Interview: Matt Kunish – River runs deep for captive buying

RiverStone chief business development officer Matt Kunish explains the group’s captive acquisition strategy.


Gone are the days when putting a captive into run-off and selling it on was seen as a sign of failure.

Today, in the wider insurance sector and the captive space, selling a ceased business or portfolio of risks to a specialist run-off buyer is viewed as a viable strategic decision which can offer up gains to all parties involved.

For the seller of the captive, it represents an opportunity to free up trapped capital and divert that capacity elsewhere. In addition, focus and resource can be turned to other areas of the business.

For the acquirer, they can utilise their dedicated claims management expertise to handle claims from legacy portfolios far more effectively and efficiently than most others in the market. This often means they generate a good profit on the claims reserves in the acquired captive book.

One such acquirer that has voiced a clear intention to expand its collection of captives in run-off is RiverStone.

RiverStone was first born in the 1990s with the sole aim of providing a quality ongoing claims service to businesses or portfolios put into run-off by insurance behemoth Fairfax, during a busy period of large acquisitions by the group.

In 2010, RiverStone took the business model out into the wider traditional insurance market by completing a number of legacy acquisitions and loss portfolio transfers.

At this point, while other run-off players were active in the captive space, it was not an area RiverStone ventured into. With generally smaller pools of risks and less valuable claims reserves than larger opportunities of $100m+ in the commercial insurance sector, captives remained outside the group’s central appetite.

Turning point

For Matt Kunish, RiverStone’s chief business development officer, he says it was in 2017 when the run-off market hit a turning point and appetites started to shift.

After years of strong results among run-off specialists, the market naturally started to become ultra-competitive. Consequently, he says pricing of traditional legacy deals became out of hand, both in the North America and London markets.

“A lot of transactions were going through that we thought were underpriced, and that led us at the end of 2017 to realise we needed to look at some other areas,” he adds.

“During this time, Fairfax was a great parent to have. It’s a parent that is in it for the long run, and looking far ahead. We weren’t looking at private equity timelines where it’s five years in and out, so weren’t under pressure to complete a lot of transactions. Then, in 2018, we started looking at the captive space for smaller risks to get involved in.”

After a period of research and building connections in 2018, RiverStone made its first foray into captive acquisitions in October 2019 – buying both GMPCI Insurance and Seaside Indemnity Alliance in Cayman.

COVID-19 and the inability to form in-person connections with key players hampered progress a little, but this drought ended in August with its third move in the captive space – a tentative agreement on a deal for Vermont-based Western P&C.

According to Kunish, the pipeline for more captive acquisitions in the near future is looking good, in part due to the name recognition that RiverStone garnered from 2019 with Cayman-based captive insurers, service providers, and regulators.

“We’re ahead of the curve in Cayman now, we’re more well-known, and we’re seeing opportunities from people we know,” Kunish says. “We hope the same will occur now that we’re officially in Vermont as well.”

Cayman and Vermont will continue to be major focus areas, but Kunish also has ambitions for RiverStone to complete captive deals in Bermuda. He was at the Bermuda Captive Conference from 12-14 September beginning the process of building contacts.


However, it’s not just increasing name recognition and building contacts why Kunish thinks it’s important RiverStone makes noise in the captive space – it’s also about education.

While selling a captive to a run-off specialist is more popular than it was, Kunish thinks there is still a lot of work RiverStone and its competitors need to do to ensure captive owners understand all the strategic benefits of taking this option.

“There’s a lot of hype around setting up a captive, and the beautiful location you visit once a year, but a lot of the time, the reasons a captive was initially set up no longer make sense for your business,” he explains.

“Things change and I think there is a general lack of awareness in the captive industry that there is the option to get out.”

Knowing there’s an escape route can also give prospective captive owners more confidence to set up in the first place, which is why Kunish thinks the whole industry should be talking about the pros of run-off sales.

Legacy buyers often need to go through either a captive manager, reinsurance broker, or other service provider to reach the captive owner, making it even more important that Kunish builds as many connections as possible, and reaches a wide audience with his message.

Part of the message is also about showing to market participants that there are all kinds of innovative options on the table when it comes to working with run-off acquirers, which do not mean the captive has to close.

“We’re trying to dispel the myth that it’s only when you’re almost insolvent that you have to come to the run-off players,” Kunish says. “It can be about proactively managing the capital that supports the captive.”

Active captives can transfer certain prior-year liabilities to the run-off carrier, reducing their capital requirements with the regulator, and freeing up capacity to write new lines into the captive.

“What we’re really doing here is a reinsurance transaction – reducing liabilities to make them a bit more capital efficient,” Kunish adds.


RiverStone’s appetite for types of deal and classes of business in the captive space is wide, as the group looks to increasingly diversify its book of legacy accounts.

Due to the lesser reserves generally held in captives, the group may need to complete multiple captive deals to equate to one single traditional deal.

However, with a patient parent in Fairfax, Kunish says this is not a problem, and that he is finding there is great quality business held in the captive industry that justifies continuing a captive buying strategy.

“The captives that we have dealt with you can clearly see have been very well managed from the outset by the captive owner,” he says. “And that’s because they have a better understanding of the risk, better risk management, and better oversight of claims.”

Though RiverStone would welcome larger captive legacy opportunities, Kunish anticipates most deals will be on the smaller end of the spectrum. But what this also means is less downside risk.

“From a diversification perspective, we’d rather do multiple smaller transactions that are well-priced and well-reserved than one large transaction, where you could lose a significant amount,” Kunish explained.

There is no specific target for the number of captive acquisitions in 2023, although Kunish does expect significantly more opportunities for RiverStone to arise.

And this seems highly likely, thanks not only to the sector’s efforts to educate captive owners and service providers on the benefits of legacy transactions, but also simply due to the growing number of captives that have formed in recent years, in response to the hard market.

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