James River Group Holdings, the Bermuda-based insurance holdings company, has entered into a loss portfolio transfer (LPT) reinsurance transaction with Aleka Insurance, a wholly owned captive insurer of Uber Technologies, under which Aleka will reinsure James River’s legacy portfolio of commercial auto policies related to Uber’s ridesharing business.
Under the terms of the transaction, James River ceded to Aleka approximately $345.1 million of commercial auto liabilities relating to business written for Uber’s ridesharing business in the years 2013-2019. The coverage being provided by Aleka is fully collateralized and not subject to an aggregate limit.
James River will recognize an after-tax loss associated with the loss portfolio transfer of approximately $23.5 million during the third quarter of 2021, mainly from claims handling costs.
As a result of the deal, AM Best has decided to revise its ratings outlook for James River from negative to stable, to reflect the “additional protection” that the LPT affords to the group’s balance sheet strength following the implementation of a loss portfolio transfer (LPT).
The rating agency says the contract will “significantly mitigate the potential for ongoing adverse reserve development” while providing stability in reserves and consistent risk-adjusted capital composition.
“While we are confident in our carried reserves for this portfolio, the transaction brings economic finality to substantially all of our commercial auto run off portfolio, effectively insulating the portfolio from further potential reserve development,” said Chief Executive Officer Frank D’Orazio.
“This decisive step enables James River to focus firmly on the future and continue to build on the progress we have made in advancing our core businesses and risk management practices. We are pleased to be working with a long term insured partner in Uber to pursue our stated goals.”
The transaction was effective as of July 1, 2021 and closed upon signing. It has received all necessary regulatory approvals.
As part of the transaction, the two James River subsidiaries involved in the transaction and Aleka have entered into an administrative services agreement with Helmsman Management Services for certain claims management services. Helmsman will assume responsibility for claims handling of the reinsured commercial auto policies for the remaining life of those claims following a transition period.
