RGA said raising capital to take Ruby Re life reinsurance sidecar to $500m: AIFA
Reinsurance Group of America (RGA) intends to make its relatively recently launched third-party capital-backed life reinsurance sidecar company Ruby Reinsurance (Ruby Re) a core component of its more asset intensive business.
RGA launched Ruby Re last December, winning the backing of a number of investors including insurance-linked securities (ILS) specialist Hudson Structured Capital Management.
Ruby Re writes U.S. asset-intensive life reinsurance business, but via RGA so is not market-facing.
As a result, it operates akin to a sidecar strategy, enabling RGA to bring efficient capital from aligned investor partnerships into its underwriting business, all through a dedicated vehicle that augments its own underwriting firepower.
It also allows RGA to benefit from a second balance-sheet, with a specific risk appetite and return requirement, which may in certain cases be a better and more efficient home for some of the asset intensive life reinsurance and pension risk transfer business it enters into.
The first round of fundraising for Ruby Re secured equity capital commitments from lead investors Golub Capital, Hudson Structured Capital Management Ltd. (operating as HSCM Bermuda), and Sammons Financial Group.
Participating at the Association of Insurance and Financial Analysts (AIFA) conference earlier this week, RGA executives explained that further capital raising is in the plan and possibly already underway.
The plan is to utilise Ruby Re for as much as 75% of the US asset intensive business first and then to expand its product range after building a track-record.
The product expansion will also come after the completion of a second capital raise, which Morgan Stanley’s analyst team attending the AIFA conference said is “on track to bring total capital raised to $500 million.”
At that level of capital, Ruby Re would be able to write significant premium for RGA, providing a large increase to its already significant firepower and helping it grow its footprint, while leveraging investor capital to hold that asset intensive business.
Building out from there, by finding products that sit well with the third-party capital investors and deliver the kind of return opportunity they are looking for, could see Ruby Re becoming an even more integral part of the RGA overall strategy.
In a recent article, we reported on the comments of analysts at Goldman Sachs that, the US life insurance and reinsurance marketplace is increasingly focused on setting-up capital light reinsurance structures, while there is also growing appetite for sidecar structures to support capacity as well.
RGA is set to be the latest example of a what is already a very significant life reinsurance, longevity risk, annuities and pension risk transfer player, becoming even bigger with the help of third-party capital and reinsurance sidecar technology.
Interestingly, the analysts from Morgan Stanley also said that RGA’s executives at the AIFA event discussed the domiciling of Ruby Re in Missouri a little as well.
They wrote that, “RGA first tried to set up an offshore domicile for Ruby Re but pivoted to an onshore domicile in Missouri after regulators raised questions related to underlying product types.”
Which is interesting, as it could point to other US life insurers looking at domestic structures for third-party capital in future as well, if regulators are bringing up questions related to the housing of risk offshore.
You can see information about many life reinsurance sidecars, alongside most collateralized P&C reinsurance sidecars, in our directory.
