Enstar Group Limited (Enstar) is a global (re)insurance group that offers innovative capital release solutions through the company’s network of group companies.
The company acquires run-off and other (re)insurance reserves using retroactive reinsurance and other bespoke contracts.
Acquire New Business
Sourcing
The company leverages its industry relationships and its position as an experienced run-off specialist, together with the company’s footprint in the major (re)insurance hubs, to source...
Enstar Group Limited (Enstar) is a global (re)insurance group that offers innovative capital release solutions through the company’s network of group companies.
The company acquires run-off and other (re)insurance reserves using retroactive reinsurance and other bespoke contracts.
Acquire New Business
Sourcing
The company leverages its industry relationships and its position as an experienced run-off specialist, together with the company’s footprint in the major (re)insurance hubs, to source new business opportunities. The company engages directly with companies and/or their representative brokers to bid for and negotiate new transactions.
Solutions
The company develops solutions and products based on the needs of the company’s partners. In addition to providing finality to discontinued lines and earnings volatility protection or acquiring troubled businesses, the company helps its partners achieve their risk management, capital and strategic objectives. The company’s Run-off business offers a variety of capital release solutions, including but not limited to:
LPTs: The company offers LPTs in situations where its clients wish to divest themselves of a portfolio of insurance business. In such instances, the company is able to retroactively reinsure against deterioration of the portfolio of loss reserves, subject to any stipulated limits. In the Lloyd's market, the company provides similar solutions through reinsurance to close (‘RITC’) transactions.
ADCs: In situations where the company’s clients are concerned about loss deterioration on selected books of business, the company offers ADCs whereby the company reinsures certain losses in excess of its clients’ established reserves, up to a pre-determined limit.
FEOs: In situations where the company’s clients are third-party capital providers and desire finality on a collateralized reinsurance contract written via a sidecar or other fully collateralized vehicle, the company offers a Forward Exit Option (‘FEO’) solution whereby investors in such vehicles will have the option to transfer the reserve risk associated with their investment to the company. The solution provides finality and liquidity to these investors at a date in the future, thus allowing them to better manage their investment horizons. The company wrote its first Forward Exit Option contract in 2024. This is a new venture and not expected to be a material component of new business for some time.
Acquisitions: Where the company’s clients or potential clients want to dispose of a company in run-off, the company may purchase it. Such a transaction is beneficial to the seller because it enables them to monetize their investment in that company.
Manage Liabilities
Non-Life Run-off
There is a period over which the reserve liabilities associated with LPTs, ADCs, acquisitions and other similar transactions are extinguished, as described below:
At take-on: Upon integrating the LPT, ADC or company the company records its best estimate of the value of loss reserves. The company then implements its plan to manage the book and its exposures that the company gathered during the course of the acquisition process.
Subsequent to take-on: In the proceeding years, the company develops a deeper understanding of the claims portfolio from a reserving perspective and, where the company has been granted claims control, employ the company’s claims management strategies in order to generate RLE.
After applying the company’s claims management strategies for a period of time, there are generally reduced opportunities remaining to achieve RLE. At that point, the company’s intention is to continue to manage costs and generate investment returns as the company runs off the remaining reserves in an orderly manner.
Both the A&E losses and LAE and defendant A&E liabilities have much longer expected claims settlement periods than the company’s general casualty books of business, and therefore the period over which their reserve liabilities are extinguished tends to be significantly longer than other lines of business.
The strategies the company employs to manage its acquired companies and portfolios of business in run-off include:
Claims Management on Portfolios with Claims Control: Integral to the company’s success is its ability to analyze, administer, and settle claims while managing related expenses. The company works with seasoned and well-trained claims professionals, along with claims reporting and control procedures, in all of the company’s claims units. The company’s claims management processes on portfolios where the company has claims control also include leveraging its extensive relationships and developed protocols to manage outside counsel and other third parties more efficiently to reduce expenses.
For certain lines of business, the company has entered into agreements with third-party administrators to manage and pay claims on the company’s subsidiaries’ behalf and advise with respect to case reserves. These agreements generally set forth the duties of the third-party administrators, limits of authority, indemnification language designed for the company’s protection and various procedures relating to compliance with laws and regulations. The agreements clearly define the company’s claims handling guidelines, and the company provides extensive and active oversight by in-house subject matter claims experts in order to ensure the third-party administrators are operating in accordance with the company’s expectations.
