Prime Insurance Company CEO Rick J. Lindsey is in the early stages of raising capital to fund a new reinsurer to support the writings of the company he leads as well as select third-party businesses, the executive has told The Insurer.
Speaking during the Wholesale & Specialty Insurance Association’s annual conference in San Diego, Lindsey said he was looking at forming a new reinsurer supported by external capital and his own funds.
“I want it to be substantial,” Lindsey said.
“It depends on how much interest I can gain, but it’s got to be at least a couple hundred million dollars. And then I would just reinsure our own business, and I would obviously look at offering other people reinsurance support if I felt comfortable with what they were doing and we could partner together,” Lindsey explained.
Lindsey said he first started discussing the possible reinsurer formation some six months ago.
Lindsey joined AM Best A rated excess and surplus lines carrier Prime in 1996 when his business merged with the Sandy, Utah-headquartered carrier. The business has grown considerably in recent years, and currently generates some $400mn in gross premiums annually.
The executive said forming a new reinsurer would give Prime greater flexibility to expand its operations further as well as increase the amount of capacity it can deploy on deals.
Referencing Prime’s current reinsurance program, Lindsey said there is little appetite to write deals above $20mn.
“I see risks that if I had [the capacity] I would already be doing. Instead, I have to offer some other alternative way of doing it,” Lindsey said.
“Rather than complain about it, my answer is to form a reinsurance company,” the executive stated.
“My plan isn’t to grow [the reinsurer] and for it to become billions of dollars. We’re going to preserve our capital, and when and if opportunities present themselves, I don’t want to be limited.I want to be able to go to $40mn [on deals].”
As Lindsey explained, the planned reinsurer will be supported by a separate pool of capital from prime and staffed by different people. The capital raised would include funds he himself would put in.
Lindsey would also want claims to be managed in-house rather than engage a third-party service provider. Having control of the claims, Lindsey said, would be critical.
“It doesn’t matter if you’ve got the wrong price or the right price on the business. It’s managing the claim where you can have the biggest impact,” Lindsey stated.
