Chubb’s ABR Re stake grows, importance as reinsurance capital rises

Chubb, the global primary insurance carrier and reinsurance company, has increased its ownership stake in its strategically important total-return and third-party capitalised reinsurance joint-venture ABR Re, as its importance as a reinsurance provider to the Chubb group continues to grow.

ABR Reinsurance Capital Holdings Ltd., the parent and ABR Reinsurance Ltd. (ABR Re), the reinsurance underwriting company, was launched in 2015 by Chubb (ACE at the time) as a total-return or investment oriented reinsurance joint-venture vehicle.

ABR Re launched with aroiund $800 million of capital, supplied by third-party investors, and was set up in a partnership with asset manager Blackrock, which provides the investment strategy for the reinsurance vehicle.

ABR Re is an internal reinsurance vehicle, with a mandate only to underwrite risks from Chubb and it is said to follow market terms on that business.

Ever since its launch, Chubb has been expanding its use of ABR Re gradually, ceding more of its risk to the third-party capitalised reinsurance vehicle each year.

By ceding risks to the joint-venture, Chubb benefits from an increasingly efficient source of reinsurance protection and also earns income and profits from the investment returns, as well as an underwriting management fee as well.

Chubb has always been relatively quiet on the use of ABR Re, but it’s clear from the strategy that the insurance giant benefits from this increasingly efficient source of reinsurance capital backed by third-party investors and it is also clear that as ABR Re scales these efficiencies likely increase as well.

Over the course of 2020 Chubb has increased its direct ownership stake in ABR Reinsurance Ltd., from 12% at the end of 2019, to 16% ownership share at the end of 2020.

At the same time, Chubb values its stake in ABR Re some 14% higher, at $114 million at Dec 31st 2020, up from $100 million a year earlier.

It’s not clear how the ownership stake in ABR Re has been increased, but its possible Chubb has bought back some shares in the Bermuda based reinsurer from the third-party investors that were invested in it, over the last year.

It’s clear at the same time that ABR Re continues to be a key strategic source of reinsurance capital for Chubb, with all the benefits of its joint-venture perhaps making it likely the most efficient source of reinsurance capacity the company accesses.

ABR Reinsurance Capital Holdings continues to be listed at the top of the list of Chubb’s largest reinsurers, signalling the important strategic role the vehicle plays for the company.

In the last year Chubb ceded more risk to ABR Re as well, with ceded premiums rising to $350 million for 2020, up by 9% from the $321 million ceded in the prior year.

Commissions received rose to $100 million in 2020, up from $96 million for 2019, but the reinsurance recoverable Chubb reports associated with ABR Re has increased significantly to $806 million, up from $674 million at the end of 2019.

The data clearly demonstrates the strategic and increasingly important role ABR Re plays for Chubb in its reinsurance arrangements, cementing the role of third-party capital within its reinsurance tower as well.

ABR Re’s role for Chubb represents an interesting take on a third-party reinsurance capital strategy, offering the efficiency of a dedicated source of reinsurance capacity, alongside the flexibility and leverage of an investment oriented underwriting approach, while delivering additional benefits through the ownership stake and share in underwriting and investment fee income.

For the investors, ABR Re provides a way to tap into Chubb’s underwriting franchise for returns, while also tapping into Blackrock’s investment acumen.