Structured Reinsurance

Matrix Global extends its structuring expertise beyond the corporate world to the insurance market itself. We serve as a strategic partner to Reinsurers, Captives, and Lloyd’s Syndicates, providing Structured Reinsurance solutions that optimize balance sheets, manage volatility, and release trapped capital.

Whether you are a Captive looking to repatriate surplus capital to your parent company, or a Commercial Insurer seeking to exit a line of business, our retrospective and prospective solutions provide the financial engineering required to achieve finality and efficiency.

Retrospective Solutions (Legacy Liabilities)

Managing “back book” liabilities is critical for maintaining a healthy Return on Equity (ROE).

• Loss Portfolio Transfer (LPT):
  • The Mechanics: An insurer transfers the reserves for a portfolio of past claims (e.g., old Workers’ Comp or Asbestos claims) to a reinsurer.
  • The Benefit: This removes the liability from the balance sheet immediately, often generating an immediate gain if the portfolio is transferred for less than the booked reserves. It provides distinct “economic finality.”
• Adverse Development Cover (ADC):
  • The Mechanics: The insurer keeps the known reserves but buys protection against them deteriorating further. If claims inflation pushes losses higher than expected, the ADC pays the difference.
  • The Benefit: Caps the downside risk on volatile long-tail lines, stabilizing earnings for shareholders and rating agencies.

Prospective Solutions (Capital Relief)

For insurers looking to grow or manage Solvency II ratios.

• Solvency Optimization Quota Share:
  • Scenario: A rapidly growing insurer is straining its capital ratios because its premium volume is rising faster than its equity base.
  • The Matrix Solution: A structured Quota Share treaty where the reinsurer assumes a percentage of the risk (and premium) in exchange for a “Ceding Commission.” This effectively rents the reinsurer’s balance sheet, boosting the insurer’s solvency ratio immediately.
• Captive Capital Release:
  • Scenario: A corporate captive has built up significant surplus capital over years of benign claims, but the parent company cannot access it easily.
  • The Matrix Solution: We structure a reinsurance transaction that effectively “buys out” the captive’s risk, allowing the captive to declare a special dividend and return cash to the parent company.

Why Matrix?

• Actuarial & Financial Expertise: Our team speaks the language of CFOs and Chief Actuaries. We understand the interplay between GAAP/IFRS accounting, Solvency II/RBC capital models, and reinsurance structures.
• Legacy Market Access: We have deep relationships with the specialized “Run-off” market—acquirers who specialize in taking over discontinued books of business.
• Tailored Structuring: No two balance sheets are the same. We design attachment points, limits, and collateral structures (Funds Withheld, Trust Accounts) to meet specific regulatory needs.

Frequently Asked Questions (FAQ)

What is the difference between an LPT and a Commutation?
A commutation is a negotiation to terminate a specific reinsurance treaty. An LPT is a broader transfer of an entire book of business (direct insurance liabilities) to a new carrier.

Can you help with M&A due diligence?
Yes. When a company is being acquired, its “long-tail” insurance liabilities can be a deal-breaker. We can structure a wrapper that ring-fences these liabilities, allowing the M&A transaction to proceed with a “clean” balance sheet.

Do you work with Lloyd’s Syndicates?
Yes, we provide Reinsurance to Close (RITC) solutions and other capital relief structures specifically for the Lloyd’s market.