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EC News (29th 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 R&Q, MS Amlin, Wells Fargo and more. 

Coverys acquires R&Q’s managing agency

US medical malpractice insurer Coverys has agreed to acquire R&Q’s Lloyd’s managing agency, it was announced last week.

Under the terms of the agreement, Coverys will pay $22.6mn for R&Q Managing Agency Ltd (RQMA), which manages R&Q’s live Syndicate 1991 and reinsurance-to-close (RITC) Syndicate 3330 and also provides back office support to China Re Syndicate 2088.

Following completion of the transaction, R&Q said that it intends to continue to support and grow Syndicate 3330 – which is supported by capital provided entirely by R&Q - via a proposed separate management agreement with the new Coverys owned agency. 

The sale follows R&Q’s decision to simplify and refocus its operations on core legacy and services businesses.

Based in Boston, Massachusetts, Coverys provides medical professional liability insurance for physicians, dentists, podiatrists, hospitals and other healthcare facilities.

The insurer had a policyholder surplus of $1.5bn at year-end 2016 and produced direct written premiums of $411mn last year.

R&Q said that it will net proceeds of £13.9mn from the sale, which is expected to generate a gain of £12.6mn over the carrying value of the business.

The firm said that the proceeds will be used to deploy more capital to finance its legacy deal pipeline and support fee-based services such as its fronting businesses in Gibraltar and Florida.

R&Q chairman and CEO Ken Randall said: “The proposed sale of our Lloyd’s managing agency is a significant milestone in the Group’s decision to simplify its operations and focus on our core areas of legacy acquisitions and management and the provision of services to our live underwriting partners.”

In addition to R&Q’s cooperation with Coverys on legacy Syndicate 3330, Randall said that the company looked forward to exploring other opportunities for the two firms to work together in the future.

Meanwhile, Gregg Hanson, president and CEO of Coverys, said: “Through the acquisition, Coverys will inherit the continued responsibility to support the syndicates currently under management with RQMA.”

He also highlighted that following the acquisition, the firm will continue to look for opportunities to assist businesses seeking to launch Lloyd’s syndicate and act as third-party managing agency.

“We are excited to enter the London marketplace and will look to RQMA’s industry knowledge and expertise to guide us in this prestigious market,” he concluded.

R&Q said that the sale will be “materially” accretive to net tangible assets and earnings per share in the current year. The deal is expected to close in late 2017.

MS Amlin​ selects Belgium for post-Brexit EU hub

MS Amlin has announced that it has selected Belgium for its post-Brexit EU base.

The carrier follows in the footsteps of QBE and Lloyd’s, which have both opted to establish EU subsidiaries in Brussels.

MS Amlin said that it will re-domicile its European business, Amlin Insurance Societas Europaea SE (AISE) from the UK to Belgium in response to Brexit, however it will retain its global headquarters in London.

The carrier already has a Brussels-based branch of AISE and offices in Antwerp.

AISE writes marine, casualty, property and fleet business through its UK domicile and its branches in the Netherlands, Belgium, France and Germany. The business reported gross written premium of £444.7mn in 2016 and has 508 employees.

Commenting on the announcement, AISE CEO Kim Hvirgel said: "We chose Belgium as our European headquarters for AISE because of its business-friendly financial centre, high-quality regulatory framework and geographical position in Europe.

"This is a strategic move that ensures our European brokers and clients experience no disruption from the UK's exit from the EU."

MS Amlin said that, subject to regulatory approval from the National Bank of Belgium, it expects to have the subsidiary established “well in time” for the 2019 renewals.

USI acquires Wells Fargo’s commercial insurance business

USI Insurance Services has agreed to acquire Wells Fargo’s commercial insurance business for an undisclosed sum.

USI said that Wells Fargo Insurance Services USA includes its insurance brokerage and consulting businesses, in addition to its employee benefits and property and casualty national practices.

According to reports, USI fended off competition from Alliant and Hub to acquire the business from the San Francisco-based bank.

In its statement, USI said that PSP Investments and Caisse de dépôt et placement du Québec (CDPQ) provided a portion of the committed financing for the transaction.

While the sale consideration was not disclosed, reports have suggested that the Wells Fargo unit could be worth about $2bn.

