Island
Veteran insurance chief Richard Brindle is set to return to the business as part of a new $2 billion insurance venture on the Island.
Mr Brindle — former CEO of Bermuda-based Lancashire Holdings — will become head of Fidelis Insurance Holdings — a hybrid company seeking to use the best of underwriting and the hedge fund reinsurance model.
He will also act as chief underwriting officer for both the insurance and reinsurance arms of the new company.
Mr Brindle will work with Neil McConachie, also one of the founders of Lancashire, who will take on the chief financial officer role.
Mr McConachie was president at Lancashire until 2012 and previously worked for Montpelier Re as treasurer and chief accounting officer.
The new firm is backed by Los Angeles-based Oaktree Capital and other investors and — according to documents seen by Bloomberg — Fidelis aims to hold an initial public offering within five years.
Mr Brindle’s operation can “capitalise on opportunities that neither the traditional insurance model nor the hedge fund reinsurance model effectively capture”, according to the document.
The Goldman Sachs pitch document said that investors will have the potential to exit through an initial public offering in three to five years if market conditions permit.
The document added that Fidelis “expects to pay low corporate income tax.”
The founding investors, including Oaktree, previously backed the London-based Lancashire, which was led by Mr Brindle until he retired last year.
According to business website Artemis, the Fidelis model will feature “an innovative structure to tactically shift capital between insurance and investments based on prevailing market dynamics.”
Fidelis will underwrite both insurance and reinsurance risks, with a focus on speciality classes of business, where its team has significant experience.
And the new company will partner with Goldman Sachs’ Alternative Investment and Manager Selection (AIMS) group.
So, instead of using a single asset manager in line with existing hedge fund-backed reinsurers, Fidelis will use managers to manage the cycle and match the investment strategy and income more closely with underwriting cycles and liabilities.
Private-equity firms Oaktree, Crestview and Pine Brook are lined up to take 25 per cent of the common equity of Fidelis, with the balance of the $2 billion to come through two fund structures, Fidelis Investors LP and Fidelis Investors Offshore LP.
Artemis said the that Fidelis aimed to make the most of major changes in the reinsurance market, with the firm optimising its balance sheet across the underwriting and asset management sides, allowing it to allocate capital where it can provide the best return and best match assets to liabilities.
Fidelis said that the traditional insurance model has failed to maximise shareholders’ returns as the focus tends to be on either assets or liabilities, while mainstream firms have problems with low fixed income investment returns.
But Fidelis said it can achieve attractive returns on both the asset and liabilities arms of its business and — with both sides diversified — it should also be able to protect itself against financial market impacts that could come from using a single asset manager.
Fidelis said it expected to work with asset and hedge fund managers like Blackrock, York Capital and Crabel Capital among others.
Blackrock is working with Ace on ABR Re, while Blackrock has its own reinsurance vehicle.
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