Speaking last week after the announcement of Sompo’s plan to acquire Aspen Insurance, executives from the Sompo side explained that the integration will expand the opportunity set for Aspen Capital Markets investors, while the business intends to continue pursuing a capital light model leveraging third-party capital.When the acquisition was announced, and called it a “highly differentiated product offering.” During an analyst call after the announcement, Sompo executives went into more detail as to why and their comments suggest that the capital-light, fee income model of the third-party, ILS and alternative reinsurance capital management unit Aspen Capital Markets is seen as a key source of strategic leverage for the group.Mikio Okumura, Group CEO, President and Representative Executive Officer, Sompo Holdings, commented that, “After integration of the business, we can expect a risk diversification effect, and also, to a certain extent, we can utilise third-party capital and we can expand the capital-light fee business, fee revenue.” Later during the analyst call he added, “With SI (Sompo International) integration and the way of thinking about underwriting and, of course, appetite on investors side, it depends on that, but we would like to continuously have a capital light business.” Nicolas Burnet, Group Deputy Chief Financial Officer (CFO), Sompo Holdings, Inc., CFO, Sompo P&C and CFO, Sompo International Holdings Ltd., went into more detail on the benefits seen from the Aspen Capital Markets (ACM) unit coming as part of the acqusition.Burnet explained, “Aspen Capital Markets provides us with one of the leading third-party capital platforms in the industry.

It has been an integral part of Aspen since 2013 with an impressive management team.“It will provide Sompo with capital flexibility, while providing Aspen Capital Market investors with access to broader reinsurance and insurance opportunities.“It is also a well-diversified product offering which is not just focused on property cat lines of business.

ACM has grown assets under management by over $1 billion since 2019 and now provides Aspen with a significant amount of fee-based income, which reduces the overall volatility of the earning stream and will be attractive to our capital base.” James Shea, Chief Executive Officer (CEO), Sompo P&C and CEO and Executive Director, Sompo International Holdings Ltd., responded to a question about what the acquisition means for the reinsurance strategy of the firm and how ACM could play into that going forwards.Shea stated, “With respect to the reinsurance, at this point we have no plans to change our strategy with respect to the Sompo P&C reinsurance.We’ve got a proven track record and a process that is working well for the group.

“By the addition of Aspen Capital Markets, we may be able to diversify some of that with the capital that’s brought in to support our business.But at this point, we don’t anticipate any real changes with respect to the overall strategy, with respect to the reinsurance purchasing.” Later in the call, one of the Japanese equity analysts asked whether growing Aspen Capital Markets business further is part of the strategy post-acquisition.To which Burnet responded, “I think the opportunity is definitely there to grow this business.

We continue to see it as a potential opportunity to give us financial flexibility and to use our balance-sheet in different ways, and it’s a capital light business.So the opportunity is definitely there.”  ..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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