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EC News (1st June 2017)

  • Publish Date: Posted almost 7 years ago
  • Author:by Alan Jarque

Round-up of the weekly news and developments from the global insurance market with stories from Sompo, AMTrust, Towergate and more. 

Sompo acquires Novae FI renewal rights

Sompo International has agreed to acquire the renewal rights to Novae Syndicate 2007’s financial institutions (FI) portfolio, it was announced earlier this week (30 May).

Under the terms of the agreement, the Bermuda-based specialty (re)insurer of Japanese heavyweight Sompo Holdings will take on rights to the Syndicate's future FI renewals, excluding emerging markets. The book had more than $25mn of gross written premiums.

Novae and Sompo said that they will work together to ensure continuity for Novae’s clients and brokers.

As part of the transaction, Novae FI class underwriter John Richards will join Sompo International as senior vice president and head of London market financial institutions.

He will report to Richard Allen, executive vice president and head of London market professional lines insurance at Sompo International.

Richards joined Novae in 2012 from Zurich Financial Services, where he was a senior underwriter. Prior to that, he served as assistant vice president at AIG.

Richards will be accompanied by fellow Novae underwriter Anthony Hoare who will also join Sompo International’s underwriting team in London, although his new role was not specified.

Commenting on the deal, Allen said: “We are excited to accelerate the growth of our London market financial institutions portfolio with this renewal rights transaction with Novae.

At the same time, we are gaining two seasoned and highly respected underwriters who will add to our existing strength in the financial institutions sector,” he added.

The renewal rights agreement comes weeks after Novae announced its decision to exit four casualty lines as part of a group strategic rethink.

In a trading update dated 10 May, the carrier said it had withdrawn from financial institutions, professional indemnity, general liability reinsurance and motor reinsurance, citing inadequate future profitability prospects.

AmTrust receives $300mn injection from founding family

Nasdaq-listed carrier AmTrust has raised $300mn of capital through family members of the company’s founders via a private placement.

In a statement issued on 25th May, the carrier said that the fresh investment would “further enhance AmTrust's balance sheet and capital base”.

The news follows troubled months for the carrier, which has included a delay in its 2016 results and an announcement that it would have to restate its financials between 2014 and the first nine months of 2016 and a note from KBW analysts speculating that AmTrust may need to take a nine-digit reserve charge in order to restore investor confidence.

AmTrust intends to direct the proceeds from the private placement to the company's insurance subsidiaries to support their financial strength, continued organic growth, and writing of business,” it added.

The company said it would issue around 24.1 million common shares price at $12.45 a share – equivalent to the closing price of the carrier’s stock on 25th May – through a private placement, which subsequently closed on 26th May.

Although the sole purchasers were certain family members of AmTrust chairman and CEO Barry Zyskind and director George Karfunkel, neither Zyskind or Karfunkel acquired any shares themselves.

The carrier also said that the unnamed buyers have agreed not to transfer the stock for at least a year and will not exercise their right to vote their shares of common stock until after the company's 2018 annual shareholders’ meeting.

Zyskind said that family members “chose to make this investment because they believe strongly in the company's future”.

In addition to enhancing our balance sheet and capital base, this sizeable investment of $300 million should also provide confidence to all of our stakeholders that we are well capitalized to grow and write business. We remain committed to continuing to support growth and maintain confidence in AmTrust,” he concluded.

In early May research note, KBW analyst Meyer Shields said that he was “very uncomfortable” with AmTrust’s stated reserves, suggesting that the company should take a “meaningful (ie, in the hundreds of millions of dollars) reserve charge” and commit to “much-improved disclosure” to ease investor concerns.

Towergate owners in £800mn debt raise

KIRS Group, the newly formed holding company for insurance brokers Towergate, Price Forbes, Ryan Direct Group, Autonet and Chase Templeton, has launched an £800mn bond offering.

KIRS, which is backed by private equity firms Madison Dearborn Partners and HPS Investment Partners, also said that it had committed to enter a super-senior £90mn revolving credit facility.

The company said it intends to use the funds to refinance existing debt, finance the acquisitions of both Direct Group and Chase Templeton, pay for transaction costs and put “incremental” cash on its balance sheet.

The creation of new holding structure was announced in early May, with all five businesses set to be run independently.

KIRS is expected to launch in the third quarter of 2017.

"The management team has held a number of successful meetings with potential and existing investors globally over the course of the last couple of weeks,” remarked KIRS chairman John Tiner.

The response to the creation of the KIRS Group, given its ability to broaden its services to clients and provide a platform for further expansion has been positive,” he added.

Meanwhile, chief executive David Ross said that the unveiling of the KIRS vision is proving to be a “momentous shake up” of UK general insurance.

During these early, critical days of this Group, we are delighted by the feedback and support we have had from our people, peers and industry at large, all of whom have welcomed the news,” he concluded.

