Harrington Re., a fledgling Bermuda operation sponsored by AXIS Capital Holdings Ltd., has raised $600 million in capital designed to beef up underwriting and investment plans put forth by its sponsor. Blackstone Group will assist with investment management.
For AXIS, this means a much broader focus on third-party capital, by way of Harrington Re, in order to service clients and brokers.
Recent AXIS Chief Underwriting Officer Bill Fischer will be Harrington Re’s CEO; he’s also been appointed to its board of directors, and is a 30-year industry veteran.
A.M. Best was quick to respond positively to the news, assigning to Harrington Re a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” Both have a stable outlook.
“The ratings reflect the prudent business plans presented to A.M. Best, strong risk-adjusted capitalization, the credibility and capability of Harrington’s management team, and the strong qualitative attributes of the sponsors,” A.M. Best said.
Harrington Re raised $550 million of equity and $50 million in debt. This includes a $100 million investment from an AXIS, and a $50 million equity investment from Blackstone affiliates.
How this will work: As A.M. Best describes, AXIS will write business on Harrington’s behalf, with focus on “building a diversified multi-line reinsurance book of business with strict limitations on property casualty risk.”
A.M. Best also noted that the investment portfolio is designed “to have a balance of liquidity, cash flow, diversification by asset class, managed drawdown risk and strong absolute returns.” Blackstone, in turn, is now Harrington Re’s exclusive investment manager, and will oversee a multi-asset portfolio of Blackstone’s alternative investment strategies on the company’s behalf, according to the deal announcement.
AXIS President and CEO Albert Benchimol said that his company’s relationship with Harrington will be key to its “21st century approach to capital management.”
Benchimol explained the deal enables AXIS to supplement its balance sheet with “a broad range of third-party capital to deliver enhanced capacity, innovation and tailored solutions to our clients and brokers.” He added that having Blackstone as its portfolio investment manager will help Harrington Re develop a stronger foundation.
AXIS Reinsurance CEO Jay Nichols echoed similar thoughts, noting in prepared remarks that “Harrington Re is an integral part of our larger alternative capital strategy, which is designed to match the right risk with the right capital.” Plans call for the division to expand its offerings to more medium- and long-tail lines of business.
AXIS Not the First
Among rivals with a related idea: Arch Capital Group Ltd. Arch launched a similar strategy a few years back with the debut of then-new subsidiary Arch Underwriters Ltd., which became a reinsurance manager for Watford Re, a (then) new multiline Bermuda reinsurance company.
At the time, plans called for it to be funded principally with third party capital. Also, Highbridge Principal Strategies LLC, a subsidiary of JPMorgan Asset Management Holdings Inc, was signed as Watford Re investment manager.
Sources: AXIS Capital Holdings/Harrington Re; A.M. Best