Ariel Re lines up capital to support 25% 2024 premium growth target

Ariel Re has had its business plan approved by Lloyd’s to grow premium by around 25 percent in 2024 and is understood to be securing backing from new and existing investors to support the expansion as it targets attractive opportunities at 1 January, especially in cat reinsurance, The Insurer can reveal.

The Bermuda-Lloyd’s carrier is understood to be lining up capital to increase Funds at Lloyd’s after fundraising over the last couple of months, working with Howden Tiger Capital Markets & Advisory.

The identity of all of the backers has not been confirmed but last year Ariel Re secured $270mn of new capital from five new institutional and family office investors, with $170mn raised through Lloyd’s London Bridge 2 PCC transformer vehicle.

Existing backers Pelican Ventures and JC Flowers also “meaningfully” increased their underwriting capital commitment to support the reinsurer’s growth plans.

Although he didn’t provide a specific stamp capacity number for 2024, the company’s CEO Ryan Mather confirmed to this publication that the plan to grow premium written by around 25 percent next year had been approved by Lloyd’s.

“We have a lot of interest from new and existing capital providers and we’re comfortable we’ll get all our capital in place. Back at Monte Carlo we felt reasonably confident that it was going to be hard yards but we would get there in the end, and we’ve made good progress in the intervening time,” said the executive.

Ariel underwrites at Lloyd’s via Syndicate 1910 and the smaller cat-sidecar Syndicate 6117. The two syndicates had starting stamp capacity of £380.8mn and £62.7mn for 2023. Details for Syndicate 1910 2024 capacity has not been published but Syndicate 6117 has been approved for a ~40+ percent increase to £88mn.

He said the capital-raising process had begun earlier this year than in 2022, when there was also a major loss in the form of Hurricane Ian to factor in.

Market opportunity

Mather said that Ariel Re remains bullish on the market opportunity, especially in cat.

“I think the market has found a new level, a step-change level. Different markets have different [levels of increase] but the peak zone cat is probably in the order of 40 to 50 percent up. We don’t see that going away.

“Will prices go up a bit and down a bit depending on what they are? Of course they will, but overall I think the new level has been found,” he commented.

The executive said that in property cat he expects to see some additional risk appetite from incumbent reinsurers rather than meaningful new capital coming in, with middle to top layers likely to see more supply as bottom layers continue to be more challenging for brokers to place.

But he also said he expects severe convective storm (SCS) to be a “huge theme” at 1.1, after record activity in 2023.

“I think that’s going to be the theme of 1.1 this year. Convective storm is an insurable peril, obviously, but a lot of the burden of that remained with the insurance companies rather than the reinsurance companies this year.

“Will that persist? What do the regional companies who are SCS exposed do about that because they’re all really struggling,” he continued.

Mather highlighted the challenges for SCS-exposed carriers, especially those writing on an admitted basis where filing the rate increases quickly enough to counter rising loss trends is difficult, at the same time as facing fast-rising reinsurance costs.

Outside of cat, the Ariel Re CEO identified marine and specialty areas as attractive for potential growth, as well as cyber, where the carrier is pushing its so-called “Cyber Shock” product, which provides catastrophe excess of loss coverage.

As previously reported, early Lloyd’s 2024 business plan forecasts indicate that several syndicates are looking at double-digit increases in their stamp capacity.

This includes the US property specialist Managing Agency Partners Syndicate 2791, which has been cleared for a hefty 37 percent stamp capacity increase to around £650mn after overwriting this year.