Hyperion X, the technology and analytics division of Hyperion Insurance Group, has partnered with Vario Partners LLP to launch a collateralised whole-account reinsurance offering backed by insurance-linked securities (ILS).

Both firms state that during this period of uncertainty, underpinned by financial market turmoil, economic recession, and increased credit risk, demand for less exposed, non-cyclical solutions is rising.

It has been suggested the product has come to the market in good timing with the current uncertainty and challenges faced by (re)insurers due to the ongoing coronavirus pandemic, noted issues in the U.S. casualty space and the impacts of heavy catastrophe loss years.

With the backing of Hyperion X’s analytics, Vario Partners’ unique approach to combined, multi-year stop-loss reinsurance will be deployed in the provision of scalable, investor-backed capacity, they both explain.

An announcement on the new whole account cover states that carrier financing costs are on the rise while retrocession rates are elevated. In this operating landscape, the pair mentioned that whole account risk transfer insurance-linked securities (ILS) are an attractive contingent capital alternative.

Founding Partner of Vario Partners, Bryan Joseph, commented: “Whole account risk transfer insurance linked securities meet the needs of insurers and reinsurers seeking to reduce underwriting and credit concentration risks. We believe that including a layer of contingent capital in a reinsurance structure provides companies with enhanced shareholder returns and protection in those years when an accumulation of events and reserve development can impair shareholder value.”

Elliot Richardson, chairman of RKH Reinsurance Brokers, Hyperion X’s sister firm, said: “This important collaboration makes new capacity available at a time when reinsurance and retrocession cover, particularly whole account stop-loss, is at or near all-time lows.”

David Flandro, managing director, Hyperion X Analytics, added: “This structure uniquely benefits earnings volatility and balance sheet strength at a time when retrocession rates-on- line have increased, and carrier financing costs are rising sharply. We are bringing this to market now to give (re)insurers access to a new source of stable, competitive capacity during this volatile period which enhances balance sheet strength for future profitable growth.”