Validus goes for 75% Q/S with new sidecar

Class of 2005 start-up Validus Re has announced that it has done a two-year sidecar collateralised q...

Class of 2005 start-up Validus Re has announced that it has done a two-year sidecar collateralised quota-share retrocession deal with Petrel Re, a new Bermuda reinsurance company set up with $200m in capital by the First Reserve Corporation private equity group.

Under the deal, Petrel Re is assuming a 75% quota share of certain lines of marine and offshore energy reinsurance contracts underwritten by Validus Re for the 2006 and 2007 underwriting years.

Other lines of business are expected to be added over time. Although no premium income targets were released, Validus Re said it will underwrite and retrocede reinsurance contracts to Petrel Re consistent with agreed underwriting guidelines, enabling Validus Re to leverage its resources.

Validus Re will pay Petrel Re a reinsurance premium in the amount of the ceded percentage of the original written premium on the business reinsured with Petrel Re, less a ceding commission that includes a reimbursement of direct acquisition expenses as well as a commission to Validus Re for generating the business.

The treaty also provides for a profit commission to Validus Re based on the underwriting results for the 2006 and 2007 underwriting years.

Paul Manders and Paul Roberts, who are responsible for the global marine and energy classes of business at Validus Re, will oversee the underwriting. Petrel Re is required to contribute funds equal to the full amount of its net exposures into a trust for the benefit of Validus Re.

Petrel Re has no current plans to obtain a rating from any rating agency. The equity investor in Petrel Re is one or more private investment funds managed by First Reserve Corporation, a private-equity firm with a history of investing exclusively in the energy industry.

George Reeth, president and deputy chairman of Validus Re, commented: "We are very pleased to be working with Petrel Re and First Reserve on this agreement, particularly given the firm's extensive experience in the global energy business.

We also view this initiative as a strategic part of Validus Re's business plan. This deal allows us to leverage our resources more effectively while at the same time managing our net exposures."

Posted on 15/5/06 at www.reinsurancemagazine.com.

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