Global managing general insurer Victor Insurance Managers LLC (Victor) has launched a third-party capital-backed mutual insurance exchange to provide additional US property catastrophe coverage capacity to policyholders of its subsidiary, International Catastrophe Insurance Managers LLC (ICAT).
Victor Exchange is a third-party capital firm whose initial sole backer was Gallatin Point Capital LLC, an American investment firm and financial services specialist.
Gallatin Point Capital has shown ambition in the past to generate US real estate catastrophe reinsurance-like returns through alternative financing mechanisms, making it an initial source of capital for a vehicle that could broaden the scope of support for ICAT policyholders. It seems.
As a mutual insurance exchange, Victor Exchange is owned by its policyholders and is capitalized from surplus notes, member surplus contributions and any retained future profits.
Initial capital was provided entirely by Gallatin Point in the form of surplus notes.
As a result, Victor Exchange joins ICAT’s existing group of carriers to provide small commercial property disaster insurance in the 42 states in which ICAT operates.
ICAT will immediately launch a coastal homeowner program targeting the Gulf and Atlantic states, the company said, suggesting that this new Victor strategy is likely to evolve and may require additional third-party capital to support it.
Commenting on the news, Brian Hanuschak, Victor CEO, said: “The impact of increasing frequency and severity of storm activity is putting enormous pressure on property catastrophe insurance capacity globally, particularly in the United States.
“By forming the Victor Insurance Exchange, Victor and ICAT are creating a new source of capability for agents and brokers, while providing longer-term stability to our small commercial and residential policyholders.”
Victor Exchange is licensed in the State of Delaware as a domestic surplus insurance insurance company, to which neither Victor nor any of its affiliates contributed any capital nor were they directly liable for insured losses suffered by Victor Exchange.
Thus, the Victor Exchange strategy appears to operate like a sidecar pool of effective venture capital to support ICAT’s real estate catastrophe underwriting expansion, which could be a low-cost way to achieve this growth in a tough market environment.
AM Best has assigned Victor Exchange a preliminary credit rating of A-.pca (Excellent).
ICAT will act as the sole managing head of the joint venture and, through its subsidiary Boulder Claims, the third-party claims administrator.
GC Securities, the capital markets and insurance-linked securities (ILS) arm of reinsurance broker Guy Carpenter, acted as financial advisor to Victor Exchange in structuring and raising capital.
This launch of Victor and ICAT is another innovative financing method to support property catastrophe underwriting, provides a flexible and dedicated source of capital, also provides access to open market reinsurance when needed, and may attract more investors to Drive usable capacity.