W. R. Berkley grows Lifson Re sidecar capital to $380m for 2023

W. R. Berkley Corporation, the US headquartered insurance holding company, has secured additional investor commitments for its Lifson Re collateralized reinsurance sidecar vehicle, growing the vehicles capital base to $380 million for 2023.

At the same time, the company has also reported a 63% year-on-year increase in premiums ceded to the Lifson Re reinsurance sidecar for 2022.

W. R. Berkley has been capitalising on investor interest in insurance and reinsurance linked returns ever since it launched the Lifson Re sidecar vehicle, with the structure becoming increasingly meaningful for the company.

It’s becoming more meaningful in terms of the premiums ceded to it, as well as in how much reinsurance protection it now provides, as Lifson Re has shot up W.R. Berkley’s table to reinsurance counterparties.

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

The Lifson Re sidecar was renewed for 2022, with the same $250 million of capital, but has been playing a growing role for W. R. Berkley, as the firm ceded growing amounts of premium to the structure.

For 2023 though, W. R. Berkley has raised additional capital for its Lifson Re collateralized reinsurance sidecar, with the structure capitalised to the tune of $380 million for the 2023 underwriting year.

It’s a relatively significant increase and means Lifson Re will be able to accelerate its importance for W. R. Berkley, in helping the firm both manage its catastrophe risks, while also partnering with investors and presumably providing a source of fee and performance related income as well, when the ceded business performs.

Lifson Re will continue to take a 30% share on the majority of W. R. Berkley’s reinsurance placements for 2023, fully-collateralized and across all treaty reinsurance and retrocessional placements, for both property and casualty business, where more than one open market reinsurer is participating.

The sidecar has been capitalised by sophisticated global investors with long-term investment horizons, although we’re not sure how many are now backing Lifson Re, it was two at the sidecar’s launch for 2021.

Lifson Re operates as a kind of third-party capital backed property & casualty (P&C) reinsurance sidecar for the W. R. Berkley, participating in its reinsurance cessions and bringing efficient capital market investor funding into its reinsurance tower.

W. R. Berkley lifted the amount of premiums it ceded to Lifson Re by 63% year-on-year for 2022, taking them to $399 million, up from $245 million in 2021.

For the first nine months of 2022, ended September 30th, W. R. Berkley had ceded approximately $308 million of premiums to Lifson Re, so the cessions continued in the fourth-quarter of the year.

It shows that W. R. Berkley continued to capitalise on the third-party investor funding of the Lifson Re sidecar, by ceding even more premiums to it, something that can now accelerate in the hard market environment, thanks to the upsized renewal at $380 million of capital raised for the vehicle.

Finally, it’s interesting to note the important role Lifson Re plays for W. R. Berkley, as the structure commands a growing share of reinsurance recoverables for the company.

As of Dec 31st 2022, of the reinsurers owing amounts due to W. R. Berkley, the Lifson Re sidecar featured seventh in the list, above major players such as RenRe, Everest Re and many more.

At the end of 2022, Lifson Re had almost $181 million in reinsurance recoverables reported as due from the structure, clearly demonstrating just how important the sidecar has become to the company as a source of efficient reinsurance capital.

For comparison, at the end of 2021, just a year earlier, Lifson Re featured twelfth in this list, at $64.2 million of reinsurance recoverables due.

As we reported last year, as Lifson Re increases in importance for W. R. Berkley, it made sense for more capital to be raised for the structure, something its sponsor has now achieved for 2023 with this larger capital raise.

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