Acrisure Re looks to strategically align with critical cat carriers and MGAs

Acrisure Re’s recent involvement in the launch of Cajun Underwriters Reciprocal Exchange (CURE) was part of a move to strategically align with six to eight carriers and MGAs in the critical cat arena from the Carolinas to Texas, The Insurer can reveal.

According to sources, the move is part of a holistic approach to bring much-needed capacity to providers of insurance – especially in the homeowners space in the Southeast – that will enable them in turn to provide insureds with viable options beyond state-sponsored plans amid the current property cat crunch.

The approach is aimed not only at accessing the fullest range of capacity sources, but also at freeing up capital to enable better-quality companies that are currently hamstrung to get back on the front foot of growth.

Last week, this publication reported that CURE successfully placed more than $200mn in cat reinsurance limit through its broker Acrisure Re as it assumed a book of homeowners and dwelling fire business from failed carrier Americas in Louisiana.

Acrisure Re’s role is understood to have gone beyond that of a transactional broker, however.

CURE is a joint venture between Southeast homeowners specialist carrier SafePoint and ClinchPoint Holdings – which is affiliated with Accident Insurance Company, a New Mexico carrier led by Bill and Bob Arowood, who also run Appalachian Underwriters, the MGA platform recently bought by Acrisure.

It launched to target significant opportunities initially in Louisiana following a major retrenchment of capacity – both insurance and reinsurance – after the frequency of hurricanes in 2020 and the severity of Ida last year led to several insurer failures, including Americas.

But it also launched at a time when capacity for Southeast critical cat is the tightest in recent memory, with reinsurers pulling back and looking to move away from lower layers of cat covers and quota shares that have been impacted by attritional losses.

Sources said Acrisure Re – which last year launched its Acrisure Re Corporate Advisory and Solutions (ARCAS) unit – is also working with an MGU client that is looking to become a balance sheet insurance company.

The strategy of aligning with critical cat carriers and MGAs is understood to be spearheaded by Acrisure Re executive vice president Craig Darling.

The strategy appears to be a response to the current property capacity crunch, especially for excess of loss and quota share in critical cat zones in the US.

As previously reported, a global retraction by reinsurers has particularly impacted the lower quadrant of reinsurance programs within the 20-year PML return period, as well as net and gross quota shares, not just in Florida but across the Southeast.

Capital stacks

Although details of other potential partners are not known, sources said it would make sense for Acrisure Re to target those with strong track records, technology and operating platforms that are able to integrate analytical capabilities with underwriting and risk management to drive profitability.

It would likely bring its own modelling and analytical capabilities to bear and help carriers to build their capital stacks by combining traditional reinsurance – including quota share and excess of loss – with industry loss warranties as well as county- and state-weighted products (CWIL and SWIL) and alternatives to increasingly expensive reinstatement premium protection covers.

Capital markets solutions such as surplus notes could form part of the approach, as well as solutions like loss portfolio transfers and adverse development covers to tidy up balance sheets and make them more efficient.

For that it is expected the firm will lean on the capabilities of its new ARCAS unit, which is led by Ben Canagaretna and operates across four pillars: strategic advisory, capital raising, legacy solutions and M&A.