Cayman reinsurer Crosswinds and TransRe strike underwriting agreement

Crosswinds Re, a specialty reinsurance business vehicle established by Crosswinds Holdings in the Cayman Islands, has entered into an underwriting agreement with TransRe as it struggles to find profitable business.

The Transatlantic Reinsurance Company (Trans Re) has agreed to act as strategic advisor to Crosswinds Re providing information on structuring, pricing, risk assessment and market conditions for reinsurance business being assessed by Crosswinds Re, according to the statement.

"We are excited that Crosswinds Re has been fully established as part of its proof of concept," Colin King, Crosswinds’ CEO, commented. "While we had hoped to write some business this season, we are opportunistically exploring deploying capital and will pass on business when our risk-return targets cannot be achieved. The 2017 renewal rates we have seen to date did not satisfy our risk adjusted return targets."

The company said that Trans Re will be compensated through a management fee calculated at a rate of 2 percent of the underwriting capital utilized by Crosswinds Re in an applicable year. For 2017, TransRe is entitled to a stand by fee of $50,000 in a year where Crosswinds Re does not write any business.

TransRe is also entitled to an incentive fee equal to 10 percent of the gross increase in enterprise value over a 7 percent compounded high water mark on the occurrence of a liquidity event for Crosswinds Re or to a termination fee in certain circumstances.

The underwriting agreement is for an initial term of 5 years with the option to renew it for successive 2 year terms, subject to earlier termination.

Meanwhile, Crosswinds Re also announced its plan for the 2017-2018 reinsurance placement season.

The company capitalised its reinsurance subsidiary Crosswinds Re with $2 million. Crosswinds Re said that it reviewed business opportunities to provide coverage to primary Florida insurance carriers for the 2017-2018 treaty year and determined that the available opportunities did not meet its risk-return criteria. Other opportunities may present themselves during wind season which typically runs through to the end of October 2017 although there can be no certainty that this will be the case. In the meantime, Crosswinds Re intends to look at appropriate opportunities to invest the funds allocated for its reinsurance activities in order to partially offset its operational expenses.

Crosswinds is a publicly traded private equity firm and asset manager targeting strategic and opportunistic investments in the financial services sector with a particular focus on the insurance industry.

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