Chubb cedes more risk to ABR Re in 2022 as its reinsurance importance builds

Global re/insurer Chubb has continued to bring its total-return and third-party capitalised reinsurance joint-venture ABR Re firmly to the centre of its reinsurance arrangements, with the amount of risk ceded to ABR Re increasing again in 2022.

Chubb has been placing increasing emphasis on its ABR Reinsurance Capital Holdings Ltd. joint-venture, and the reinsurer ABR Re, in recent years, with the vehicle increasing in size and becoming one of the largest reinsurers participating in Chubb’s reinsurance arrangements.

ABR Reinsurance Capital Holdings Ltd., the parent company, and ABR Reinsurance Ltd. (ABR Re), the reinsurance underwriting vehicle, were launched in 2015 by Chubb (ACE at the time) as a total-return, or investment-oriented, reinsurance joint-venture alongside asset management giant Blackrock.

ABR Re is a third-party capital play of sorts for global re/insurer Chubb, having launched with around $800 million of capital sourced from third-party investors and the joint-venture partners themselves, which at launch were Chubb and Blackrock.

Blackrock provides investment services to the reinsurance vehicle and both parties earn a source of income from ABR Re, in terms of fees and profit shares.

ABR Re is an internal reinsurance vehicle and has a strict mandate to only underwrite risks ceded to it by Chubb, while it is said to follow market terms on that business as well.

Chubb benefits from the reinsurance market efficiencies that ABR Re can generate, as it allows the company to leverage a low-cost of capital and dedicated source of reinsurance, which is third-party supplied and so additive to its own scale in terms of limit it can deploy.

Last year we reported that ABR Re raised $210 million in capital through a primary common share issuance, with the shares issued to an unnamed investment firm that was set to manage a portion of ABR Re’s assets.

So the vehicle grew in size in 2022, which will help in increasing the reinsurance efficiencies Chubb benefits from with ABR Re.

In 2021, ABR Re underwrote roughly $464 million of gross premiums for Chubb, which was up from 2020’s $350 million.

Now, Chubb has reported that it ceded $507 million of premiums to ABR Re in 2022, a further increase on the prior year.

Overall commissions received reached $138 million for 2022, up from 2021’s $133 million.

Which helped the reinsurance recoverable associated with ABR Re increase to $1.05 billion at the end of last year, up from $963 million at the end of 2021.

Chubb also reported $7 million of income from investment management performance related fees earned via ABR Re for 2022, which was down on 2021’s $11 million.

That decline is not surprising given the hit to global asset class values seen over the course of last year.

ABR Re continues to represent an interesting third-party reinsurance capital strategy, offering the efficiency of a dedicated source of reinsurance capacity, alongside the flexibility and leverage of an investment oriented underwriting approach.

For its third-party investors, ABR Re offers a way to tap into Chubb’s underwriting-linked returns, while also benefiting from Blackrock’s and the newer asset manager’s investment acumen.