Reinsurance News

$510m run-off startup Premia launches with Arch & Kelso backing

9th January 2017 - Author: Steve Evans

Premia Holdings Ltd., a new Bermuda-based property & casualty insurance and reinsurance run-off group, has launched today after a $510 million initial capital raise and with backing from Arch Capital and Kelso & Company.

Premia Re has been founded by industry veteran and former ACE / Chubb chief reinsurance officer Bill O’Farrell, who becomes the company’s Chief Executive Officer.

The company has raised an initial $510 million of capital and counts private equity group Kelso & Company and co-investors, plus an affiliate of insurance and reinsurance group Arch Capital Group Ltd., as cornerstone investors.

Arch will also provide capacity as a key strategic reinsurance partner, so enabling Premia to compete for large global run-off transactions. The rest of the capital raise comes from other institutional investors, the Premia Re management team and senior members of Arch.

The company said that the $510 million capital raise represents “one of the largest capital raises ever focused on the P&C runoff market and immediately establishes Bermuda-based Premia Re as a significant market participant.”

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Premia Re’s initial capitalisation is made up of $400 million of common equity and $110 million in unsecured senior debt. Arch Reinsurance Ltd. and certain co-investors, including the senior management of Premia, invested $100 million and acquired around 25% of the reinsurers common equity plus warrants to purchase additional common equity.

Meanwhile, affiliates of private equity firm Kelso, along with co-investors, invested $300 million and acquired the balance of Premia’s common equity as well as warrants to purchase additional common equity.

“We are very excited to introduce a new, strongly capitalized reinsurance group focused on P&C runoff,” commented O’Farrell. “I have been gratified by the number of inbound calls I have already received from companies, both large and small, and their advisors, seeking runoff solutions from Premia. This has only validated my strongly held position that the P&C runoff market is in need of a specialist solutions provider as clients seek to address the inefficient capital drag arising from their runoff operations, free up management time to focus on their core live business, and diversify their legacy exposures away from the concentrated handful of runoff companies that have shaped the market to date.”

Premia Re will offer run-off solutions to the global market, looking to insure, reinsure or acquire runoff portfolios and companies around the world. Its team has expertise across all business lines and regions and Premia aims to help its clients with tailored solutions to meet their run-off needs.

Premia Re will also benefit from the relationship with Arch, as Arch Reinsurance is set to provide a 25% whole account quota share reinsurance treaty on business written by Premia Re, while another Arch Capital subsidiary will provide administrative and support services to Premia.

Chris Collins, Managing Director of Kelso, explained; “We believe we are entering this market at the right time with the right management team and with a differentiating partner in Arch. We are confident Premia will be a leading participant in the runoff market.”

Marc Grandisson, President and COO of Arch, added; “We are very pleased to help launch Premia. We believe that Premia, with its strong management team, will be well positioned to provide innovative solutions and structures not available in the P&C runoff market today.”

Ex-Enstar executive Scott Maries, who joined Arch to work on a run-off project some months ago, will serve as Premia’s Chief Financial Officer, and Joe Calandro will serve as Executive Vice President.

Maries has a track record in the investment banking, run-off reinsurance, and also investment oriented reinsurer strategies, so it will be interesting to see whether Premia Re will look to leverage a more active, or total return, asset side to its business.

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