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Multi-Strat embarks on capital-raising round to fuel growth

Multi-Strat Holdings plans to raise both equity capital to finance expansion and to strengthen its balance sheet as it seeks to maintain a rapid expansion, The Insurance Insider can reveal.

“We need to grow,” CEO Bob Forness told this publication, adding that the company’s expansion pace has reached 50 percent annual premium growth in recent years.

Multi-Strat plans to raise as much as $20mn in equity capital, working exclusively with Stonybrook Capital, a New York-based investment bank for the (re)insurance industry.

“We’re trying to lead the way” toward broader investor participation in alternative reinsurance markets, Forness said. “That’s why we’re trying to raise additional capital.”

The fresh funds could come through equity, debt or a mix of the two, Forness said. The key is finding the right balance, he said, adding: “We’re open to the right type of investor.”

The company’s MultiStrat Re unit and its MultiStrat Advisors agency combine to help asset managers develop reinsurance businesses, providing underwriting services and acting as an incubator for those just entering the ILS market through the Bermuda-based firm. The company also collaborates with existing reinsurers, Forness said.

“We work with reinsurers – we don’t replace them,” he added.

In one typical deal cemented in June 2017 MultiStrat Advisors worked with Hudson Structured Capital Management to close a transaction involving $35.3mn of workers’ compensation liabilities and a reinsurance vehicle in which Hudson invested $20.1mn in exchange for preferred shares.

Using similar casualty linked accounts, MultiStrat Re has helped hedge funds and family offices tap into the burgeoning ILS market. At the same time, it offers reinsurers cost-effective risk protection and capacity.

“We operate like an MGA,” Forness noted.

The company’s deals are backed by a panel of capacity providers, the members of which Forness declined to name. But he pointed out one recent transaction was completed with a hedge fund that has $16bn in assets under management.

The deals involved have ranged from $5mn to $100mn in size, in terms of annual premiums. Clients have included insurers and asset managers with insurance expertise and alternative capital investors seeking to enter the ILS market for the first time, Forness said.

MultiStrat has previously discussed enlarging the deals it puts together. In its MGA-like capacity, it cedes the risks involved while providing services that bridge the gap between reinsurance underwriters and investors.

In addition to working with specialty brokers, MultiStrat Re, Annapolis and MultiStrat Advisors focus on helping investors understand the risks and the reinsurance market generally, Forness said.

Multi-Strat has also used its Maryland-based Annapolis Consulting unit to work with clients to tap the legacy and run-off markets as sources of reinsurance risks, including through taking on discontinued books of business. The Annapolis group also provides due-diligence services on deals.

The accelerating flow of capital into the reinsurance market has helped fuel Multi-Strat’s growth, Forness said.

Including a 7 percent increase in the second quarter, alternative capital rose to $95bn this year, according an Aon Benfield report last week.

“We’re not a very complicated story after four years” in business, Forness said. To establish a new casualty linked account, he said the company looks for available niche risks that have the potential for replication and to produce adequate returns.

As an investment bank and advisor, Stonybrook previously helped Gramercy Risk Holdings raise $25mn in equity capital in its drive to become a construction risk carrier. The company also helped arrange a $30mn subordinated debt issue for Conifer Holdings last year.

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