Liberty Mutual Completes $240 Million Limestone Re Transaction

July 2, 2019

For the fourth time, Liberty Mutual has utilized capital markets’ reinsurance capacity via the Bermuda collateralized reinsurance sidecar, Limestone Re Ltd.

The Boston-based insurer said it has completed a new transaction utilizing the Limestone Re capital markets platform that provides approximately $240 million of reinsurance capacity from capital markets investors for the company’s U.S. property catastrophe program and global treaty property reinsurance business.

The transaction is comprised of $135 million of Bermuda Stock Exchange listed 2019-2 Notes issued by Limestone Re Ltd., a Bermuda domiciled segregated account company, with the remainder of the capacity provided via private placements.

According to Arno Gartzke, vice president and director of Insurance-Linked Securities, Liberty Mutual, the transaction successfully replaced the expiring Limestone Re 2018-1 placement and had an overall lower target size due to a revised portfolio composition.

The Limestone Re sidecar took its first outing in December 2016 when Liberty Mutual entered into a multi-year transaction, which, together with individual private transactions, provided approximately $160 million of collateralized reinsurance. The second deal was announced in June 2018 when Limestone Re provided approximately $278 million and this past January a third deal saw Limestone Re providing approximately $150 million for Liberty’s U.S. property catastrophe program, as well as its U.S. homeowners and global property reinsurance businesses.

James Slaughter, executive vice president and chief underwriting officer of Liberty Mutual’s Global Risk Solutions strategic business unit, said the latest deal reaffirms the quality of risk which insurance-linked securities (ILS) investors can access via Limestone Re. “Third-party capital will continue to be a growing presence in the (re)insurance market, and the Limestone Re platform remains an integral component of Liberty Mutual’s strategy for accessing this capital,” he said.

Reinsurance sidecars are generally quota-share and excess-of-loss arrangements whereby third party investors take on the risk and return of re/insurers’ specific books of business, based on a fixed percentage or through excess-of-loss protection. Liberty’s reinsurance sidecar is fully collateralized which means that funds are almost always available to pay claims when losses occur.

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