Riverstone: Chasing the Caribbean crown for captive run-off

Matt Kunish, RiverStone’s chief business development o­fficer, on the firm’s expanding run-off operations within the captive industry as it seeks to grow its presence on the island of Bermuda

 

Captive Review (CR): What does RiverStone offer the captive market?

Matt Kunish (MK): At RiverStone, we’re not in the business of setting up captives but instead supporting those looking to exit them. We’re happy to stay at the back end of the process, where our expertise in runoff can provide the most value as an exit solutions provider.

Many companies set up a captive without an exit strategy in mind. But over time, a captive may no longer serve its intended purpose. Leadership changes, the need for capital efficiency, mergers and acquisitions and strategic focus on core business are all reasons a company may need to exit a captive.

With over 20 years of experience in acquiring and managing run-off businesses and insurance portfolios, RiverStone is uniquely positioned to provide exit solutions to those who need them.

For example, if two large companies with captive operations merge, we can take ownership of liabilities for the defunct structure, take those claims and allow fi rms to walk away from the past.

CR: Why Bermuda?

MK: Of course, there are many options for choosing a location for a captive from an onshore domicile in the US, such as Vermont, or offshore, like the Cayman Islands and Bermuda. Since the inception of the captive industry, Bermuda has been a popular destination for captives, and as such, it offers a large market for us to serve.

Though there is a tremendous history of captive experience on the island, the idea of run-off for captives is still relatively new. We want to raise awareness across the industry and tell the local captive advisors of what we do. Maintaining an unwanted captive is a costly and cumbersome affair, and many businesses would do well to see the advantages and opportunities exiting a captive would bring them.

CR: Why RiverStone?

MK: There are not many companies that offer what RiverStone does. Leveraging run-off as a captive exit solution remains a relatively unknown concept in the captive industry. Many don’t realise there are options at the end. Captive owners aren’t typically experienced enough to explore these options independently.

At RiverStone, we thoroughly understand the many functions and needs of the insurance business. Over the past two decades, we have developed the in-house talent needed to support these wide-ranging functions and don’t have to outsource our services.

Where captives often need to hire several service providers to satisfy the diverse needs of operating a captive (eg accounting, actuarial, capital management, legal, reinsurance broker and so on), we can do it all under one roof.

The experience and knowledge we can offer clients, combined with our history of successfully managing a wide range of run-off portfolios (including captive run-off since 2018), means we are in a unique position to support the captive industry.

CR: What about private equity?

MK: Hedge funds and some well-known private equity firms operate in the insurance space. Most of our competitors are funded by private equity. Private equity typically works on a short timeline, rarely owning something for more than five years before it’s looking to cash out.

This should be a concern for potential sellers who need long-term reliability. Our portfolio has included tort action on everything from asbestos and talc to chronic traumatic encephalopathy (CTE), sexual molestation and more.

RiverStone has a long track record of handling claims with a long-term time horizon. We don’t view ‘old’ claims as more or less worthy of our time than newer claims. We believe old claims require the same (or greater) level of care and attention to detail. We’ve been around for a long time, we’re very stable, and we’re committed to the insurance business for the long run. The same cannot be said about private equity firms operating in the market.

CR: Can you tell us more about this growing partnership between RiverStone and Bermuda?

MK: With multi-billion-dollar corporate backing from Fairfax and our deep knowledge and experience from over 20 years in run-off, there is no doubt that RiverStone and Bermuda captives will form a successful partnership.

We intend to establish a strong, permanent presence as a significant provider in captive run-off services, one that is not only here to stay but to grow. As businesses continue to evolve, so will their needs for services around managing captives.

While exit solutions may not be the most glamorous aspect of the captive industry, there is no doubt the services we provide in this space are becoming ever more critical.

12 August 2024
5-6 November 2025

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