5 March 2015 Insurance

BlackRock venture could offer new income stream for Ace

It looks increasingly likely that the much-anticipated deal between Ace and fund manager BlackRock will copy the sidecar-type arrangement used by so many reinsurers and ultimately generate fee income for Ace by underwriting third party risks – as opposed to the vehicle insuring Ace’s business only.

The companies are rumoured to be close to revealing details of the structure, called ABR Re, following a fund raising exercise that could generate some $1.5 billion.

Whispers of a deal first emerged more than six months ago but details of what was originally described as an internal reinsurance vehicle have been sketchy.

It appears now that, in addition to reinsuring a chunk of Ace’s ceded premium, the vehicle could also give investors access to third party risks. This development would be especially interesting if those risks came from the primary side of the business and included non-cat business – risks that have rarely been touched in this type of model so far.

“There are various ways of doing this: a company with expertise in the primary business might continue to write primary business. This is the case with Ace. If they are getting more capital from external capital providers and setting up a vehicle they will probably look to make some money,” one source said.

“Through this deal they may make fee income or they may just want to secure their reinsurance on a long term basis. But diversifying their income stream would make sense and it would make sense for a big operation to have this sort of vehicle.”

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