“This is a transformational transaction for both USI and Wells Fargo Insurance,” remarked USI chairman and CEO Michael Sicard.

“Together, we create a premier industry leader with an un-matched team of exceptional sales consultants, account executives, technical resources and team members,” he added.

Meanwhile, head of Wells Fargo wholesale banking Perry Pelos said that the sale of the commercial insurance business reinforces Wells Fargo's focus on core banking products and services that best meet the needs of its customers and support strong financial returns for shareholders.

Wells Fargo has a track record of transacting with USI, including a 2014 deal that saw the investment bank sell 42 offices to the broker.

Meanwhile, USI only closed its own change of ownership in May, when KKR and CDPQ bought out Onex in a deal valuing the broker at $4.3bn or 12x earnings.

The transaction is expected to close in the fourth quarter of 2017.

Lloyd’s targets expense reduction and expands oversight

Lloyd’s CEO Inga Beale has outlined a new oversight approach and plans to reduce the Corporation’s workforce by 10 percent in a half-yearly circular sent to the market earlier this week.

To protect the Central Fund in the current challenging environment, Lloyd’s syndicate oversight activity is focusing on all elements of combined ratio, rather than almost exclusively on loss ratios, she explained.

In her note, she reiterated an earlier pledge from the Corporation to conduct fewer minimum standards reviews and focus on high-impact areas, and to have fewer portfolio review classes.

“We will spend more time helping underperforming syndicates improve underwriting performance while leaving the good performers to get on with running their successful businesses,” said Beale. 

She also said that the Corporation plans to reduce its workforce by around 10 percent.

“We are seeking to minimise the impact on our people by opening up a voluntary severance programme and through re-deployment within the organisation,” Beale noted.

Beale said that given current conditions, improved performance means the market should shrink in 2017 and 2018 as underwriters maintain strong discipline.

“While progress against our objectives in 2017 has been encouraging so far, the fact we are expecting the market to shrink this year and next shows there is still a performance gap to address,” she added.

“To close this gap, syndicates must exercise strong underwriting discipline, improve efficiency and reduce costs, supported by targeted market oversight, innovation and talent,” Beale continued.

Managing agents and brokers need to look at ways to reduce internal costs and work more efficiently; adopting London Market Target Operating Model (TOM) initiatives will help reduce market-wide costs over time, Beale said.

Regarding acquisition costs, Beale noted that the Lloyd's oversight team had collected data from a number of managing agents, and would soon contact the market on the next possible steps to help reduce costs across the entire value chain.

“We expect to see the new oversight focus I have outlined above reflected in managing agents’ 2018 plans,” Beale said.

Sompo International enters A&H insurance market

Sompo International, the Bermuda-based specialty arm of Japan's Sompo Holdings, has launched a new London-based accident and health (A&H) insurance unit.

The new division will be headed by Dale Willetts, who joins from ANV where he served as head of underwriting for A&H. Prior to that, he held a similar position at Travelers.

He will report to Richard Housley, CUO Sompo International London Market Insurance.

The new team, which comprises six underwriters based in London, will write a broad portfolio of global A&H business written primarily through the company’s Lloyd's Syndicate 5151.

Commenting on the announcement, Housley said: “We are very pleased to welcome the A&H team to Sompo as we continue to expand our London presence into new product offerings and distribution channels.”

“With strong broker relations built over decades serving this niche market, the team’s client-centric underwriting approach complements Sompo’s reputation for collaboration and responsive service. Dale and his colleagues are a great addition to the London insurance platform that we have built over the last four years.”

CNA Hardy hires Marriott as Lloyd’s cargo head

CNA Hardy has appointed Alistair Marriott as head of cargo for its Lloyd’s platform, it was announced earlier this week.

Marriott joins from Neon, where he was joint deputy head of marine and cargo class underwriter. Prior to that, he spent 13 years as a cargo portfolio manager at QBE.

In his new role, Marriott will be responsible for developing the Lloyd’s cargo book and driving profitable growth and raising awareness of CNA Hardy’s proposition in the London, Chinese and Far Eastern markets.

He will report to Carl Day, head of energy and marine.

CNA Hardy has made a number of appointments to its marine and energy division over the past 18 months.

Last July, the carrier hired Chubb's Greg Dodds as head of marine for Asia, based in Singapore.

