Humboldt Re Ltd., one of two Guernsey-based Credit Suisse Insurance-Linked Strategies rated reinsurance companies, has been sold to a run-off specialist, with the deal expected to be finalized shortly.
As we explained in August, the signing of a sale agreement had been revealed which would allow Humboldt Re’s largest shareholder, which we assume was certain funds managed by the Credit Suisse ILS team, or a entity linked to the larger Swiss Credit Group, to recognize the value blocked in the rated reinsurance company and its portfolio.
A sale would allow the remaining capital to flow for the benefit of the company and any investor supporting the funds or positions that supported Humboldt Re.
Humboldt Re and the other reinsurance company linked to Credit Suisse ILS, Kelvin Re, have both been shut down due to strategic decisions made by the ultimate institutional investors behind them.
Both Humboldt Re and Kelvin Re have received financial support from investors in insurance-related securities (ILS) and funds managed by Credit Suisse Asset Management’s dedicated ILS investment unit.
Humboldt Re was backed by capital from some of the insurance-linked securities funds (ILS) managed by Credit Suisse Asset Management (CSAM), while Kelvin Re’s backing came from investments made by the Abu Dhabi Investment Council , a sovereign investor.
The Credit Suisse Group Pension Fund recently announced a restructuring of CHF 357.1 million of investments in insurance-related securities (ILS) and also revealed exposure to the liquidation of the Humboldt-rated reinsurance company D.
It is therefore expected that this pension fund could benefit from the sale of the interest rate reinsurer.
Now, in an update to ratings on Humboldt Re, AM Best has removed vehicle credit ratings, saying that “the company has requested to no longer participate in AM Best’s interactive rating process.”
AM Best has kept Humboldt Re’s financial strength rating of A- (excellent) and long-term issuer credit rating of âa-â (excellent) under review with negative implications, saying this reflects the uncertainty regarding the impact of the current change of ownership. will have on the potential financial strength of the business.
Regarding the change in ownership, AM Best revealed that the sale of Humboldt Re is to a run-off specialist, which is new information because previously efforts to sell the company had consisted of trying to sell the noted reinsurer in as a going concern, while eliminating its portfolio already in liquidation through an arrangement such as a loss portfolio transfer.
But now it looks like the entire reinsurer will be sold to a run-off specialist, who we understand to be one of the usual suspects in this market and it is expected that the sale will be completed and possibly announced in such a way. imminent.
AM Best reiterated that the run-off continues to progress, stating: âSince Humboldt Re entered the run-off in December 2020, his underwriting exposures have declined significantly and risk-adjusted capitalization has increased. The company recorded a small loss in the first half of 2021. â
A sale of Humboldt Re as a whole will unlock the trapped value for investors still exposed to the reinsurer, while also allowing this chapter to be finalized for Credit Suisse.