Private equity firm Cartesian Capital Group has created a Bermudian Class 3 insurer – Iris Reinsurance Ltd – expected to offer an estimated $100mn in industry loss warranties (ILW) capacity. Iris is Cartesian’s first foray into insurance-linked investing, a spokesman told Trading Risk. The global financial crisis and a surge in ILW rates – which have increased up to 60 percent this year – are cited as catalysts for the creation of Iris.
“The global financial crisis has created a true dislocation in the reinsurance markets,” said Peter Yu, managing partner of Cartesian and director of IrisRe. “While the underlying risks remain largely unchanged, the financial crisis has fuelled both strong demand for reinsurance and a significant reduction in the reinsurance capacity of the capital markets.”
Iris Re is believed to have $100mn in initial capacity, according to senior market sources. Although it will also offer other reinsurance products, it will focus on the ILW market.
Cartesian – a New York-headquartered private equity firm which manages $1.1bn in investments worldwide – has hired ex-Credit Suisse ILW trader Chase Toogood to manage Iris Re’s ILW portfolio.
Previously, Toogood was with ACE Capital Re, where he specialised in structured products and financial guaranty reinsurance. He is joined by Schuyler Havens, who joins the reinsurer from Seattle-based investment advisor Freestone Capital Management.
Yu founded Cartesian in 2006, having left AIG Capital Partners with other members of the senior management team.
Although there is anecdotal evidence of ILW rates softening as 1 June renewals crystallise and it becomes apparent that traditional capacity is more plentiful than originally thought, ILW rates are still historically high.
ILW pricing in 2009 has increased by up to 60 percent on certain contracts, with rates on line for Nationwide US wind contracts tipping the 50 percent rate on line mark, according to the latest pricing data from ICAP-JLT.
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