Round-up of the weekly news and developments from the global insurance market with stories from Axis, Novae, AIG and more.
Axis to acquire Novae for $604mn
Bermudian (re)insurer Axis has struck a $604mn all-cash deal to acquire Novae, ending speculation surrounding Lloyd’s carrier’s future.
The transaction values Novae at around 1.5x of the carrier’s net tangible book value as of year-end 2016.
The 700 pence a share consideration represents around a 20 percent premium to Novae’s share price as of 4 July closing and an aggregate transaction value of about £467.6mn.
Novae had a market value of £374mn on 4 July.
The acquisition will allow Axis to create a $2bn London specialty market carrier and a top 10 insurer at Lloyd's.
Axis said that the combined entity would have gross written premiums of more than $6bn based on last year's performance of the two companies.
Following the acquisition, Novae CEO Matthew Fosh will become Axis’ executive chair of Europe and will help guide the integration of the two businesses, while the Lloyd’s carrier’s chief underwriting officer Robert Forster will be appointed to the leadership team of Axis Insurance’s international division.
Commenting on the deal, Axis CEO Albert Benchimol said: “The acquisition of Novae is a great opportunity to accelerate the breadth and depth of talent, lines of business, and leadership positions that we are developing in the London market for specialty risks, advancing our growth and enabling us to better serve our clients.”
Meanwhile Fosh said: “Axis is an ideal partner for Novae’s clients and our employees – and I am particularly enthused for our employees who will benefit from having access to the financial strength of a major global carrier and to the enhanced tools, support and resources required to grow our portfolio of underwriting businesses.”
Axis said that it has identified around $50mn of run-rate, pre-tax cost synergies from the deal, which it expects to be fully realised in year 2.
The deal will leave just three publically listed Lloyd’s carriers: Beazley, Hiscox and Lancashire. This follows a wave of acquisitions of Lloyd’s carriers in recent years including Amlin, Catlin and Brit.
The deal is expected to close in the fourth quarter of 2017.
Credit Suisse and Fenchurch Advisory Partners are acting as financial advisers to Axis while Evercore is advising Novae.
AIG names Zaffino as COO
Marsh CEO Peter Zaffino is set to become global chief operating officer at AIG, the US insurance giant has announced.
Effective 1 August, Zaffino will lead the day-to-day business of all country operations, including US commercial field operations and AIG’s multinational organisation, as well as global business services, administration and communications.
The move will reunite Zaffino with recently instated AIG CEO Brian Duperreault who was once his boss at Marsh & McLennan Companies (MMC).
Zaffino has been Marsh CEO since 2011, prior to which he served as president and CEO of MMC’s reinsurance broking arm Guy Carpenter, a position he assumed in early 2008.
During that time, Zaffino reported to Duperreault who led the group from 2008 and 2012.
“Peter is one of the most talented executives operating in the insurance industry,” remarked Duperreault.
“AIG’s field operations will benefit from Peter’s experience across all aspects of the business, most recently with one of the world’s largest brokers. Adding his deep insurance knowledge and expertise to the leadership team at AIG will accelerate our efforts to build and expand on this great franchise,” he added.
Concurrently, Marsh has announced that its current president John Doyle will succeed Zaffino as CEO when he departs.
Prior to joining the insurance broker in 2016, Doyle was CEO of AIG’s commercial insurance businesses worldwide.
"John's accomplishments and impressive track record of building strong client relationships and inspiring colleagues make him ideal to serve as president & CEO of Marsh," said Dan Glaser, president and CEO of MMC.
"On behalf of our colleagues and Executive Committee, I want to thank Peter Zaffino for his meaningful contributions to our firm," he added.
Childs replaces Jardine as Lloyd’s deputy chairman
Hiscox non-executive chairman Robert Childs has been appointed deputy chairman of Lloyd’s, the Corporation has announced.
He replaces Paul Jardine, chief experience officer of XL Catlin and CEO of Syndicate 2003, who stepped down from the deputy chairman role earlier this year after nine years on the council.
Childs will be one of three deputy chairmen of Lloyd’s, joining Simon Beale, MS Amlin’s chief underwriting officer and Andy Haste, chairman of Wonga Group.
Childs began his career at Hiscox in 1986, serving as active underwriter of the carrier’s Lloyd’s Syndicate 33 between 1993 and 2005.
He founded Hiscox Bermuda in 2005 and was chairman of Hiscox USA. He was first elected to the Council of Lloyd's in 2012 as the nominated representative of an external member. He became Hiscox chairman in 2013.
Commenting on the appointment, recently instated Lloyd’s Chairman Bruce Carnegie-Brown said: “This is an excellent appointment both for the Council and the market.”
“Rob brings with him vast experience of the sector in London, the United States and Bermuda which means he has a keen understanding of the challenges the market faces, but also of its strengths and what Lloyd’s can do to help it thrive and be successful. I look forward to working with him closely over the coming years.”
