Arcadian eyes balance sheet platform to support growth after passing $1bn GWP mark

Arcadian Risk Capital is weighing options to launch a balance sheet platform, including a potential rated Lloyd’s or Bermuda vehicle, and is engaging (re)insurers to add to its existing capacity panel as it looks to onboard new underwriting teams, The Insurer can reveal.

The moves come after the expansive MGA went past $1bn of cumulative premium in Q1 this year, with GWP expected to grow organically by around 10 percent from $355mn in 2023 to close to $400mn in 2024.

If Arcadian chose to go the Bermudian route, it is expected that it would need to capitalise a Class 3 or Class 4 carrier to around $150mn to support its growth trajectory in the coming years at the level needed to secure an AM Best A- rating.

That would likely require the expansive firm to bring in new investment, which could be in the form of a strategic partner from within the sector.

Arcadian, founded by seasoned executive John Boylan, began underwriting in 2021 and has built a portfolio of business that includes general liability across a number of industry verticals on an excess basis, a range of professional liability classes and property D&F.

It was launched with an equity investment and capacity support from SiriusPoint – then Third Point Re.

But the Bermudian deconsolidated the MGA effective 30 June this year, disclosing an estimated fair value of around $115mn for its remaining 49 percent stake in the business at that date and booking a $96mn investment gain in the process.

Capacity for Arcadian – which can offer up to $25mn in limits on its general liability and professional liability books – comes from SiriusPoint (85 percent) and RenaissanceRe (15 percent).

The SiriusPoint capacity is provided by its Bermuda and Swedish carrier subsidiaries, while RenRe capacity is accessed through the Bermudian’s Lloyd’s Syndicate 1458 and Lloyd’s Insurance Company.

Arcadian operates from its regulated Bermuda and London platforms and earlier this year put down a marker in the US with the launch of a mid-market E&S casualty offering written through a newly established entity on the ground led by Biju Joy.

Assessing options to support phase two

Speaking to this publication, Boylan said the MGA is assessing a number of options for the second phase of its build-out.

He said it is key for the firm to address its current dependence on fronting paper with a full reinsurance stack behind it, especially against a backdrop of fronting capacity becoming more “skittish”.

“We need to be masters of our own destiny in terms of onboarding new teams and scaling our operation. In order to achieve that, we would be best positioned by having the ability to assume risk ourselves,” said the former Max Capital, Markel and XL Europe underwriting executive.

Boylan said that as an MGA, Arcadian has been returning “decent” Ebitda with a high cash conversion rate such that it is on course to have $30mn-$40mn of cash sitting on its balance sheet at the end of the year.

He added that the firm has had inbound interest from potential investors over the last 12 months and is considering its options.

“As part of the scaling process, we may look to do something in terms of monetising early-stage investment in order to provide us with the firepower we would need to go to the next balance sheet level.

“Lloyd’s is a very different dynamic in terms of the capital and Funds at Lloyd’s to support the plan there; Bermuda would be a Class 3 or Class 4 in order to get the requisite rating to do what we’d like to do,” the executive explained.

And he added that Arcadian is talking to a number of additional capacity providers to diversify its panel further.

SiriusPoint relationship

Boylan said the MGA continues to have a strong relationship with SiriusPoint and that the Bermudian could continue to have a role in its capital structure and as a capacity provider, as both parties consider their options.

He also noted that SiriusPoint has been building out its insurance franchise, which could put it in conflict with Arcadian in some areas.

To support plans to launch a balance sheet business the MGA would need to be able to put in around $150mn of capital, Boylan suggested.

“That would necessitate us doing something to push more for that liquidity event and bring in a strategic investor.

“We need to control the risk capability ourselves. We either do that ourselves, or via some kind of strategic partnership to be determined, and that’s under active consideration,” he continued.