Apollo's newly minted Acra Re nears first deal

Apollo’s new Bermudian reinsurance vehicle Acra Re looks set to conclude its maiden deal by the end of the month.

As previously reported, legacy acquirer Catalina is close to finalising a deal to take on Zurich’s £1.6bn ($2.1bn) UK employers’ liability back book.

It is understood that Acra Re is set to co-invest in the Zurich deal alongside Apollo-backed Catalina.

The $250bn alternative investment manager based in New York quietly registered the vehicle in Bermuda in August.

With no announcement of the formation of the business, no rating, no $1bn balance sheet and no full-time executive team, Acra Re defies the received wisdom about what is required to get a successful reinsurance entity off the ground.

As such, the creation of the vehicle has gone largely unremarked, with Acra Re not a subject of discussion at Monte Carlo despite the current focus on Apollo in the wake of its $2.6bn agreed acquisition of Bermudian carrier Aspen.

Nevertheless, the Class 3A reinsurer is said to be a strategic exercise for Apollo and could become a crucial part of the Bermuda market over time, as it continues to evolve away from the traditional quoted balance sheet plays of the past.

The starter deal may come in the form of a co-investment with Apollo’s legacy carrier Catalina, but sources have suggested the alternative asset manager has already begun the hunt for other major transactions to feed the vehicle.

Acra Re will look to transact big one-off deals as a means of gathering liabilities without building a meaningful cost base, with both P&C and life likely to be targeted.

It is believed the vehicle will look to strike deals with companies in the Apollo ecosystem, as well as investing alongside them, with Aspen a potential candidate for such a transaction.

Apollo has tended to embrace a total return model with its other insurance assets like Athene and before that Brit, and it seems likely to continue this approach with Acra Re.

Sources have suggested that Apollo will look to rapidly build the asset base of Acra Re, with one pointing to Athene’s growth trajectory as a precursor.

The asset manager has a track record of delivering fast growth, with life consolidator Athene Holdings growing from a standing start to around $100bn of investable assets in roughly 10 years.

It is further understood that Acra will employ a funds-managed structure, deploying third-party money into a variety of deals offering investors different projected return hurdles and risk tolerances.

As such, the equity base of the company could remain small over time, even as the firm grows, with the business more akin to asset managers Nephila and Aeolus than Arch and RenaissanceRe.