ILS capital dominates Citizens reinsurance renewal, led by Nephila’s $ 600 million line

Third-party sources of reinsurance capital, largely from the insurance-related securities (ILS) market, dominated the reinsurance renewal of the Citizens Property Insurance Corporation of Florida in 2021, with ILS giant Nephila Capital being far the largest market with a $ 600 investment. million lines.

The ILS market has once again demonstrated its commitment to the Florida property insurance market in 2021, taking the largest share of the traditional Florida citizen reinsurance program during the June 1 renewals.

In total, we can identify at least $ 951 million of reinsurance limit incurred in the Florida Citizens renewal program as coming from third-party sources of capital and the ILS market, out of a total limit of nearly $ 1.65 billion. .

So this means that ILS and third-party reinsurance capital sources have committed nearly 58% of the reinsurance limit citizens need for the traditional portion of their reinsurance tower for the upcoming hurricane season.

Nephila Capital is by far the largest participant in the traditional Florida Citizens reinsurance renewal for 2021, having provided nearly $ 601 million of the total limit.

This $ 600 million is spread over several levels of the reinsurance tower, both for the coastal account and the personal lines account, all on a guaranteed basis and thus representing approximately 36% of the limit guaranteed by the citizens.

This is another important commitment from Nephila, who has always been a leading player in the state catastrophe reinsurance market, to the Florida property insurance market. It should also be noted that Nephila participated in all levels of the program.

The second largest participant on a guaranteed basis was DE Shaw Re, the reinsurance entity of the hedge fund investment group.

DE Shaw provided almost $ 170 million of the total limit guaranteed by Citizens, but only participated in about half of the diapers offered.

LGT ILS Partners was the second largest participant in the ILS and secured reinsurance markets, providing just over $ 59.5 million in limit, all underwritten through its reinsurer Lumen Re Ltd.

After that, we have specialist manager ILS Pillar Capital with just over $ 48.1 million in limit, which was managed for ILS funds by global reinsurer Hannover Re.

After that we have Fermat Capital Management, a manager specializing in Catastrophic Bonds and ILS, who provided a limit of over $ 29.3 million, all written down via the horseshoe operated transformer and securitization vehicle. Eclipse Re.

As a result, we think we might see another private cat bond issued by Eclipse Re as Fermat uses the vehicle to generate risk in a form suitable for its large cat bond fund strategies.

The next participant in the ILS market was Leadenhall Capital Partners, which supported more than $ 27.6 million from Florida Citizens reinsurance renewal, working with Lloyd’s of Amlin syndicate in 2001.

After that, ILS investment manager Securis Investment Partners took $ 11 million of the limit available for its funds.

Finally, the last identifiable participant in the ILS market was investor Quantedge, who used nearly $ 4.6 million of the renewal on a guaranteed basis.

In addition to these easily identifiable players as ILS markets or capital backed third party players, there were other participants who likely used third party capital, from their own ILS unit offerings, or will have divested a part. of risk to ILS capital in their managed vehicles.

These include RenaissanceRe, PartnerRe, Ariel Re, Swiss Re, Everest Re, TransRe and Validus, all of which have capital relationships with third parties to feed off real estate disaster risk and may have sent part of their stake to the renewal of Florida Citizens who way.

When you add catastrophe bonds from Florida Citizens, whose insurer got $ 950 million on this renewal, it’s clear that the ILS market dominates its reinsurance program agreements again in 2021.

Including other cat bonds Everglades Re II Ltd. (Series 2020-2) Citizens’ current $ 110 million from last year, the insurer has $ 1.06 billion in cat bond-backed reinsurance in effect for the 2021 season.

Which gives us a total of at least $ 2.01 billion in reinsurance limit available to Florida citizens to help pay for the hurricane losses throughout the 2021 season that originate from the ILS market and other sources of third-party reinsurance capital guarantee.