Bermuda-based, run-off reinsurance provider, Fleming Reinsurance Ltd. (Fleming Re), has announced the formation of a new custom reinsurance facility for BevCap P&C Protected Cell, Inc. (BevCap).
The new, innovative loss portfolio transfer (LPT) facility provides BevCap’s members with the ability to remove seasoned risks by providing full economic and legal finality and on an annual basis.
Leveraging a single flexible structure, the facility offers annual recurring novations under a clearly defined mechanism that provides certainty on pricing and transaction timing.
An announcement on the establishment of the facility explains that it will assume BevCap’s Workers Compensation, General Liability, Automobile Liability and Auto Physical Damage liabilities.
Chief Executive Officer (CEO) of Fleming Re, Eric Haller, said: “Fleming Re continues to focus on providing innovative solutions to the run-off industry that are specifically designed to achieve our counterparty’s goals. Although a facility with recurring transactions is not necessarily a new concept, Fleming Re has developed a product with a repeatable algorithm to provide counterparties with unusual pricing certainty for future policy years which in turn provides managers and group members the ability to better optimize their programs.
“The structure itself creates efficiencies for both parties and will streamline the transaction process in future years. Our structure can be incorporated at the onset of any new captive/entity formation to give counterparties a definitive exit path from their liabilities.”
BevCap Captive Group was founded in 2008 and operates as a homogeneous group captive for the beverage distribution industry. Domiciled in Hawaii, the Group has P&C and Health cells.
BevCap commented: “Fleming Re, aware of our leading position in the group captive space, came to us with this novel approach to optimizing our programs, and the benefits to the captive was immediately obvious. Together we were able to develop a solution to meet our goals on legacy liabilities. Fleming’s focus on alignment of interests was key. We look forward to this ongoing relationship with Fleming Re and wouldn’t be surprised to see others in the industry starting to implement similar models.”
Under the arrangement, BevCap stands to benefit from an ongoing solution that will provide capital release, full finality and pricing certainty on future run-off transactions.
Fleming Re notes that owing to current market dynamics and its reputation as a run-off provider, the firm is witnessing increased demand and will complete a number of additional transactions over the coming months.
Stephen Minor, Fleming Re Chairman, added: “BevCap and the Fleming Re team worked hard to launch a product that delivers an unusual degree of LPT efficiency as well as strong alignment of interest. We believe this structure can be replicated throughout the captive market and is reflective of the direction we and the larger legacy market is headed.”
