The agreement, which includes a series of transactions, will commute, or novate all the reinsurance contracts written by Enhanzed Re.
The transaction also includes a debt payment of $70m to an affiliate of the German insurance major and the distribution of Enhanzed Re’s excess capital between Cavello Bay and Allianz based on their equity ownership.
Currently, Cavello Bay controls 75.1% of Enhanzed Re and Allianz owns the remaining 24.9%.
In September 2021, Cavello Bay finalised the deal to buy a 27.7% stake in Enhanzed Re for $217.1m from an affiliate of Hillhouse Group.
Following the agreement, the insurance liabilities ceded to the reinsurance JV by Enstar affiliates will be commuted or novated to Cavello Bay.
Similarly, the insurance liabilities ceded by affiliates of Allianz will be commuted to Allianz or novated to Enstar’s subsidiary.
An exception for the liabilities is a reinsurance deal related to a block of annuity policies, which were written by Allianz’s affiliate. The firms hope to novate the annuities portfolio to a third party.
“Completion of the commutations and novations contemplated by the master agreement will eliminate Enstar’s direct exposure to catastrophe business and is expected to result in an approximate $62m increase in Enstar’s book value,” Enstar said in a statement.
The completion of the deal is subject to customary closing conditions and receipt of regulatory approval.