Prospero Re, the reinsurance company wholly owned by ILS Capital Management, has been given the green light to write traditional and collateralised reinsurance contracts, following regulatory approval from the Bermuda Monetary Authority (BMA) for its amended business plan.
The new plan allows Prospero Re to retain the benefits of the collateralised reinsurance model while adding an element of leverage that is more reflective of traditional reinsurers. Prospero Re has $250 million in statutory capital.
Tom Libassi, co-founder and managing partner of ILS Capital, said Prospero Re will be a low-leverage reinsurance company with sufficient capital to pay total losses that are expected to occur every 1,000 years. It will also offer investors “attractive non-correlated returns, lower costs and even greater alignment of interests,” he added.
ILS Capital said a substantial number of current cedents have already agreed to purchase non-collateralised reinsurance contracts from Prospero Re. Several reinsurance brokers have also approved Prospero Re as a non-collateralised counterparty.
In February, Prospero Re was assigned an A rating by Kroll Bond Rating Agency (KBRA), based on its amended business plan, making it the first Bermuda-based collateralised reinsurance company to be rated.
In August, ILS Capital completed the first-ever securitisation of trapped capital. Implementation of Prospero Re’s amended business plan is expected to reduce the amount of trapped capital in the future.
Libassi said: “The ability to write traditional and collateralised business, together with our rated balance sheet, allows us to be more capital-efficient while writing attractive new business and further increasing diversification.”
Prospero Re, ILS Capital, Bermuda Monetary Authority, BMA, Tom Libassi