Legacy specialist Enstar is to shutter its Enhanzed Re joint venture, eliminating all catastrophe exposure.
In a filing with the US Securities and Exchange Commission (SEC), the firm said it was transferring its share of the firm to Allianz.
The filing reads: “On August 18, 2022, Cavello Bay, a wholly-owned subsidiary of Enstar entered into a Master Agreement with Allianz and Enhanzed Re. Cavello Bay currently owns 75.1% of Enhanzed Re and Allianz owns the remaining 24.9%. Pursuant to the Master Agreement, Cavello Bay and Allianz have agreed to a series of transactions that will (a) commute or novate all of the reinsurance contracts written by Enhanzed Re, (b) repay the $70m of subordinated notes issued by Enhanzed Re to an affiliate of Allianz, and (c) distribute Enhanzed Re’s excess capital to Cavello Bay and Allianz in accordance with their respective equity ownership.”
It added: “Pursuant to the Master Agreement, all of the insurance liabilities ceded to Enhanzed Re by affiliates of Enstar will be commuted or novated to Cavello Bay. All of the insurance liabilities ceded to Enhanzed Re by affiliates of Allianz will be commuted to Allianz or novated to Cavello Bay, except for one reinsurance transaction related to a block of annuity policies written by an affiliate of Allianz (the “Annuities Portfolio”).
“Each commutation and novation will be priced based on the estimated amount of the liabilities being commuted or novated as of June 30, 2022. Pursuant to the Master Agreement, Cavello Bay and Allianz will cooperate in good faith with Enhanzed Re to novate the Annuities Portfolio to a third-party on commercially reasonable terms.”
In closing down its venture, Enstar was eliminating its catastrophe exposure.
In the filing, it wrote: “Completion of the commutations and novations contemplated by the Master Agreement will eliminate Enstar’s direct exposure to catastrophe business and is expected to result in an approximate $62 million increase in Enstar’s book value, which represents an increase of approximately $3.57 in book value per share, exclusive of the potential impact of a future novation of the Annuities Portfolio.”
It was only in September that Enstar completed its purchase of the entire 27.7% interest in Enhanzed Re previously held by an affiliate of Hillhouse Group.
Enhanzed Re, which Enstar said it would consolidate in its future financial statements, has approximately $4bn of assets. The reinsurer also holds life, non-life run-off, and property and casualty reinsurance reserves of approximately $3bn, primarily sourced from Allianz and Enstar.
It was originally launched in 2018 as a joint-venture life and P&C reinsurer that is being launched by a partnership formed by Enstar, Allianz and investor Hillhouse Capital. Its remit was to underwrite and reinsure life, non-life run-off, and property and casualty insurance business, with the business initially sourced from joint-venture partners Allianz SE and Enstar.