R&Q, the non-life insurance and reinsurance legacy, run-off and program management specialist, has completed a new legacy acquisition deal, with the reserves assumed set to further build-out its Gibson Re sidecar vehicle.Gibson Re, R&Q’s legacy insurance focused collateralised reinsurance sidecar, takes 80% of the reserves from any legacy transactions completed by the company, with R&Q retaining 20% for alignment purposes.It’s part of a strategy to shift the legacy and run-off assumption side of the R&Q business to one more driven by fee income, by leveraging investor capital within the sidecar to enable the company to do more and larger deals., with $300 million of investor capital raised to support a significant percentage of R&Q’s legacy portfolio.

R&Q said at the time that the introduction of the reinsurance sidecar would simplify its legacy insurance and reinsurance business model.It does this by lowering the capital required from R&Q’s own balance-sheet to enter into new legacy deals, while delivering a source of fee income.R&Q still takes 20% of the legacy reserves, for alignment of interest reasons, but most of the legacy earnings are switched to a fee income basis, as well as profit share.

R&Q previously said that .Now, R&Q has completed a legacy acquisition of liabilities from MSA Safety and has worked with alternative asset manager Obra Capital on the deal, in a new partnership ().MSA Safety contributed roughly $341 million in cash to the acquired subsidiary, in addition to related insurance assets, and the joint venture of R&Q and Obra contributed $35 million.

R&Q will provide claims and management services and Obra will provide investment management services to support the assumption of legacy liability risks.Which means R&Q and Gibson Re are solely focused on the risk or liability side, with Obra now the investment management part of this run-off arrangement.The deal allowed MSA Safety to remove all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary from its balance sheet.

William Spiegel, R&Q’s Executive Chairman, commented, “We are pleased to form a joint venture with Obra to acquire and professionally manage these legacy liabilities, providing MSA Safety with a complete finality solution.This is an exciting transaction for R&Q, showcasing the capabilities, reputation and innovation of our Legacy Insurance business.“This will see our reserves and non-insurance liabilities under management increase to over $1 billion, comprising two pools: traditional insurance reserves via Gibson Re, and non-insurance legacy liabilities, furthering our goal of becoming a manager of legacy liabilities.” As a result, it’s safe to assume the legacy reserves assumed by Gibson Re have now risen and this will ultimately help to drive incremental fee income from the sidecar arrangement back to R&Q, as long as the legacy business performs as expected, with the investors backing the sidecar also set to earn their shares.

Key to generating the fee income it desires, from the strategic shift to running its legacy business via the Gibson Re sidecar, is for R&Q to build-out the vehicles reserves and in future launch additional sidecars as well.By scaling the strategy, the reserves can generate the fee income the company desires and now by partnering with an asset manager it removes the asset side risk for R&Q as well, with presumably a share of investment income earned in fees as well.Blair Wallace, CEO of Obra Capital, added, “With our team’s decades of experience investing in, managing and servicing long dated liabilities, we are excited to partner with R&Q on this liability solution.

The transaction highlights both our ability to deploy capital into this type of risk as well as our capability of focusing on targeted investment returns in a portfolio framework that considers both asset risk and the liability requirements for a broad variety of liability types.” Andrew Pinkes, R&Q’s Chief Executive Officer of Legacy Insurance, also said, “While we have been providing Legacy Insurance solutions to insurers, reinsurers and corporate captives for decades, this transaction opens up a new growth avenue in providing similar services for non-insurance, corporate liabilities.This transaction is a strong demonstration of R&Q’s expertise in underwriting and managing long-tailed liabilities, as well as our innovative approach to structuring and delivering comprehensive finality solutions.” Peter Polanskyj, Head of Structured Credit at Obra, further commented, “This transaction highlights Obra’s diverse investment capabilities ranging from deploying opportunistic capital into specialty risk situations to leveraging our more traditional investment capabilities across a variety of fixed income capital markets to enhance investor returns.” Nish Vartanian, MSA Safety Chairman, President, and Chief Executive Officer said, “We are pleased to complete the sale of this subsidiary to R&Q and Obra, trusted specialist partners with proven track records of managing legacy matters. This important action enables greater focus on “MSA’s future growth, profitability, and continued strong return of value to our shareholders.

 The completion of this transaction allows us to do more of what we do best – developing and manufacturing innovative safety technologies and protecting the world’s workers.” Lee McChesney, MSA Safety Senior Vice President and Chief Financial Officer added, “This transaction enhances predictability in the cash flows of our business and reduces our risk profile.Our balance sheet remains strong, and we are confident in our ability to delever within 12 to 18 months while maintaining our current dividend policy.” Find details of numerous reinsurance sidecar investments and transactions in our directory of .Get a ticket soon to ensure you can attend.