Northern Re, a reinsurance firm focused on long-tail casualty business, has announced an asset management partnership with Jaffa Capital Management, LLC, an insurance and reinsurance investment manager.
Through this partnership Northern will have access to Jaffa’s expertise in fixed income, guided by investing and insurance veterans Mark Zarkhin and Nathan Lord, who are Jaffa’s Founder and Chief Investment Officer, and cofounder, respectively.
Northern’s Insurance Linked Security strategy produces premium and collateral assets which can be invested within the confines of reinsurance trusts.
These trusts dictate the types of eligible investments which the assets can be allocated towards, mirroring similar principles to those of an insurance company balance sheet.
Northern’s trust assets have significantly over-performed relevant fixed income indices in 2023, this through the collaboration with Jaffa.
According to the firm, its trust assets are trending similarly through the first half of 2024.
“As we approach premiums and collaterals in our trusts of $200 million in 2024, our focus remains on utilising liquid, low-risk assets while minimising downside in the portfolio. Jaffa actively manages our trusts such that we are properly hedged against macro concerns like inflation or duration risk,’ Northern cofounder Anthony McKelvy stated.
Adding: “It has become clear that insurance carriers prefer cash over Letters of Credit as a form of collateralization. Our partnership with Jaffa further strengthens this value proposition to our counterparties while generating alpha.”
Jaffa’s Zarkhin said: “Partnering with Northern aligns perfectly with our mission to harness fixed income mandates for robust asset growth within re/insurance companies. Their market position and dedication to liquidity management makes Northern an ideal partner for achieving sustainable returns through our strategies.”
As a fixed income expert, Jaffa works to generate extra return per unit of risk in highly rated fixed income while avoiding heavy exposures to credit, economic cycle, and real estate.
“We believe that active portfolio management is key to delivering better results, which we strive to achieve by offering custom solutions for asset-liability risk management and decorrelation. This is paired with our firm’s specialised skill set that enables us to offset an insurance portfolio’s exposure to macroeconomic factors such as inflation and economic cycles,” said Jaffa’s cofounder Nathan Lord.
Based in the Cayman Islands, and founded by brothers Anthony and Peter McKelvy, Northern Re had a strong start in 2023. It targets high-frequency, low-severity casualty business; it also underwrites and partners with premier MGA groups, program carriers, as well as regional and mutual insurance companies.
After a “very warm welcome” from the market last year, and driven by the ongoing growth trajectory of the MGA and program markets, the co founders expect favourable market conditions to continue to improve into 2025.
Northern was on track to achieve its original 2023 goal of $50 million in GWP on $25million in capital when the events of late-Summer presented an opportunity to accelerate the business.
“Continuing the responsible growth trajectory alongside trusted insurance and reinsurance partners, our N12M GWP has increased to 200M following 1/1/24.”