Claims Oversight on Portfolios without Claims Control: On some of the more structured reinsurance transactions where claims control has been retained by the original cedants, the company has developed bespoke oversight, reporting and monitoring programs. These programs are specific to the individual transactions and involve utilizing the company’s in-house subject matter claims experts to work with the original cedants who can leverage the company’s expertise and experience. As the company has seen a shift towards more reinsurance transactions without claims control, the company’s oversight programs have given the company greater insights into the development of the risks that the company has assumed and have also added benefits to its cedants in giving them more access to the company’s expertise in claims management.
Commutations and Policy Buybacks: Where possible, the company negotiates with third-party (re)insureds to commute their (re)insurance agreements (sometimes called policy buybacks for direct insurance) for an agreed upon up-front payment by the company.
Commutations and policy buybacks provide the company with an opportunity to exit exposures to certain policies and (re)insureds generally at a discount to the ultimate liability. Commutations can reduce the duration, administrative burden and ultimately the future cost the company faces as the company manages the run-off of the claims and the amount of regulatory capital the company is required to maintain.
In certain lines of business and jurisdictions, such as direct workers’ compensation insurance, commutations and policy buyback opportunities are not typically available, and the company’s strategy with respect to these businesses is to derive value through efficient and effective claims management.
Reinsurance Recoverables: The company manages reinsurance recoverables by working with reinsurers, brokers and professional advisors to achieve fair and prompt payment of reinsured claims, and the company take appropriate legal action to secure recoverables when necessary. Where appropriate the company negotiate commutations with the company’s reinsurers by securing a lump sum settlement in complete satisfaction of the reinsurer’s past, present and future liability in respect of such claims.
Generating RLE: When the company has contractual claims management rights, the company’s strategy is to obtain claims resolutions and settlements on the actual and potentially valid claims within each portfolio quickly, where feasible, to avoid lengthy and continuing defense costs. When claims control has been retained by the cedant, the company develops oversight programs to monitor the business and provide the company’s partners with the opportunity to leverage its expertise and experience. The company includes the net development as a component of its performance, which the company refers to as RLE.
The company intends to generate positive RLE by drawing on in-house expertise and trusted third-party relationships to close claims efficiently, paying valid claims on a timely basis, and relying on policy terms and exclusions where applicable, and litigation when necessary, to defend against paying invalid claims.
Using detailed claims analysis and actuarial projections, the company seeks to negotiate with policyholders and reinsurers with an intention of settling existing (re)insurance liabilities and monetizing (re)insurance assets in a cost efficient manner.
Seasonality
The company completes most of its loss reserve studies in the fourth quarter of each year (year ended December 2024), and as a result, the company tends to record the largest movements, both favorable or adverse, to net incurred losses and LAE in these periods. However, the company also monitors the progression of claims and claims settlements in the earlier interim periods and may adjust the company’s reserves if, and when, the company deems it appropriate.
Manage Investments
The company manages its investments to obtain attractive risk-adjusted returns while maintaining prudent diversification of assets and operating within the constraints of a regulated global (re)insurance group. The company also considers the liquidity requirements and duration of its claims and contract liabilities.
The company has a group-wide investment policy and group mandate, which applies to the company’s consolidated investment portfolio and all subsidiary cash and investment portfolios.
The company’s investment policy outlines the company’s investment objectives and constraints; prescribes permitted asset class limits and strategies; establishes risk tolerance limits; and establishes appropriate governance.
The company’s investment policy also includes constraints that impact the company’s asset allocation and external asset manager selection.
In pursuing the company’s investment objectives, the company typically allocates to asset classes with varying risk-return profiles that fall into two classifications: core assets and non-core assets.
The company’s core assets, or fixed income assets, include short-term and fixed maturities classified as trading and available-for-sale (‘AFS’), funds held and cash and cash equivalents. Under funds held arrangements, the reinsured company has retained consideration that would otherwise have been remitted to the company. The funds held balance is credited with investment income and is used to offset settlement of paid losses. Funds held arrangements where the company receives the underlying portfolio economics and the contractual right to direct the asset allocation strategies are referred by the company as ‘Funds held - directly managed’. Funds held arrangements where the company receives a fixed crediting rate or other contractually agreed return are referred by the company as ‘Funds held by reinsured companies’.
