By David Bull

Feb 6 - (The Insurer) - Topsail Re is set to continue on its strong top-line growth trajectory after entering into a long-term strategic partnership with a consortium of leading global financial institutions that will supplement its own balance sheet with third-party growth capital, The Insurer can reveal.

In a client update, the reinsurer said it now has the ability to match its “lead” market approach with larger lines, which has helped expand its book to $1.5bn of in-force premium through the year-end cycle and the early part of 2025.

The company further noted that “the most important, and not unexpected” part of this is that while year-over-year growth continues to steadily increase, its program count is up by less than 10 percent.

“Our growth is predominantly coming from existing clients, who we already know and trust, and who continue to build and scale profitable books under favourable primary market conditions,” it continued.

Cayman Islands-domiciled Topsail Re continues to have an average line size across its portfolio of less than $15mn, as it maintains a “highly diversified and balanced book”.

But it also offered several individual lines of $40mn to $50mn over the second half of 2024, and more recently through the year-end cycle.

Since its launch by former Axiom Re president and JLT Re executive vice president David Johnson in 2018, Topsail Re – which is a closely held organisation with no outside shareholders – has grown to almost 50 employees.

The company, which has also just undergone a rebrand, describes itself as a “solutions-first” reinsurer and believes it has successfully differentiated itself as a “true specialty lead reinsurer” with brokers and clients.

Commenting on the long-term strategic partnership with the consortium, the reinsurer said the move “will materially transform” its ability to address clients’ and partners’ “most demanding growth and related risk-capital challenges”.

“This partnership, in collaboration with highly select, non-correlated third-party capital providers, will supplement our own balance sheet with a significant infusion of growth capital,” it continued.

Speaking to this publication, chairman and CEO Johnson added: “[It’s] given us a lot of financial flexibility to continue to grow and take larger lines and diversify our income stream. We’re giving them a share of our blocking and tackling of structured transactions, which provides a great diversification play for our partners.”

“Minimal volatility”

Christopher Miller, who runs Topsail Capital Partners and is also chief strategy officer at Topsail Re, highlighted what he said is the appeal of the reinsurer’s book of business to capital providers.

"A scaled, highly diverse and profitable portfolio with minimal volatility is actually a highly sought-after commodity for leading capital sources. They desire access to the team's final work product, particularly the stability provided by a seasoned portfolio of structured proportional reinsurance, which has been developed and refined over the past five or six years.

“For them this is a highly efficient and de-risked means of accessing that business, immediately at scale. It’s a flywheel for both sides – but it is dependent on us sticking to the game plan, doing the blocking and tackling, and executing with consistent underwriting margins,” he explained.

Miller added that clients and brokers are beginning to differentiate Topsail Re from a collateralised market, as a result of its lead-market mindset.

Johnson also pointed to the total return profile Topsail Re can deliver to its capital partners.

“The relationships are built for the long-term, which is the core ethos of our company. We provide our partners access to business they likely would not see or underwrite otherwise while at the same time delivering a diversified portfolio of risk. They sit in the same shoes as we do, which provides excellent premium and asset leverage to capital which creates a very attractive total return.”

Foundational move

In its update, Topsail Re said these initial partnerships are “foundational” to its long-term vision for collaborating with “highly strategic” third-party capital.

“It is also important to note, however, that it will not in any way change our approach or underwriting discipline as we continue to build upon and strengthen our reputation as a thoughtful, highly consistent and prudent market leader of structured reinsurance, supporting best-in-class and growth-oriented clients.

“These partnerships will simply allow us to do more and have a greater impact, for both our established and prospective clients, such as with our joint venture with RedBird Capital on the Bishop Street Underwriters launch,” the client update said.

As previously reported, in March last year, Topsail Re invested in RedBird Capital-backed MGA platform start-up Bishop Street Underwriters as part of a joint venture under which the reinsurer also provides preferred capacity.

In its update, Topsail Re also confirmed it materially expanded its strategic banking relationships last year, with a consortium that now includes eight “highly respected” US institutions providing more than $1.2bn in letter of credit collateral capacity in addition to the reinsurer’s collateral trust facilities.

It said the relationships are critical to its operating model and how it transacts with clients and partners, adding that it will continually work to optimise the panel for financial strength, reputation, “(re)insurance IQ”, as well as counterparty diversification.

Bullish in 2025 opportunities

In the update, the company said that it is “quite bullish” about 2025 opportunities, even though as a privately held reinsurer it is under no outside pressure to grow.

Among the growth opportunities identified is “material interest” from cedants such as regional mutuals or monoline specialists to access surplus or leverage relief quote share support for net property or multiline deals.

Topsail Re said these types of cedants haven’t historically turned to such solutions.

“For us, this is a validation of the solution-first model, as the approach and methods to helping cedants hasn’t changed, even if the type of cedant or their geographic footprint shifts year over year, as needs dictate, from Florida, to the Gulf Coast, the Midwest, or West Coast,” it commented.

Other trends such as the flow of business from the admitted to the non-admitted market and talent migration from legacy carriers to the programs and MGA space are also providing opportunities, as are book-rolls and carve-outs.

“Equally important to us, alongside these broad trends, the program space offers a unique opportunity to create long-term partnerships, as most of the carriers operate under ‘capital light’ or ‘capital efficient’ models, whereby they are still relatively dependent on quota share reinsurance.

“Their continued need for surplus/leverage relief, in conjunction with our consistent approach and appetite for structured reinsurance, should bode well for all parties,” said the reinsurer.