Sector developments and company hires

ILS

Rewire Holdings and Vida Capital have announced the formation of Merion Square Capital, a joint venture which combines the two companies. The asset manager has established an open-ended fund structure which will primarily invest in ILS with an emphasis on property and casualty insurance, as well as annuities and mortality-related products. Merion Square will be led and managed by the Rewire managing principals: Stefano Sola, Richard Pennay and Markus Schmutz. Sola was previously a member of the board of directors and trustees at Pure Life Renal before joining Rewire, whereas Pennay was a director at Swiss Re Capital Markets and Schmutz was md at the same company.

RenaissanceRe and PGGM have announced the creation of Vermeer Reinsurance to provide capacity focused on risk remote layers in the US property catastrophe market. Vermeer will be initially capitalised with US$600m of equity from PGGM, with up to a further US$400m available to pursue growth opportunities in 2019, for a total of US$1bn of capital. The company has received a single-A financial strength rating from A.M. Best and has obtained approval in principle to be licensed and regulated by the Bermuda Monetary Authority as a class 3B reinsurer. Vermeer will be managed by Renaissance Underwriting Managers, and is expected to be consolidated into RenaissanceRe’s financial statements. PGGM is the sole investor in Vermeer.

Digital SME securitisation partnership

German digital SME lender creditshelf has partnered with CrossLend to offer the first digital securitisation of SME loans in Germany. CrossLend will act as an investor on the creditshelf platform and purchase loan receivables as part of its regular lending processes. CrossLend will then securitise the loan receivables and offer them in the form of a new product to a broad base of additional investors via its own channels. Initially, one institutional investor will invest a mid-single-digit million euro amount each month in creditshelf's new business via CrossLend. The transaction is processed via CrossLend's digital securitisation platform and there are other institutional investors in the pipeline that are set to invest in SME loans via the solution.

Multi-tranche CIRT debuts

Fannie Mae has completed its first multi-tranche Credit Insurance Risk Transfer (CIRT) transaction, covering a pool of approximately US$10.9bn of existing multifamily loans in the company's portfolio. The deal, CIRT 2018-M02, transferred US$273m of risk to nine reinsurers and insurers. The covered loan pool for the transaction consists of 1,085 loans, secured by 1,091 multifamily properties, acquired by Fannie Mae from February 2018 through June 2018. The GSE will retain risk on the first 150bp of losses, while the A tranche will transfer risk to reinsurers covering the next 150bp-300bp of losses and the B tranche will transfer risk to reinsurers covering the next 300bp-400bp of losses on the reference pool. Finally, once the pool has experienced 400bp of losses, the credit protection will be exhausted and Fannie Mae will be responsible for any further losses.

Stock purchase agreement

KCAP Financial has agreed a stock purchase and transaction with BC Partners Advisors whereby an affiliate of BC Partners will become the external manager of KCAP. Under the terms of the agreement stockholders will receive a direct cash payment from an affiliate of BC Partners of US$25m.