The company’s non-core assets, or other investments, include equities, equity method investments, hedge funds, fixed income funds, private equity funds, private credit funds, equity funds, collateralized loan obligation (‘CLO’) equity funds, CLO equities, and real estate funds.
Core Asset Strategy: The company’s core assets investment portfolio is predominantly invested in investment grade fixed income securities that are duration and currency optimized and matched against the expected payment of loss reserves in accordance with the company’s contractual obligations with its counterparty insurers and as prescribed in statutory liquidity and solvency regulations. The company’s intention with these securities is to meet the expected maturity to support prompt payment of the claims, whilst maximizing investment income.
The company’s fixed income assets include the U.S. government and agency investments, highly rated sovereign and supranational investments, high-grade corporate investments, as well as mortgage-backed and asset-backed investments.
Non-Core Asset Strategy: The company’s intention with its non-core assets investment portfolio is to provide diversification and increased return. The company’s non-core assets typically include below-investment grade fixed income securities and bank loans, public equity securities, hedge funds, private equity funds, fixed income funds, CLO equities, real estate funds, private credit funds and equity method investments.
Segments
Effective January 1, 2024, the company’s business is organized into two reportable segments: (i) Run-off and (ii) Investments. The company’s previous Assumed Life and Legacy Underwriting reportable segments were determined to no longer meet the definition of reportable segments as they no longer engage in any active business activities following the series of commutation and novation transactions in Enhanzed Reinsurance, Ltd. (‘Enhanzed Re’) and the settlement of the arrangements between SGL No 1. and Arden and Atrium.
The Run-off segment consists of the company’s acquired property and casualty and other (re)insurance business, while the Investments segment consists of the company’s investment activities and the performance of the company’s investment portfolio.
The former Assumed Life segment consisted of life and catastrophe business that the company assumed via the 2022 acquisition of the controlling interest in Enhanzed Re, while the former Legacy Underwriting segment consisted of businesses that the company exited via the sale of the majority of the company’s interest.
In addition, the company’s Corporate and Other activities, which do not qualify as an operating segment, include income and expense items that are not directly attributable to the company’s reportable segments.
Major Operating Subsidiaries
The company’s (re)insurance business is regulated and requires licenses to operate in each relevant jurisdiction.
Regulation
The Bermuda Monetary Authority (BMA) acts as group supervisor of the company. The company's Australian regulated insurance entity is subject to prudential supervision by the Australian Prudential Regulation Authority (APRA).
The company has subsidiaries in Belgium, as well as StarStone Insurance SE, a Liechtenstein-based company that is regulated by the Financial Markets Authority. Its subsidiaries and branches in European jurisdictions are regulated in their respective home countries. The application of the Solvency II framework across such European jurisdictions generally results in a more uniform approach to regulation.
To the extent that the ESA applies to its entities registered in Bermuda, the company is required to demonstrate compliance with economic substance requirements by filing an annual economic substance declaration with the Registrar of Companies in Bermuda.
The company's U.K. based insurance subsidiaries are regulated by the U.K. Prudential Regulatory Authority (the PRA) and the Financial Conduct Authority (the FCA, together with the PRA, the U.K. Regulator). The company's non-Lloyd's U.K. companies use the standard formula for determining compliance with the Solvency Capital Requirement (SCR).
The company's U.K.-based insurance subsidiaries consist of wholly-owned run-off companies. These subsidiaries are authorized and regulated by the U.K. Prudential Regulation Authority (the PRA) and is also regulated by the Financial Conduct Authority (the FCA, together with the PRA, the U.K. Regulator). The U.K. Regulator's rules require the company's U.K. insurance subsidiaries to obtain regulatory approval for any proposed or actual payment of a dividend. The U.K. Regulator uses the SCR, among other tests, when assessing requests to make distributions.
The company has subsidiaries in Belgium, as well as StarStone Insurance SE (SISE), a Liechtenstein-based company that is regulated by the Financial Markets Authority.
History
The company was founded in 1993. It was incorporated in 2001. The company was formerly known as Castlewood Holdings Limited and changed its name to Enstar Group Limited in 2007.
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