AmTrust inks major quota share deal with Everest Re

AmTrust has struck a deal with Everest Re to reinsure a significant share of its $700mn book of program business, The Insurance Insider understands.

Sources told this publication that the Bermuda-domiciled reinsurer had agreed to write a 35 percent share of the business, which has historically had some performance issues.

The ceding commission for the major deal is not known.

AmTrust has scaled back the book dramatically over the last couple of years, almost halving it from a peak of $1.3bn as it dropped underperforming programs.

In Q3 2017, the company posted $120mn of adverse development in its specialty programs lines of business, primarily from programs relating to long-tail lines that had already been terminated.

Accident years 2012 through 2016 loss ratios averaged at 78.9 percent for the division.

With the circa 40 percent Maiden quota share in-force the new proportional deal leaves AmTrust with only a relatively small net position on its program business, and it is understood that it is looking to transition this part of its business to something more akin to a fronting operation.

AmTrust’s decision to approach the commercial reinsurance market for the deal – which was also offered to other reinsurers – may also provide some clues as to its future reinsurance buying strategy.

AmTrust and sister company Maiden Holdings took a decision in August to push back by three months the decision of whether to continue with the giant quota share, extending the deadline to 31 January from 30 September.

This was to give AmTrust time to close its take-private with Stone Point, and to decide on its future reinsurance needs.

Establishing a major relationship with a commercial reinsurer like Everest Re may indicate that AmTrust will lean more heavily on the commercial market going forward, or at least suggest that it wants to explore that market’s appetite for AmTrust’s business.

The inception date of the deal is not known but is believed to be the second or third quarter of this year.

In the second quarter, Everest Re top line growth in US reinsurance grew by 37.3 percent year-on-year to $652mn.

It is likely but not certain that Everest would book the revenue up front on a written basis on a big proportional deal.

AmTrust declined to comment. Everest Re did not respond to a request for comment.