Late last week, James River Group Holdings, Ltd. announced that two of its principal operating subsidiaries entered into a loss portfolio transfer reinsurance transaction with a wholly owned captive insurer of Uber Technologies, Inc.
Under the agreement, the Uber captive, Aleka Insurance Inc., will reinsure substantially all of James River’s legacy portfolio of commercial auto policies related to Uber’s ridesharing business. Specifically, James River ceded about $345.1 million of commercial auto liabilities relating to business written for Uber’s ridesharing business in the years 2013-2019.
The coverage being provided by Aleka is fully collateralized and not subject to an aggregate limit.
The news prompted an outlook change from rating agency AM Best, which changed the outlooks of the A-minus financial strength rating on James River’s operating subsidiaries to stable from negative. Best noted that while James River’s commercial auto lines have had recurring adverse reserve development in recent quarters, “AM Best feels that the protection provided by the LPT reduces uncertainty as the contract significantly mitigates the potential for ongoing adverse reserve development while providing stability in reserves and consistent risk-adjusted capital composition.”
Commenting on the benefit of the LPT in a media statement, James River Chief Executive Officer Frank D’Orazio said, “While we are confident in our carried reserves for this portfolio, the transaction brings economic finality to substantially all of our commercial auto run off portfolio, effectively insulating the portfolio from further potential reserve development.”
“This decisive step enables James River to focus firmly on the future and continue to build on the progress we have made in advancing our core businesses and risk management practices.”
“We are pleased to be working with a long term insured partner in Uber to pursue our stated goals.”
The transaction, effective as of July 1, 2021 and closed upon signing, has already received all necessary regulatory approvals.
James River said it will recognize an after-tax loss associated with the loss portfolio transfer of roughly y $23.5 million in third-quarter 2021—largely from claims handling costs incurred in connection with the transaction.
Going forward, James River and Aleka have entered into an administrative services agreement with Helmsman Management Services LLC for claims management services. Helmsman will assume responsibility for claims handling of the reinsured commercial auto policies for the remaining life of those claims following a transition period.
Source: James River Holdings, Ltd.; AM Best