PE firm Oaktree buys Nephila MGA Velocity Risk Underwriters

Alternative investment manager Oaktree Capital Management has taken a majority stake in Nephila-founded Velocity Risk Underwriters that will support the continued build-out of the property-focused MGA platform.

Markel-owned ILS fund management giant Nephila retains a minority shareholding in Velocity following the transaction.

Nashville, Tennessee-based Velocity Risk was launched by Nephila in 2015 with former Willis Re executive Phil Bowie at the helm.

It has built out its book of business across three main segments: largely coastal homeowners; cat-exposed small business; and cat-exposed large commercial.

Its homeowners book was initially built in Florida and Texas but has expanded up the Eastern seaboard, including growth through the captive agency networks of major US carriers.

Velocity Risk’s small business platform also initially focused on Florida and Texas but has moved into other Southeast and Mid-Atlantic states, distributed through wholesalers via the MGA’s low-cost underwriting platform.

Meanwhile, the firm’s large commercial book is also largely wholesale-distributed and focused on coastal wind and quake risk-exposed territories, often writing 100 percent ground-up deals on soft occupancy risks.

Sources said the MGA had been expected to grow to gross written premium in excess of $650mn this year.

Evercore was the sole financial advisor to Velocity Risk on the transaction, with TigerRisk Capital Markets & Advisory the exclusive financial advisor to Oaktree.

In a statement confirming the transaction, Velocity Risk CEO Bowie said: “The launch of Velocity Risk was designed to disrupt the value chain between insurance and capital, through innovative underwriting and operational efficiency.

“We are thrilled to have received Oaktree’s support and believe we have the right investor in Oaktree to help us continue building out our business.”

Oaktree is an active investor in the sector and last year supported the launch of legacy acquirer Marco Capital Holdings.

It had $158bn in assets under management as of 30 September 2021. Brookfield Asset Management bought a majority interest in Oaktree in 2019.

Commenting on the Velocity Risk investment, Greg Share, managing director in Oaktree’s Global Opportunities Group, said the firm had established itself as a “leading” property-focused MGA “through the quality of its management team, its strong underwriting results and its investment in enabling technologies”.

“We are excited to partner with the Company and support its track record of driving growth and delivering value for its stakeholders,” he added.

Nephila co-CEO Frank Majors said: “We’re delighted to be partnering with Oaktree and are confident they will help Velocity Risk continue to build on its past successes. We look forward to continuing to work with Velocity Risk through our ongoing minority shareholding.”