In a move to replace an exiting capacity source, London-based specialist MGA, K2 International is to raise capital for additional reinsurance and possibly US retrocession and industry loss warranties (ILW) underwriting in 2023.
The structure of the vehicle or fund that the capital will be raised to is yet to be decided and it is understood it could be more fund-like, or something more akin to a sidecar pool of capital, to augment K2 CAT’s ability to write new risk through 2023.
The retrocession appetite is an additional target and this will be an addition to K2’s CAT strategy, as well as a new offering it makes to investors and capital providers.
Similarly, the ILW area is an attractive proposition in the current market environment and one in which K2 CAT has a previous, profitable track record, according to a K2 spokesperson.
The capital markets team at Stonybrook is undertaking the capital raise on behalf of K2, with a range of investors being approached including K2 CAT’s existing US client-base.
If the capital raise is successful, K2 International will use the funding to write US Cat business, both for existing K2 CAT clients and possibly some US retrocession & ILWs as well, according to the spokesperson.
K2 CAT, the company’s flagship catastrophe reinsurance underwriting venture, already has two US cat facilities that it has renewed for 2023.
As K2 CAT’s 9-year relationship with Hong Kong headquartered reinsurer Peak Re is coming to an end this year, the underwriter is actively sourcing replacement US cat capacity. The company has said it is making steady progress on this, and conversations with a number of potential new carriers are well advanced.
K2 hopes to raise at least $250 million for this new fund or facility, but if more capital is interested then the underwriting opportunity could be even more sizeable.
At a time of needed continuity, the company is confident it will be able to support its existing client base at the 1/1 renewals and going forwards, said K2’s spokesperson.
