FG Re Investors LLC (“FGRI” Sidecar of FG Reinsurance Ltd)
FG Re Investors LLC (FGRI), the reinsurance sidecar for FG Reinsurance Ltd (FGRE), a subsidiary of FG Financial Group Inc (Nasdaq: FGF), is seeking $105 million to support the group’s growing reinsurance portfolio of diversified reinsurance that writes collateralized loss capped reinsurance.
Established by FG team led by Tom Heise and Larry Swets in June 2020 and initiated risk taking in January 2021
Despite operating with a modest capital base to date, FG Re has written eight reinsurance contracts
The proposed opportunity is distinct from other “on-the-run” alternative investments:
Offers true diversification to traditional alternative investments, low price per risk unit and a high degree of risk measurement
Growing alternative risk market uncorrelated to broader markets as evidenced during 2009 financial crisis and COVID-19 Pandemic
Mitigation of risk by line of business, geography, and event type
Broker and carrier network allows for quick deployment of capital into a growing market
Large Market Size. The Traditional Reinsurance Market is approximately $600 billion in size, and the ILS is a $100 billion market that is growing rapidly (10x growth since 2005)
Resilient Industry. Despite rising risks in the financial markets, ILS markets have performed relatively well and the first half of 2022 was the third most active first half for new issuance on record
Opportune Timing. Favorable reinsurance market conditions with the current pricing environment favoring new market entrants
Diverse Participant Pool. The industry has attracted participants who seek real diversification and uncorrelated returns, such as pension funds, endowments, sovereign funds and family offices, who value insurance risk as a long-term strategy
Growing Alternative Risk Market. FGRI operates in a growing alternative risk market, the significance of which was proven in the 2009 financial crisis and in 2020 during COVID
Objectives and Structure
FGRI seeks to generate attractive risk-adjusted returns that are uncorrelated with traditional asset classes through reinsurance structured in creative ways and nontraditional ILS
- Traditional Reinsurance Market is approximately US$600 billion in size
- ILS is a US$100 billion market and growing rapidly—approximately 10x growth since 2005
- Focus on ILWs, a growing part of the broader ILS market
Through multiple quota share agreements, FGRI is organized to quickly deploy capital across its portfolio of insurance businesses
Favorable Timing For New Entrants
Property catastrophe reinsurance rates are now back at their highest level since 2012, which analysts note was before much of the expansion of alternative, or third-party capital, in the space
The Guy Carpenter US Property Catastrophe Rate-on-Line Index increased by almost 15% for January 2022 through July 2022 renewals, the most significant shift since 2006
- Forecasts suggest broad reinsurance price hardening for 2023 and some sources predicting 30%-50% rate increases across property catastrophe lines of reinsurance business
FGRI’s Investment Strategy
Designed to generate above-market, sustainable dividend yields throughout industry and market cycles
Targeted short duration exposure to ILS
FGRI intends to deploy capital into a diversified portfolio of reinsurance contracts whose returns are based on a portfolio of risks managed by managers with a history of high returns.
Broad access via multi-manager structure
Multi-manager structure, targeting successful underwriters of and managers of insurance risk who can supply the full spectrum of information on each risk.
FGRI diversifies its underwriting by class of business, geography, and event type. This recognizes reduced correlation between losses in different lines of business as well as different geographic locations (e.g. Hurricanes in Florida are uncorrelated to Earthquakes in California)
FGRI Leadership Team
Significant reinsurance and capital allocation experience
Tom Heise| CEO
- Co-founded the Bermuda Commodities Exchange, which was an insurance industry-led,
fully collateralized market for insurance risk, which funded and helped create the Guy Carpenter Catastrophe Index and the collateralized non-traditional reinsurance market that exists today.
- Currently serves as the Non-Executive Director of AkinovA (Bermuda) Ltd.
- Director of Reinsurance and Financial Planning for American International Group, Inc, and served as a Director at ILS specialist Horseshoe Group.
Larry G. Swets, Jr. | Chairman
- Executive and/or director experience includes roles at several public companies including
FG Financial Group, GreenFirst Forest Products and Kingsway Financial
- Led successful IPOs, including two insurance companies:
- Atlas Financial Holdings
- 1347 Property Insurance Holdings
- Over a decade of SPAC experience including mergers with Hagerty and United Insurance Holdings
- Previously served as director of Atlas Financial Holdings, United Insurance Holdings and Kingsway Reinsurance Ltd. (Bermuda), a Kingsway subsidiary and Bermuda reinsurer.