Enstar Group‘s subsidiary, Cavello Bay Reinsurance (Cavello Bay), has entered into an ADC reinsurance agreement with certain subsidiaries of James River Group Holdings.
This agreement is set to provide $75m of limit in excess of the existing $160m ADC reinsurance coverage provided earlier this year by State National Insurance Company.
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The transaction aims to offer further protection against future adverse reserve development for certain US casualty exposures within James River’s Excess & Surplus (E&S) Lines segment, covering accident years from 2010 to 2023.
In addition to the reinsurance coverage, Cavello Bay will invest in James River by purchasing $12.5m of newly issued common shares at a price of $6.40 per share.
This investment adds to the 637,640 common shares Cavello Bay already owns through open market purchases.
Enstar chief strategy officer David Ni said: “We are pleased to work with James River on a bespoke solution that further de-risks their balance sheet and provides equity capital to take advantage of the robust E&S market.”
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By GlobalDataMoreover, Enstar will establish an informal consulting relationship with James River, engaging in a best practices dialogue with the latter’s claims leadership.
This collaboration forms part of James River’s strategic actions, which were announced alongside its third-quarter 2024 results.
During this period, James River reported a net loss from continuing operations available to common shareholders of $40.7m.
Bermuda-based James River’s strategic actions also include reducing quarterly dividends and plans to redomicile to the US in 2025, aiming to align its effective tax rate more closely with the US statutory rate.
In a separate development, last week, Enstar disclosed that its shareholders had approved the proposed acquisition by Sixth Street, supported by Liberty Strategic Capital, JC Flowers & Co, and other institutional investors.
The acquisition, announced in July 2024, values Enstar at $5.1bn, with shareholders set to receive $338 in cash for each ordinary share they hold upon the deal’s closure.
