Transverse in $48mn debt and equity raise to fuel growth

Hybrid fronting carrier platform Transverse Insurance Group has raised $48mn of additional capital from debt and equity sources to support its growth trajectory in 2022 and beyond after building its portfolio to greater than $400mn in annualized premium, The Insurer can reveal.

The Princeton, New Jersey-based company raised $30mn through a private placement of senior unsecured notes and a further $18mn of follow-on equity capital from incumbent investors led by Virgo Investment Group.

Transverse said it expects the capital infusion will push its insurance subsidiaries into the AM Best financial size category VIII, which will enhance its ability to take advantage of growth opportunities within its “robust” pipeline.

The move to raise more capital comes after Transverse closed several new MGA partnerships in 2021 that helped grow its portfolio of programs beyond $400mn of annualized premiums.

Transverse’s co-founding president and CIO Dave Paulsson said: “We continue to receive strong support from the credit and equity markets which speaks to the quality of our team, business, MGA and reinsurance partners in completing the capital raise.”

His co-founder Erik Matson, who is chairman and CEO of Transverse, said the platform is experiencing “exceptional demand” from high quality MGA partners that the capital raise will help it support by providing additional capacity and expanding lines of coverage in “attractive market conditions”.

In an interview with this publication he described the deal pipeline for Transverse as “incredibly robust” as he predicted significant growth in 2022.

But he added that the carrier would be selective and conservative in its growth as MGA and reinsurer partners also become more discerning in who they work with in the highly competitive fronting segment.

“What is standing out is that people are starting to look for quality. Our focus is on growing with partners who share our priorities of responsible underwriting and prudent capital management and we see an abundance of opportunity in the market to execute on that plan.

“Growth for the sake of growth is not in our DNA and it’s our every intention to continue to emphasize quality first in our underwriting process,” he commented.

Transverse currently has 12 programs on its books and Matson said the aim is to build deep and strong relationships with MGAs that benefit them and its reinsurer partners.

Examples of its current program relationships include bringing capacity to MGA heavyweight AmRisc on its E&S commercial insurance program; supporting flood MGA Neptune’s nationwide program; and insurtech Lumen Risk Services.

The pipeline of deals includes property cat deals as well as non-cat property, liability, commercial auto as well as general auto liability and financial/professional liability.

Larger deals

The AM Best VIII financial size category would likely lend itself to larger program transactions across a broader range of business lines.

Paulsson said that Transverse expects to develop strategic large relationships, including more substantial single programs as well as bigger multi-program relationships with specific MGAs.

He added that Transverse’s reinsurance panel is sufficiently diversified while ensuring that over 90 percent of its capacity comes from reinsurers with at least an A rating, and over three quarters that are A+ rated.

In an interview last September, Matson described the group’s hybrid fronting carrier model as a “three-legged stool”.

“We believe that the MGA, the reinsurer and the hybrid fronting carrier have to be aligned and that if one of us wins, we all win.

“The basic philosophy is that we want the MGA to win because that’s how we win. And if we’re winning and the MGA is winning then almost by definition the reinsurer will win, because they’re the ones providing a good portion of the capacity,” he explained.

It bills itself as an underwriting-focused operation which is also a global facilitator connecting and enabling partners through access to risk capacity and alternative capital on its admitted and surplus lines A- rated paper.

Transverse targets specialty P&C programs from MGAs and insurtechs, fronting for reinsurers and retaining up to 10 percent of the risk on its own balance sheet.