Lancashire Holdings Ltd will soon launch a new Bermuda-based specialty purpose reinsurer.Saltire Re I, which has received approval from the Bermuda Monetary Authority, will be a fully collateralised sidecar to the tune of $250 million, Its share capital will be owned by a syndicate of investors — freeing up capital for Lancashire to underwrite new insurance business.Lancashire, a member of the Lloyd’s of London insurance market, said it will invest approximately $33 million of its own capital in the venture. The company has also launched Saltire Management Ltd, which is wholly owned by Lancashire and will provide underwriting services to Saltire Re I.The company said it would raise the cash through the sidecar — allowing it to share the risks of certain policies with investors who in turn receive a portion of the premiums.“The Saltire model will be capable of replication and should prove attractive to both investors and clients in the future as opportunities arise,” Lancashire’s CFO Elaine Whelan said. “It will give Lancashire the opportunity to leverage its underwriting expertise whilst affording flexibility in the management and deployment of its own capital.”Saltire Re, will underwrite a range of reinsurance products specifically for the January renewals — when it renews billions of pounds worth of contracts with its insurance company clients at the start of 2013. The vehicle will have $250 million of capacity and will underwrite a combined exposure ultimate net loss aggregate reinsurance product .Special purpose vehicles like this are a tried and tested method, which give outside investors exposure to potentially lucrative business lines without diluting a company’s existing shareholders.Demand for flexible instruments like sidecars has risen sharply following the hefty claims generated by a last year’s natural disasters — such as the Japanese earthquake in March 2011 which inflicted a $116 billion loss on insurers — as insurers seek to top up their capital to cash in on rising catastrophe insurance prices.Insurers have since seen a heightened demand from investors for similar products, as more financial backers look to the reinsurance sector to boost returns and avoid some of the swings that have plagued stock and bond markets in recent years.Around $1.4 billion in sidecar capacity has been raised by insurers since 2011, including Lancashire’s own vehicle, Accordion Re, which covers global property “retrocession” business or the passing on of reinsurance risks to other reinsurers.