Lancashire sets up $250M catastrophe reinsurance sidecar

HAMILTON, Bermuda—Specialty insurer and reinsurer Lancashire Holdings Ltd. said Friday that it has established a sidecar, Accordion Reinsurance Ltd., to provide up to $250 million in additional capacity.

Accordion will reinsure worldwide property retrocession business of Hamilton, Bermuda-based Lancashire’s subsidiary, Lancashire Insurance Co. Ltd., and share losses based on a proportional basis. The $250 million, including $50 million from LICIL and the rest from unidentified investors, will be deployed on a draw down basis once attractive business materializes, Lancashire said in a statement.

Extensive catastrophe losses in 2010 and 2011 plus Risk Management Solutions Inc.’s new U.S. hurricane model have reduced capacity for retrocessional property coverage while increasing demand, Lancashire CEO Richard Brindle said in the statement.

“Lancashire is well-positioned to take advantage of these developing underwriting opportunities, particularly in the event of an active U.S. storm season,” he said.

In another recent similar move, Bermuda-based reinsurer Alterra Capital Holdings Ltd. and Greenwich, Conn.-based private equity firm Stone Point Capital L.L.C. said they had put up to $200 million toward a sidecar, New Point IV, that also provides retrocessional property catastrophe coverage.