Coalition in talks to launch new cyber reinsurance MGA, targeting 1.1 launch

Cyber insurtech Coalition is in talks to secure capacity for a new cyber reinsurance MGA to write unaffiliated, third-party treaty business, in the Joshua Motta-led firm’s latest prominent step to establish a diversified portfolio, The Insurer can reveal.

Sources suggest the new vehicle would look to write the full spectrum of cyber reinsurance products – including quota share, excess of loss and aggregate stop loss – for a range of clients that would span local, regional and global carriers.

Sources also said the insurtech is close to have capacity arrangements in place and is targeting a 1 January launch.

The move follows the roll-out of Coalition’s open-source cyber risk modelling tool in February 2022. The model simulates how a singular cyber risk event can trigger a chain reaction resulting in substantial economic losses, and includes an illustration of the potential for a nearly $30bn insured aggregated cyber loss event.

Coalition collaborated with academia on the systemic risk modelling tool, which the firm’s head of insurance Shawn Ram alluded to in a recent interview with The Insurer.

“We think there's a misunderstanding around systemic risk and cyber, which has a significant impact on reinsurance, on capacity, on pricing,” Ram told this publication last month.

“And so I think that was a pretty meaningful step that we took in February,” he said, describing the modelling tool, as well as Coalition’s ambitions to be a thought leader in the cyber segment.

In a sector where (re)insurance appetite has tightened, the move by Coalition is likely to be welcomed by cedants as a new source of capacity.

With threat activity approaching all-time highs following a recent resurgence, many market participants are predicting a rehardening of cyber market conditions, which is expected to become much more tangible as upcoming cyber treaty renewals play out.

Coalition recruited Swiss Re’s former global head of cyber John Coletti in May, and it is understood that the executive has been intimately involved in getting the new cyber reinsurance MGA off the ground.

The move by Coalition to launch a reinsurance MGA would mark the firm’s first foray into writing cyber on a portfolio basis, expanding beyond its retail-oriented roots, and would mark the latest step in its innovative approach to the cyber business.

Coalition’s co-founder and CEO Motta had previously signalled his firm’s ambitions to play a role in reinsurance in an interview with The Insurer a year ago, where he spoke admiringly about RenaissanceRe’s history in the catastrophe reinsurance market.

Motta noted that RenRe was launched to better leverage technology in modelling cat risk to make the point that there is room for more cyber reinsurers to come into the market, in addition to managing third-party capital through sidecars.

“Everything is on the table,” Motta told The Insurer last year. “We already are starting to take risk, and so we are no longer just another cyber MGA – and that’s been the case for a long while.”

Similar to existing major (re)insurance industry players that currently write both insurance and reinsurance – most notably at Bermuda-based firms like Everest, Arch, Axis, Vantage, Convex and Axa XL, among others – Coalition’s reinsurance operations are expected to be independently staffed and operate with a ‘Chinese wall’ in place.

In addition to writing business through capacity partnerships as an MGA, the company pivoted to a full-stack model when it launched A- rated Coalition Insurance Company earlier this year, a move it described as “a major milestone” and said was a “validation” of its past success.

Last year Coalition launched Bermuda-based reinsurer Ferian Re in conjunction with BDT Capital Partners, a vehicle that assumes some Coalition business. The insurtech also struck a multi-year capacity deal with Allianz covering programs in the US and the UK.

In late 2021 it launched a captive as an additional source of capacity, and has capacity deals in place with Vantage, Arch, Ascot, Fortegra, Swiss Re Corporate Solutions and Zurich.

The company announced last July it had raised $250mn in a Series C funding round that valued the firm at $5bn.

Among Ram’s other comments in his interview, he said that Coalition doesn’t “have any pressure” to go public, as he noted that market conditions haven’t been great for IPOs, but that the business is keeping an eye on how second-half IPOs take shape for some firms outside the industry.

Coalition could look to raise additional capital if it wanted to support more of its risk-taking operations, but Ram said the insurtech has no pressure to do so.

“We don't have any pressure to go public. We'll make the decision when it's right for the company,” he explained.

The potential launch of Coalition’s new reinsurance MGA comes as The Insurer revealed yesterday that Envelop Risk will collaborate with Lloyd’s insurer Apollo to set up a 1.1.24 cyber reinsurance special purpose arrangement.

A spokesperson for Coalition declined to comment.