Enstar’s Cavello Bay renewed $25m investment into Ark sidecar Outrigger Re for 2024

When Ark Insurance sponsored a renewal of its $250 million collateralized reinsurance sidecar Outrigger Re Ltd. for the 2024 calendar year, one of the third-party investors that renewed its stake in the vehicle was the Enstar owned reinsurance company Cavello Bay.

Ark Insurance, a property and casualty insurance and reinsurance subsidiary of the White Mountains Insurance Group, Ltd., has now been running the Outrigger Re Ltd. collateralized reinsurance sidecar since the 2023 underwriting year.

The first vintage of Ark’s $250 million collateralized reinsurance sidecar Outrigger Re Ltd was launched in December 2022, for the 2023 underwriting year and at the time “a subsidiary of Enstar Group Limited” was named as one of the associated third-party investors that took a stake in the vehicle.

White Mountains itself was the lead investor and when Ark renewed its reinsurance sidecar for the 2024 underwriting year, White Mountains was again the largest investor, contributing $130 million of the $250 million in capital for this year.

Now, we’ve learned from a filing that the Enstar subsidiary that invested in the first year of the Ark sponsored Outrigger Re sidecar was Cavello Bay Reinsurance Limited.

The same filing also states that Cavello Bay Reinsurance has renewed its sidecar investment for the 2024 underwriting year, making a $25 million investment into Outrigger Re Ltd.

The way the filing is worded also suggests the investment was likely $25 million in size for the previous 2023 underwriting year as well.

Of course, Enstar is a recognised specialist in the legacy and run-off reinsurance space, one of the largest players in that market.

As a result, its core focus is typically on mid to longer-tailed lines of insurance and reinsurance, so diversifying through an investment into a property catastrophe risk focused sidecar with a well-known and respected market player makes sense as a complimentary source of income for the company.

The Outrigger Re sidecar was a profitable investment for White Mountains through 2023.

The company had invested $205 million into the vehicle for that underwriting year and reported its investment into the Outrigger Re collateralized reinsurance sidecar generated the company $69 million in pre-tax income.

So, it stands to reason that Enstar’s investment, if it was $25 million for 2023, could have generated the company somewhere around the $8 million mark (that’s our estimation), in income terms if all earnings of the sidecar were equally shared across its participating investors (of course we don’t know the specific investment terms or returns).

That would have been a very profitable use of that capital invested and an attractive diversified source of return for the legacy specialist player.

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