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Insider View: Kelso backs Premia Re

When news broke last year that Bill O'Farrell and Arch were working together on a run-off start-up, it was speculated that the vehicle would be a Watford Re for the legacy sector, another iteration of the total return reinsurer model that was about to add Enstar's Kayla Re to its ranks.

The thesis seemed to have been strengthened when it emerged that Premia Re's majority backer would be Kelso & Co, the private equity firm that previously invested in hedge fund reinsurer Third Point Re.

But it has become clear that Premia Re does not fit that particular mould. Sources have instead described its investment strategy as closer to that of a traditional reinsurer, rather than the total return model of pursuing outsized returns on the asset side.

And despite a strategic relationship with Arch, the (re)insurer will not control Premia Re's underwriting process, in contrast to its tie-up with Watford Re.

Some have suggested the start-up will have a tougher task matching the kind of returns private equity typically demands because it won't be able to apply an aggressive investment strategy to the float it builds.

Private equity is no stranger to the run-off space, however, with Enstar counting on backing from JC Flowers and Stone Point as it has grown to reach the dominant position it now shares with Catalina in the middle-market segment.

Premia Re will also be able to leverage reinsurance support from Arch when looking at bigger deals, and its ability to combine live and legacy portfolios in transactions puts it on a level playing field with Enstar.

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