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Nephila Capital, is building itself a more direct pipeline to access catastrophe risks with its recently established MGA, Velocity Risk Underwriters LLC, evidence of which can be seen in the firms plans to participate in a takeout of wind only policies from Florida Citizens in 2016. 5 billion of assets invested in catastrophe risk, weather risk and related insurance and reinsurance linked securities, has been following a strategy in recent years that sees it bringing its capital closer to the ultimate source of risk. With conditions in the reinsurance market challenging, with rates down and competition high, the business that typically gets shopped around at reinsurance renewals is becoming less attractive to investment managers that need to make their investors an adequate return. One way to reduce the reliance on the typical syndicated reinsurance renewal cycle is to go out and find ways to source risk more directly for yourself, something Nephila has become adept at doing. Of course it helps to be the largest player in the capital markets backed collateralised reinsurance space, making Nephila a meaningful player in the property catastrophe reinsurance market and also the largest single source of efficient ILS capital on the planet.
That opens doors and helps to build strong relationships that have helped Nephila as its strategy of getting closer to the risk has progressed. Now, with the build out of Velocity Risk Underwriters, Nephila Capital is looking to secure itself access to a pipeline of property catastrophe business, which it will not have to bid for or go up against the traditional reinsurance market to win a place on the renewal slip. Led by CEO Phil Bowie, a former Willis Re North America property casualty broker, Velocity Risk Underwriters is headquartered out of Nashville, Tennessee. Nephila Capital has been busy hiring a team of experienced professionals to get Velocity up and running, with the majority having experience in the agency, MGA, distribution areas of primary property and commercial insurance.
We understand that technology is going to play an important role for the MGA, with Nephila hoping that it can gain an edge over other MGA’s by developing its own advanced systems to help it manage risks. Other services such as claims management are set to be outsourced. We understand that Velocity is yet to enter into any deals, but that the MGA is working on participating in the early 2016 policy takeout from Florida’s Citizens Property Insurance. These takeouts can enable large amounts of catastrophe exposed property business to be taken from Citizens as a single transaction. We understand that in the case of the February 2016 takeout, Velocity Risk Underwriters will participate via State National Companies insurer National Specialty Insurance Company. That is likely the reinsurance agreement that will see the bulk of the property catastrophe risk reinsured back to Nephila vehicle Ananke Re, allowing it to then consume the risk into its range of reinsurance-linked investment funds. The takeout has been approved and could include as many as 17,534 wind-only Florida property insurance policies, we understand.