SRR targeting whole account fronting carrier capacity deals

By Chris Munro

Feb 27 - (The Insurer) - Specialty Risk Re (SRR) has secured an additional $25 million in capital to support the startup as it makes inroads into the U.S. programs and MGA sector through whole account capacity deals with fronting carriers.

Specialty Risk Re (SRR) has secured an additional $25 million in capital to support the startup as it makes inroads into the U.S. programs and MGA sector through whole account capacity deals with fronting carriers.

The Los Angeles, California-based collateralised reinsurer announced in February that it had successfully closed a $50 million institutional funding round, led by private equity firm NMS Capital Group.

And in an interview with Program Manager, SRR’s president and CEO Jonathan Collura said the company had already agreed a deal to get a further $25 million in capital support from its investor group before the end of Q1 2025, taking its overall funding to $75 million.

As Collura explained, the investor support it has received to date reflects confidence in the collateralised reinsurer’s risk selection and capital management.

From his perspective, Collura said SRR having the financial backing and support of a family office like NMS was “a really good fit” because investing in the reinsurer provides it with an asset uncorrelated to the rest of its portfolio.

The additional $25 million of capital, Collura told Program Manager, means SRR “can truly grow” with the fronting carriers it is partnering with.

SRR was launched last year, with Collura recruited as CEO to lead the firm. His financial services career began in 1999 and encompasses roles as a financial adviser and banker at firms such as Ameritrade, Morgan Stanley and Wells Fargo Bank.

In 2011, he founded a boutique corporate advisory firm specialising in structured finance, debt and management solutions. Collura has also worked in the oil and gas sector and completed acquisitions involving both public and private companies.

KEY RELATIONSHIPS IN PLACE

SRR already has key relationships in the market in addition to those which Collura developed at his previous business, which was a company focused on structured reinsurance vehicles.

“It’s not by mistake that out of the gate we have key relationships,” he said.

“I spent five years networking and building and getting to know the right people in the space which has benefited SRR with a smooth launch into the market.

“We're looking at working with the best-in-class fronting carriers at a time when there really does seem to be some pullback on capital investment in the space.”

ESTABLISHED OPERATORS

This publication has previously reported that SRR is looking to support programs that have established loss histories.

It will do that by providing quota share and excess of loss reinsurance coverage to the fronting carriers that provide capacity to programs and MGAs.

Broadly, SRR’s appetite is for non-catastrophe property and casualty business. However, Collura said it may assume cat-exposed business, although it is not looking to specifically support cat-focused programs and MGAs.

“If we're looking at a carrier that has a diversified P&C book, our commitment to them is to be a dedicated capital partner, and so there may be cat-exposed business, but not cat-specific business,” Collura said. He added that SRR will focus on “a lot of the casualty specialised lines”.

SRR’s business model is to partner with a select group of fronting carriers to provide capacity across their entire portfolio.

“When I initially began developing this model, and obviously it's something that has evolved over time, I called it indexing, and they now call it whole book,” said Collura.

“It reduces the heavy expense with financing a typical insurance firm’s infrastructure substantially to be able to take a whole slice of a book.”

KEY CONSIDERATIONS

There are two core considerations for SRR when looking to partner with a fronting carrier, Collura explained.

First is the fronting carrier’s returns, its underwriting and whether it can write enough business to justify the relationship with SRR.

Secondly, does the fronting carrier generate those returns on a consistent enough basis so that SRR can justify backing the insurer to its investors.

“We really are looking to partner with four best-in-class carriers – we've identified three of them already – and grow with them.

“If they have mandates to grow their book, we can be that capital partner to them. It’s a way for us to get into the market, get good quality business and get diversification.

“Now we're not going to necessarily see as big of an upside, but we won't see necessarily as big of a downside. But we are going to have consistent returns, which is really where we’re focused.”

TRUE PARTNERSHIP

Collura said the partnerships that SRR is currently working on closing would see the reinsurer really act as a partner to the fronting carrier.

“We're saying we're trusting your underwriting, and your underwriting standards and guidelines, and your claims audit. We’re trusting them to be the decision maker.

“Coming out of finance and banking, I look at it as we are a capital provider first and foremost. We are there to support them.”

Collura leads SRR as CEO and president, and the executive said the company is in the process of finalising its board of directors.

“We've got a couple of really good names that are going to be joining us,” he said.

From a management standpoint, Collura said several key individuals will soon join him to help grow the business.

“Right now, we have a small team in our Los Angeles office, and we are going to be building that team out as well,” he said, with the company planning to add additional staff to provide support with the reporting, analysis and day-to-day management of SRR.