Northern Re targets Europe as collateralised casualty comes of age – McKelvy

Northern Re’s managing partner Anthony McKelvy says collateralised capacity for casualty is moving from niche to mainstream.

The New York and Cayman-based reinsurer is stepping up international expansion of its structured solutions business after scaling to $175m of capital and more than $600m of gross written premium since its 2022 launch.

McKelvy (pictured) spoke to GR at RVS 2025 in Monte Carlo, outlining a playbook centred on high-frequency, low-severity casualty portfolios and whole account quota shares that he said can deliver balance sheet relief and earnings stability for cedants.

“We started underwriting on 1 January 2023, and our investors are focused on that high-frequency profile,” he said.

“What we are getting is the benefit of the rate that has flowed through more recent portfolios, without exposure to the older accident years where a lot of adverse development [within US liability lines] is occurring.”

McKelvy said Northern Re bifurcates capital between pre-funded cash-collateralised trusts and unencumbered surplus shareholder capital.

This supports growth while keeping programme-level security simple and transparent, he explained.

He noted that the platform was built to channel institutional capital into insurance risk with “engineered structures” that meet specific accounting and regulatory objectives.

“We have an SPC [segregated portfolio company] domiciled in Cayman, and we provide end-to-end servicing for investors, from sourcing and underwriting through to capital modelling and everything that comes within the lifecycle of transactions,” he added.

Structured solutions and solvency credit

McKelvy said demand is rising for creative placements such as structured quota shares, multi-year protections and hybrid deals that blend prospective risk transfer with legacy considerations.

These, he noted, giving cedants capital optimisation and volatility smoothing without resorting to costly equity raises or blunt surplus notes.

“A lot of what we do is sitting down with cedants to understand objectives, then matching those portfolios with the right investor pools before structuring around them,” he said.

Northern Re’s structured reinsurance product suite is designed to move cedants beyond one-size-fits-all quota share, argued McKelvy.

“Traditional reinsurance can force cedants to trade off capital relief against operational complexity,” he said.

“Our job is to design protection around the cedant’s balance sheet objectives, then price and administer it in a unified way,” he added.

Internationally, the firm’s priority is the UK and Europe, where McKelvy sees an education gap matched with an opportunity for collateralised reinsurance to earn solvency credit, compared with US regulator the NAIC’s “more prescriptive” framework.

“Under the NAIC there is a very defined approach using unearned premium, Schedule F loss reserves and a multiple,” he said.

Under US rules, Schedule F requires insurers to book additional reserves if recoverables are not fully collateralised or if they come from non-admitted reinsurers.

“For the UK and Europe under Solvency II there is more flexibility driven by the company’s balance sheet and documentation, but we often end up in much the same place, just a different calculation to get there,” he added.

SME portfolios, scale and limits

McKelvy said the underwriting sweet spot remains casualty-centric business, such as general liability (GL), professional liability (PL), workers’ compensation and auto for small business-focused portfolios.

“PL tends to carry higher limits, while GL is more often one-two or two-four,” he said.

“For us it is less about the limit on its own, and more about that limit in the context of the total portfolio size and history. A $5m limit on a $20m book looks very different to the same limit on a $100m book,” he said.

He revealed that the firm is well advanced in deploying its latest capital raise and is prioritising deals with Bermudian and European cedants alongside US growth.

The company plans further capital expansion in 2026 to support larger whole account and structured placements.

Despite the ambitions, McKelvy stressed that collateralised capacity should be seen as a complement rather than a replacement for traditional reinsurance.

“Realistically, we are one tool in the belt, usually alongside traditional reinsurance and other financing. The same way you diversify a portfolio, you diversify the capital stack as well,” he added.