Temporary securitization vehicle created by a reinsurer to raise external capital participating on a quota-share basis in a defined risk portfolio, without diluting its permanent shareholders.
A reinsurance sidecar is an ad hoc legal structure (Special Purpose Vehicle) created by a sponsoring reinsurer to raise external capital to temporarily expand its underwriting capacity on a specific risk portfolio. The sidecar's investors (ILS funds, pension funds, family offices) participate in the portfolio's results on a quota-share basis: they receive a fraction of premiums proportional to their capital commitment and bear the same fraction of losses. Collateral is fully posted in a guarantee trust, eliminating counterparty risk. Sidecars are typically created ahead of a hurricane season or during a market hardening, when demand for coverage exceeds permanent reinsurers' capacity. Their temporary nature (one to three years) allows flexibility impossible with permanent capital. For the reinsurer, the sidecar allows writing more premium without increasing its own leverage, while earning management fees and a profit commission. For the investor, the sidecar provides direct exposure to a reinsurance portfolio curated by an experienced manager. Beazley used this mechanism in 2023 to create the first cyber-type sidecar, a market innovation illustrating the attempt to securitize cyber risk.
Following the 2022 hurricane season (Ian), several major reinsurers launched sidecars for the 2023 season, attracted by the hardened market's elevated spreads. Everest Re and RenaissanceRe raised several hundred million dollars through these vehicles, enabling them to accept additional coverage without exposing their permanent capital to a second consecutive season of heavy losses.
sidecar, reinsurance sidecar, véhicule de capacité temporaire