Bank of America Merrill Lynch is acting as global coordinator and sole physical bookrunner for the bond offering. Barclays, Credit Suisse, Goldman Sachs and KKR Capital Markets will act as joint bookrunners for the bond offering.

Hansen appointed AGCS global head of aviation

Allianz Global Corporate & Specialty (AGCS) has promoted Mike Hansen to global head of aviation.

He succeeds Henning Haagen, who was appointed northeast zone executive for North America earlier this year and has been performing both roles in the interim.

Hansen will report to AGCS board member and chief underwriting officer (CUO) for specialty Paul O’Neill and will be based in London once he has relocated from Canada later this year.

He will be responsible for leading the overall aviation underwriting strategy, with the aviation business accounting for seven percent of the AGCS’s overall EUR7.6bn of global gross written premiums in 2016.

Hansen joined AGCS in June 2016, heading up the US, Canadian and Mexican aviation business. The carrier said that a successor for this position will be announced in due course and that Hansen will maintain responsibility for both the global and North American markets whilst a replacement is found.

Prior to joining AGCS, Hansen was deputy CUO at XL Catlin Aerospace. He has also held underwriting positions at AIG and Markel.

I look forward to working with Mike managing our aviation business in a challenging market environment and making the most of opportunities in the months ahead. I am confident this will be a smooth transition,” remarked O’Neill.

Brazilian reinsurer IRB files for IPO

Brazil's reinsurer IRB Brasil Resseguros is closer to listing on the Sao Paolo Stock Exchange after the three banks that together own a majority stake in company said that they had filed for an initial public offering (IPO) with the country's securities regulator CVM.

In series of securities filings, BB Seguridade Participações, which is a unit of state-controlled lender Banco do Brasil, Banco Bradesco and Itaú Unibanco Holding said they will sell part of their stakes, in a so-called secondary share offering.

The banks said the notice to the regulator should not be considered an offering announcement, which "will depend on favourable market conditions".

IRB shareholders originally agreed to list the company in August 2015, but the offering was postponed. In November 2015, Itaú Unibanco asked the Brazilian securities regulator to halt the pre-IPO process.

IRB was formed in 1939 and was the state monopoly reinsurer until 2007, when international reinsurers were permitted to enter the market.

For 2016, the reinsurer generated 4.9bn reals ($1.5bn) of gross written premiums, up 13.6 percent from the prior year. It reported a combined ratio of 92.2 percent, 1.2 points better than in 2015. 

Meanwhile, net income rose 11.3 percent year-on-year to 849.9mn reals ($261mn) in 2016.

XL Catlin promotes McAdams to global marine CUO

XL Catlin has promoted Rob McAdams to chief underwriting officer for global marine, effective immediately.

McAdams, who is based in London, was previously marine leader for UK and Ireland.

He joined XL Group in 2000 as a deputy class underwriter, following which he served as a class underwriter and global practice leader for marine and offshore energy liabilities

Prior to XL, he worked at Reliance National in New York, where he held several positions within the marine and offshore energy team.

European Council authorises signing of EU-US reinsurance deal

The European Council has approved a covered agreement between the European Union (EU) and the US on insurance and reinsurance matters, which is set to enhance regulatory certainty in transatlantic (re)insurance operations.

The decision was adopted at a recent meeting of the Competitiveness Council, and provides for provisional application of certain provisions within the new (re)insurance agreement, dependent on the completion of procedures needed for its conclusion, says the Council.

The covered agreement between the EU and the US has been under negotiation for some time, and looks to provide legal certainty for insurers and reinsurers on both sides of the Atlantic in the application of regulatory frameworks.

Furthermore, the Council explains that the agreement provides policyholders and other consumers with greater protection via improved cooperation between both supervisors and the exchange of information.

The Council explains that a joint committee will oversee the implementation of the agreement, once finalised, and that the Council also requested the consent of the European Parliament for conclusion of the agreement.

Earlier this year the National Association of Insurance Commissioners (NAIC) called for more work to be done on the proposed covered agreement amidst areas of uncertainty and ambiguity.

Zurich merges North American units

Zurich is combining its specialty products and commercial insurance businesses in North America as it continues to "simplify and strengthen" its operations.

The expanded unit will fall under the leadership of Paul Horgan, current head of North America commercial insurance.

Horgan will continue to report to Zurich North America CEO Mike Foley and James Shea, Zurich’s chief executive for commercial insurance globally.

Zurich said that a new simpler, combined structure will provide “easier access” to its products and services and will create “greater consistency” in its go-to-market approach across North America and its global network.

We are confident this structure will help us become more agile, more collaborative, and more customer-focused,” remarked Horgan.

Concurrently, the company also announced that it had appointed Brian Winters as head of specialty products for Zurich North America, reporting to Hagan.

Winters was most recently responsible for managing relationships with Zurich’s largest customers and brokers in his role as head of customer and distribution management for North America.

The latest restructure follows Zurich’s decision to merge its commercial markets and global corporate businesses In North America last November.