Better rates in 2018-2019 are a bonus for Third Point Re, which had already opted to begin writing property catastrophe business and selected specialty classes
Third Point Re been adding new talent to its ranks and writing business in new lines, the reinsurer tells GR at this year’s Monte Carlo reinsurance rendezvous.
Better rates at recent renewals are great news, but the company’s underwriting plans were already laid out, rather than reflecting any “opportunistic” moves, David Govrin, president of Third Point Reinsurance (USA) Ltd, tells GR.
“We’ve added to our risk appetite, added people, and added to our lines of business,” says Govrin.
“This was not at all an opportunistic play, but rather consistent with the company strategy. However, those changed market conditions are most welcome and have helped us,” he says.
“It’s been easier to get on new business in the hardening market. There has been a contraction of supply in certain areas, with some capital markets capacity being restrained ,” he adds.
The Bermuda-based reinsurer has added peak zone property catastrophe business for the first time, as well as building its underwriting of specialty classes, including catastrophe business for workers’ compensation and personal accident, plus terrorism and contingency covers.
“We had very little exposure on the cat side before,” says Govrin.
Speaking about the problems faced by the insurance-linked securities (ILS) market in 2018-2019 – particularly trapped capital amid loss creep following the record losses in 2017, Govrin notes the differentiation of a rated balance sheet versus unrated collateralised ILS.
“That tying up of capital has highlighted the value of a rated balance sheet, which is what we offer,” says Govrin. “Capital markets are still an important part of the industry, but rated paper doesn’t suffer some of the same impediments as collateralised capacity.”
The ILS market faces a structural challenge to part of its business model, where limits are collateralized, in addition to a flight to quality of asset managers, Govrin suggests.
“When there are no losses then the structural challenge is less apparent,” says Govrin. “I expect to see more use of sidecar vehicles and other rated balance sheets leveraging their capital structures and sitting between clients and investors.”
In June, Third Point Re announced a strategic equity investment in Noblr, a technology-driven motor insurer that rewards members’ driving habits by rates based on, among other things, time of driving, choice of roads, miles driven and quality of driving.
The Noblr investment was made through a combination of a minority equity investment and reinsurance. Govrin suggests this is a type of investment Third Point Re is selectively keen to make – tying in with its underwriting side.
“Reinsurance should not play the role of a cheap venture capital fund. We only invest when we can extract the underlying reinsurance relationships,” he says.
Third Point Re’s most recent hire (in a staff of just 36 people) is David Sinclair, a financial lines veteran, as senior vice president for marketing and investments. Sinclair, previously of Trans Re, joined the company on 2 September.
Among Sinclair’s roles is to establish strategic partnerships, notably with managing general agents (MGAs) and SME insurance companies looking to grow or develop. These investments will extend to Third Point Re providing equity and/or debt to leverage a reinsurance relationship, he underscores. “If that reinsurance element doesn’t happen, we don’t make the investment,” Sinclair adds.