Lifson Re sidecar stays at $380m for 2024, but grows importance to W. R. Berkley

The collateralized reinsurance capacity provided to US headquartered insurance holding company W. R. Berkley Corporation by its Lifson Re reinsurance sidecar vehicle grew in importance over the last year, but the company has kept its sidecar capital flat at $380 million for 2024.

A year ago, W. R. Berkley secured additional investor commitments for its Lifson Re collateralized reinsurance sidecar vehicle, growing the vehicle’s capital base to $380 million for the 2023 underwriting year.

W. R. Berkley first launched the Bermuda based special purpose insurer (ILS), Lifson Re Ltd., for the 2021 underwriting year, with $250 million in capital raised from third-party investors for the sidecar.

The Lifson Re sidecar was then renewed for 2022 with the same $250 million of capital, before being upsized to $380 million for the 2023 underwriting year.

As we have reported, the Lifson Re sidecar has become increasingly important for W. R. Berkley, as the company cedes a growing amount of premium to the sidecar vehicle and recognises the capital efficiencies of leaning on third-party capital.

Lifson Re has also helped W. R. Berkley to lean into the opportunity presented by the reinsurance market cycle, especially in 2023 where the company grew in property catastrophe reinsurance and other areas of cat exposed property business.

When we reported that, W. R. Berkley had ceded $348 million of premiums ceded to the Lifson re sidecar over the first nine months of 2023.

By the end of the year that figure had grown further, with $437 million of premiums ceded to Lifson Re over the full-year 2023, up from $399 million of premium ceded in 2022.

The cession rate applied to Lifson Re rose from 22.5% to 30% as of July 1st 2022, which means the sidecar now takes a significant proportion of premiums under the property and casualty reinsurance book of W. R. Berkley, across all traditional reinsurance and retrocession placements for both property and casualty business where there is more than one open market reinsurer participating.

For 2024, both the cession rate of 30% and the capitalisation of Lifson Re remain flat, so at the $380 million of equity backing from global investors, which includes Ontario Teacher’s Pension Plan and we understand Japanese holding company MS&AD also has a stake in the sidecar.

Lifson Re is an increasingly important source of reinsurance capital and capacity for W. R. Berkley, having now moved up the list of reinsurers owing the company money and now sitting in second right behind Lloyd’s of London.

At the end of 2022, the amount due to W. R. Berkley from Lifson Re was almost $181 million, but by the end of 2023 it had soared to over $335 million, putting it only second to Lloyd’s in terms of sources of reinsurance capital for the company.

Through the use of Lifson Re, W. R. Berkley has access to a significant pool of reinsurance capital that is likely more efficient than open-market capacity, due to the economics of the sharing of risk and fees it can earn through the performance of that business as well.

It’s a perfect example of how a third-party capitalised reinsurance sidecar can become a core component of a companies risk capital arrangements, while the aligned approach means the investors stand alongside the company’s underwriting results.

Find details of numerous reinsurance sidecar investments and transactions in our directory of collateralized reinsurance sidecars transactions.