Earlier in March 2016, CNA Hardy appointed Stephen Barr from Neon, then Marketform, as a senior marine and energy liability underwriter, and Camilla Hendry from Aegis London as a marine and energy underwriter.

Speaking on Marriott’s hire, Day said: “Over the last year we have looked to build out our capabilities significantly.”

“Alistair’s appointment complements the recent appointment of Greg Dodds in Singapore and finalises the leadership of our global team based in London, comprised of Stephen Barr, Giles Coghlin, Tim Howard-Smith, Clive Magnus and David Grant.”

Patrick Gage, chief underwriting officer at CNA Hardy, added: "Energy and marine is a key area of long-term growth for us, and we see significant opportunity for our offering in this space."

Anthem agrees record $115mn data breach settlement

Anthem has agreed to pay $115mn to settle a class action lawsuit over a data breach in 2015 that compromised the personal data of nearly 80 million individuals.

If approved by the court, it would be the largest data breach settlement in history, according to the plaintiffs' lawyers.

The proposed $115mn settlement fund would be used to pay for two years of credit monitoring for those affected by the cyber-attack and cover their out-of-pocket expenses incurred as result of the breach.

The US health insurer will also have to provide compensation to customers already enrolled in credit monitoring services.

Additionally, as part of the settlement, Anthem will be required guarantee a certain level of funding to bolster its cybersecurity over the next three years.

In a statement confirming the settlement, Anthem said that it is not admitting any wrongdoing or that any individuals were harmed as a result of the cyber-attack.

More than 100 lawsuits filed against Anthem over the breach were consolidated into one class action suit.

The 2015 cyber-attack saw hackers steal the names, dates of birth, social security numbers and healthcare ID numbers of 78.8 million people.

At the time of the breach, The Insurance Insider reported that Anthem had in place a $100mn AIG-led cyber programme and that AIG's excess and surplus lines arm Lexington had 100 percent of a $10mn primary layer in excess of a $5mn self-insured retention.

Delek’s $610mn sale of Phoenix to Yango collapses

Israeli energy conglomerate Delek Group’s 2.2bn shekel ($610mn) sale of its 52.3 percent stake in Israeli insurer Phoenix Holdings to China’s Yango Group has been dropped by both parties after failing to secure regulatory approval.

Statement issued earlier this week (26 June), Delek said that two sides had agreed to cancel their agreement and waive their right to claim losses from the process “in view of prolongation of the proceeding for receipt of approval to transfer control in The Phoenix to Yango”.

“The Company has received new inquiries from both Israeli and foreign entities in connection with sale of The Phoenix's holdings, and will continue to work to sell its holdings as required by law,” it added.

Last August, Delek signed a binding agreement to sell its 52.3 percent stake in Phoenix to Yango for 1.97 billion shekels ($557mn), which was later raised to 2.2bn shekels ($610mn) in April.

The group has been forced to sell its stake in the insurer due to an Israeli regulation that prohibits large domestic conglomerates from holding both financial and non-financial businesses.

The latest failure marks Delek’s third abortive attempt to sell Phoenix.

The group had initially agreed to sell its stake in the insurer to Chinese conglomerate Fosun in December 2015 for 1.8bn shekels, but the transaction fell through in February 2016 after conditions weren’t met.

Shortly after, Delek announced that it has signed a non-binding letter of intent with an unnamed US insurer, which was reported to be AmTrust.

However, the letter was then cancelled by mutual consent at the beginning of March 2016.

Marcell named Aon Benfield president

Aon has named Andy Marcell as president of its reinsurance broking arm Aon Benfield with immediate effect.

Marcell was most recently head of strategy at Aon Benfield and will now play a wider role in managing the global business.

He will report to Aon Benfield CEO Eric Andersen.

Prior to joining Aon Benfield in 2015, Marcell was CEO of Guy Carpenter’s US operations and head of its global facultative business.

Commenting on the appointment, Andersen said: “Andy has an admirable track record of industry experience and knowledge, and has an impressive skill set to become president of Aon Benfield.”

“He will provide strong leadership to our teams and he brings an international perspective to the role as we continue to grow our global business.”

Marcell's appointment follows the retirement of Aon Benfield chairman Michael O'Halleran in May.