Published on 7 Dec 2023 on Zacks via Yahoo Finance

Reinsurance Group (RGA) Expands Capacity With Launch of Ruby Re

Reinsurance Group of America, Incorporated RGA recently announced the launch of a third-party life reinsurance sidecar, Ruby Reinsurance Company (“Ruby Re”), domiciled in Missouri. It has completed the first round of funding and secured capital commitments in the form of equity from major investors like Sammons Financial Group, Golub Capital, and Hudson Structured Capital Management Ltd.

Ruby Re will be established as a non-market-facing sidecar, which would reinsure the portfolio of the sponsor, RGA, through a quota share arrangement and not deal with clients directly. RGA will retrocede $2.5 billion of current liabilities to Ruby Re and transfer a portion of premiums to compensate for the risk taken. This will reduce the dollar amount of risk shown in RGA’s accounts.

The aim of a reinsurance sidecar is to spread the underwriting risk assumed by its sponsor and provide additional reinsurance capacity when the market is constrained. RGA could have reinsured itself by ceding premiums to a reinsurance company. However, another alternative is to form a financial entity and solicit private investment at comparatively lower costs. Investors in the sidecar gain from premiums earned and the ability to enter the reinsurance market for a limited time in favorable market conditions.