Industry Updates
New Company Buzzes In
Hudson Structured Capital Management creates new special purpose insurer—Bumblebee Re.
Edouard von
Herberstein
Edouard von Herberstein, chief executive officer for Bumblebee Re and chief underwriting officer for Hudson Structured Capital Management, said the new special purpose insurer is transforming reinsurance risk by creating a system of collateralized cells.
Following is an edited transcript of the interview.
Can you tell us about your new insurer, Bumblebee Re?
We have been transforming reinsurance contracts for about four years now, since we started Hudson, using Offshore Re license.
We also have a team in Bermuda, and we've been ramping up not just the deal count and the number of contracts that we transform, but also broadening the variety of lines of business we transform through the Offshore Re license.
As that has grown in size and deal count, it became interesting and worth exploring having our own license to increase the control that we have on the transforming of those contracts.
We think that, over time, this will probably save some cost for investors as well as we are doing some of that transforming and servicing in-house.
What types of contracts are you transforming?
We are transforming many of what other ILS [insurance-linked securities] funds would transform as well, starting with property reinsurance and property retrocession, catastrophe, natural disaster-focused contracts.
We have a mandate that's very broad, so we have transformed deals not just across natural disaster risk transactions, but also in the casualty space, in the specialty space. In casualty, we've transformed cyber insurance contracts and reinsurance contracts.
We've transformed auto contracts, personal auto and commercial auto, and in specialty lines we have been active in the marine and energy space as well. We are in the process of transforming a financial guarantee product at the moment.
The license itself is not that flexible. It's a very basic, unrestricted special purpose insurer, which allows us to create cells that will effectively allow us to segregate investments to that specific contract for investors.
It has to be fully collateralized. We are not allowed to hedge or reduce our liability through hedging and reinsuring that risk. It's a fairly simple construct. It has some fairly strict constraints in terms of what we can and cannot do.
Does the segregated cell idea tie into the name, Bumblebee Re?
We ran a questionnaire with the team, and we asked people to provide suggestions. Two of our younger employees suggested Bumblebee, because Bumblebee is a Transformer in the movie. That was No. 1.
Then quickly we realized that maybe using a Bumblebee was also a good analogy to those honeycomb cells that honeybees, but also bumblebees, use to store the nectar and make honey. To replace honey with cash, that works quite well.
I think Bumble is a dating app, and we like to think that we can date a lot of insurance companies and reinsurers around the world, and have dating relationships across a wide variety of cedents.
Is demand for collateralized reinsurance growing in the market today?
Because our mandate is very broad, what we are seeing is we get requests and opportunities that are initially defined for the traditional reinsurance market or insurance market. Often, because the traditional market doesn't provide the capacity for such risk of some specific structures, if we can, we'll find a way to use our mandate and our collateralized products and capacity to support, to take on that risk.
It doesn't come to us as a collateralized reinsurance product request. It comes in the form of a traditional product request. Because we don't have a rated balance sheet, we effectively guide the brokers and the clients to all the collateralized reinsurance solutions.
