LONDON Nov 6 Insurer Lancashire Holdings Ltd
is to seek $250 million from outside investors to take
advantage of high demand from financial backers to invest in the
Investors have turned their attention to reinsurance, which
covers insurance companies looking to unload risk, attracted by
its market-beating returns and low exposure to faltering
economic growth in the United States and Europe.
Lancashire, a member of the Lloyd's of London
insurance market, said it would raise the fresh funds through a
special purpose vehicle (SPV), a tried and tested method which
gives outside investors exposure to potentially lucrative
business lines without diluting a company's existing
Demand for such flexible instruments has risen sharply
following the hefty claims generated by a last year's natural
disasters - such as the Japanese earthquake in March which
inflicted a $116 billion loss on insurers - as insurers seek to
top up their capital to cash in on rising catastrophe insurance
Insurers have since seen a heightened demand from investors
for similar products, as more financial backers look to the
reinsurance sector to boost returns and avoid some of the swings
that have plagued stock and bond markets in recent years.
Lancashire said it would raise the cash through a
Bermuda-based SPV - also known as a "sidecar" - allowing it to
share the risks of certain policies with investors who in turn
receive a portion of the premiums.
The SPV, called Saltire Re, will underwrite a range of
reinsurance products specifically for the January renewals -
when it renews billions of pounds worth of contracts with its
insurance company clients at the start of 2013.
This frees up capital for Lancashire to underwrite new
The $250 million in capacity will be owned by a syndicate of
investors and Lancashire itself will invest approximately $33
million in Saltire Re I, the insurer said in a statement.
Around $1.4 billion in sidecar capacity has been raised by
insurers since 2011, including Lancashire's own vehicle,
Accordion Re, which covers global property "retrocession"
business or the passing on of reinsurance risks to other