September 12th, 2017

New Vehicle Matches the Right Capital to Risk - GC@MC Commentary

Posted at 3:30 AM ET


David Priebe, Vice Chairman, and Brendan Roche, Global Leader - ILS and SPV Management Services, Marsh Captive Solutions


  • A new Marsh & McLennan vehicle provides unparalleled support in accessing long-term capital markets-based protection
  • A broader and more diverse range of capital sources brings better matching, more efficient solutions customized to the unique risk profile of clients
  • Provides a standardized documentation process and single point of access, in an efficient and cost-effective manner

Corporations and governments accessing long-term capital markets-based protection can now receive unparalleled support and expertise that bring the right capital to their risks through the unique strengths and synergies of a new vehicle, relates David Priebe, Vice Chairman, Guy Carpenter.

“Marsh & McLennan Companies, through GC Securities* and Marsh Captive Solutions, has brought to market Cerulean Re SAC Ltd. (Cerulean) - a Bermuda registered segregated account company (SAC) and licensed special purpose insurer,” Priebe says. “The new enterprise provides an efficient and cost-effective placement process for collateralized reinsurance and private catastrophe bond deals that affords opportunities for entrée to new markets and relationships with investors. It helps new capital, entering the protection market and seeking non-correlated investments, to find the right risks.”

He continues, “Using industry-leading ILS arranger GC Securities (as arranger) and Marsh Captive Solutions (as insurance manager to Cerulean) to work in tandem, clients will seamlessly and efficiently achieve standardized transaction documentation (with ability to bundle investor participation to streamline such documentation volume) in a continuous process that extends the traditional (re)insurance implementation process within Marsh & McLennan and reduce reliance upon external parties.”

“With the wide range of the combined Guy Carpenter/GC Securities and Marsh networks, Marsh & McLennan is able to bring unmatched group expertise to the placement process,” adds Brendan Roche, Global Leader - ILS and SPV Management Services, Marsh Captive Solutions. “Our advanced technologies and predictive analytics capabilities help clients understand and minimize risk and price accurately, ultimately providing competitive advantage. A wide range of trigger types is available to our clients through Cerulean: indemnity, industry index and parametric. These provide a superior method of acquiring the correct type and level of coverage.”

Marsh Captive Solutions’ participation also provides an opportunity to introduce elements of corporate risk to insurance-linked securities (ILS) transactions. Roche continues. “As the largest global captive manager (1), our client base is already accessing the reinsurance markets and we have seen our clients use their captives to transfer risk through ILS structures, some of whom have used Guy Carpenter-developed trigger mechanisms.”

The ILS solution delivered by Cerulean includes additional features:

  • The collateral held in trust is invested in appropriate assets (thus eliminating credit risk) and pledged to the benefit of the client in order to comply with credit-for-reinsurance requirements.
  • Documented post-event collateral retention mechanism for claims development to ensure a transparent and efficient claims development and collateral release process.
  • A straightforward single firm execution process for clients - from risk identification to risk placement and execution.

Priebe mentions that Cerulean utilizes a proven reinsurance mechanism in the ILS sector - the SAC - which allows development to concentrate on better risk solutions, rather than how they are delivered. “Tapping new sources of capital, it brings a broader and more diverse range of capital sources, better matching more efficient solutions customized to the unique risk profile of clients. Government entities and pools are likely to benefit from these solutions as they help close the protection gap and move the catastrophe burden away from the public sector to the private sector. Additionally, we expect that the expanded range of capital sources will facilitate new opportunities for capital markets-based protection around emerging risks, such as cyber and the ‘Internet of Things.’”

ILS is an established and permanent part of the reinsurance and capital markets and its participation is not wholly dependent on the (re)insurance cycle. “It is here to stay,” Priebe says. “In addition to its role in serving uninsured and underinsured risk, we see Cerulean as an important new vehicle for attaining capital market-based protection for clients and to expand the range of solutions that Marsh & McLennan affords its clients. We are excited about its launch.”

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1. Business Insurance: Special Report - 2017 Captives Report, “Top 10 Captive Managers,” March, 2017.

*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities LLC, a US registered broker-dealer and member FINRA/NFA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, main office 25 The North Colonnade, Canary Wharf, London E14 5HS. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities LLC, MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.

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