Global insurance and reinsurance company Everest Re ceded fewer premiums to its third-party capital investors in Mt. Logan Re during the first-half of 2022, but also positively for returns from the vehicle fewer losses were ceded to it as well.
The Mt. Logan Re Ltd. collateralized reinsurance sidecar-like vehicle continues to be a core structure for Everest Re, as its main third-party capital management play and a key source of retrocessional flexibility as well
The company has an appetite to grow Mt. Logan Re, while at the same time the third-party capital venture is a core component of the firm’s efforts to lower its catastrophe exposures.
As we explained last week when Everest Re reported its second-quarter 2022 results, the company is continuing to take steps to reduce volatility in its results, by pulling-back on property cat risks.
This shift has been quite rapid in parts, acting as an offset to growth Everest Re has been experiencing elsewhere in its business.
While property catastrophe reinsurance may no longer be a core target for Everest Re, it does continue to write some and Mt. Logan Re is one of the beneficiaries of this.
However, during the second-quarter and first-half of 2022, Everest Re ceded fewer premiums to Mt. Logan Re, reflecting its adjustment in strategy and also perhaps the fact deployable capital may still be a little behind for the structure year-on-year.
Everest Re said, “The higher percentage increase in net written premiums compared to gross written premiums mainly related to a reduction in business ceded to the segregated accounts of Mt. Logan Re.”
Despite this, Mt. Logan Re remains the largest retrocessional capacity provider to Everest Re, with a $618.1 million reinsurance recoverable for paid and unpaid losses booked against the structure.
For the second-quarter of 2022, Everest Re ceded $31.8 million of written premiums to Mt. Logan Re, down from almost $56.2 million in the prior year. For the first-half the figure stood at $82 million of written premiums ceded to Mt. Logan, down from the prior year’s $155.3 million.
Ceded earned premiums dropped a comparable amount but, importantly for the vehicles returns, ceded losses and loss adjustment expenses fell too, to $21 million for Q2 2022 (down from $31m) and $61.7 million for the first-half of 2022 (down from $111.9m).
As Everest Re works through the remodelling of its own catastrophe exposures, it will be interesting to see how the use of Mt. Logan Re changes over time, as the vehicle could increase in importance, allowing Everest Re to maintain a role in core global property cat markets without over-exposing its own balance-sheet capital to them.