Amounts that insurance companies and some financial firms are legally required to set aside to cover future policyholder claims or other obligations; regulators dictate how these reserves are calculated and reported. Think of it as a mandated emergency fund or safety cushion whose size and adequacy affect a company’s reported capital, solvency ratings, and the reliability of its ability to pay claims—information investors use to assess financial strength and risk.
best estimate reservesfinancial
The insurer’s actuarial calculation of the present value of future claim payments and related expenses using the most likely assumptions for things like claim frequency, severity, mortality, interest rates and expenses. Think of it as a careful best-guess price tag for the future obligations a company has promised to pay; it matters to investors because those numbers determine reported liabilities, profits and the capital needed to cover policyholder promises.
retrocedefinancial
Retrocede means a reinsurer passes part of the insurance risk it accepted on to another reinsurer, like a store handing off a big delivery to a specialist carrier. It matters to investors because retrocession changes how insurance risk, required capital and potential losses are spread across firms, which can affect balance-sheet strength, earnings volatility and exposure to other counterparties.
spread-based risksfinancial
Spread-based risks are the chance that the gap between two related prices or interest rates—such as yield spreads between bonds, bid-ask spreads in trading, or credit spreads over a benchmark—will widen or narrow in a way that affects value or cost. Like the difference between the price you buy and sell a used car, changes in these gaps can increase trading costs, change the market value of assets, or alter borrowing costs, which matters to investors monitoring returns and liquidity.
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HAMILTON, Bermuda--(BUSINESS WIRE)--
Fortitude Re announced today the signing of a $3.8 billion reinsurance transaction between its subsidiary, Fortitude Reinsurance Company Ltd. (“FRL”) and Unum Life Insurance Company of America (“Unum”), a subsidiary of Unum Group (NYSE: UNM).
Upon receipt of regulatory approvals and subject to satisfaction or waiver of certain other customary closing conditions, Unum will recapture from Fairwind Insurance Company ("Fairwind"), a wholly-owned subsidiary of Unum, an individual long-term care ("LTC") block representing approximately $3.8 billion of statutory reserves in Fairwind (or approximately $4.5 billion of Unum best estimate reserves) and cede the block to FRL, further building on the successful transaction between Fortitude Re and Unum announced last year.
Unum will continue to service and administer the reinsured policies. Simultaneously with the closing of the reinsurance transaction with Unum, FRL will enter into an agreement to retrocede 100% of the LTC insurance risks to a highly rated global reinsurance partner.FRL will thereby retain only the underlying spread-based risks associated with this block of business.
“We are pleased to again partner with Unum and value the trust they have placed in our team,” said Kai Talarek, Chief Growth & Optimization Officer, Fortitude Re. “We also appreciate the support of our strategic partner Carlyle, whose investment expertise helps ensure we optimize the risk-adjusted return of the investments that back the promises we are making to our clients and their policyholders."
“This reinsurance agreement demonstrates how our client-centric approach drives highly customized solutions tailored to meet client needs,” said Russell Gao, Head of U.S. Origination & Strategy, Fortitude Re. “We thank Unum for its trust, collaboration and continued partnership.”
Sidley Austin LLP served as legal counsel to Fortitude Re.
About Fortitude Re
Fortitude Re refers to FGH Parent, L.P. and its subsidiaries. Fortitude Re is a leading global reinsurer with more than $100 billion in reserves. Backed by world-class investors, including Carlyle and T&D Insurance Group, Fortitude Re combines deep expertise, disciplined execution, and a strong capital base to help clients navigate significant risk and capital challenges. Powered by a people-first culture that attracts, develops, and retains top industry talent, the company delivers innovative, tailored solutions that create lasting value for clients, partners, and policyholders. For more information, visit fortitude-re.com and follow Fortitude Re on LinkedIn.