PRA warns on ‘over-optimistic’ views on pricing
The Prudential Regulation Authority (PRA) has warned that some carriers may be taking an “overly optimistic” view of current pricing, as well as highlighting carriers’ concerns surrounding facilities.
In a 22 June letter to insurance CEOs following the regulator's latest ‘monitoring-the-market’ questionnaire, PRA executive director of insurance supervision David Rule noted that although the survey findings pointed to another year of continued price softening and some evidence of widening terms and conditions carriers", estimates of overall premium adequacy were “marginally higher”.
“While we recognise that not all business can be subject to robust technical price, this observation does raise the question whether some firms are taking an overly optimistic view of current pricing,” he said.
Rule said that given the findings of the review, the PRA was concerned that some firms may have insufficiently captured current market conditions and the potential impact of broadening terms and conditions in their risk management.
He noted that examples of widening terms and conditions included extending business interruption coverage to incorporate non-damage perils, cyber inclusions, expansions of cover to feature non-physical damage, and an increase in multi-year policies.
“It is important that firms are transparent on the extent and level to which changes in terms and conditions carry an internal cost (for instance an increase in risk capital or an increase in the level of IBNR held), and whether this cost is commensurate with the additional risks,” he continued.
Rule said that the PRA will carry out a number of supervisory initiatives to improve
Its understanding of how individual firms are being affected by current market conditions, including a detailed assessment of underwriting and exposure management at several large corporate insurers for selected lines of business.
Meanwhile, the PRA also said that it is looking at the impact of business written by the firms participating in broker facilities, MGAs and other delegated underwriting arrangements.
“We will be assessing how they ensure that they understand the impact of business written on their overall risk profile and their results," Rule wrote.
This comes as many survey respondents expressed concerns about “changing distribution channels”, with common themes including higher commissions, difficulties in exposure management and the implications of moving from case to portfolio pricing.
"Views differed as to whether broker-insurer facilities were significantly increasing acquisition costs. Some firms stated that increased commissions could be offset by a reduction in their own claims administration," said Rule.
"However, a common point of feedback was the importance of managing the potential for conflicts of interest and transparency of commission arrangements. Several firms mentioned increases in different types of commission and fee arrangements that could be perceived as going against the benefit of the insured,” he continued.
Liberty Specialty Markets picks Luxembourg for post-Brexit hub
Liberty Specialty Markets has selected Luxembourg as the location for its post-Brexit EU base.
The carrier joins the likes of AIG, CNA Hardy, FM Global, Hiscox and RSA in its decision to establish an EU subsidiary in the Grand Duchy in a bid to safeguard access to the EU following Brexit.
Liberty said it will seek regulatory approvals to operate via an insurance company and insurance intermediary domiciled in Luxembourg to serve both the Lloyd's and company market.
The company noted that it will maintain its London headquarters, adding that it is continuing to analyse potential structures for its new EU operation, with a further announcement expected later in 2017.
Liberty already has branch offices in Paris, Cologne, The Hague, Madrid and Zurich.
"We have ambitious plans for growing the business that we do within and from the EU, and Luxembourg best fits the design principles we set ourselves to best position our post-Brexit structure,” remarked Nick Metcalf, president and managing director of Liberty Specialty Markets.
"It is important to us to locate ourselves in a robust regulatory environment, and Luxembourg offers us exactly that. The regulator is well-respected, pragmatic and insurance-specific, and so understands the market very well,” he added.
Price Forbes enters Chilean market through Cooper Gay Chile stake
Price Forbes has entered the Chilean reinsurance market through the acquisition of an equity interest in reinsurance broker Cooper Gay Chile.
The operation, which has been trading for over 12 years serving large Chilean corporate clients and the reinsurance markets, is led by Luc Van Eyghen.
Greg Ferguson, Price Forbes’ managing director of non-marine international, will join the board of the company, which is in the process of changing its name to Price Forbes Chile.
Van Eyghen will continue to grow the business and expand the specialist services the reinsurance broker offers with the help of Price Forbes.
Commenting on the announcement, Van Eyghen said that Price Forbes’ involvement would “provide access to expertise in specialist classes of business which will help us to support our clients and develop new business.”
Meanwhile, Ferguson said: “This is an exciting international investment outside of our core business platforms and is a clear message of our ambition to enter into strategic markets.”
“The robust platform gives us a spring board in to a market place where we see great opportunity to jointly grow our brand and the current portfolio with innovative solutions combining Price Forbes’s capabilities.”
Price Forbes is part of the private equity-backed KIRS insurance group, which also includes Towergate and Bishopsgate.
Chaucer acquires SLE Holdings
Lloyd’s carrier Chaucer has agreed to acquire Australian underwriting agency and Lloyd’s coverholder, SLE Holdings.
Chaucer said that the acquisition would increase the specialty product capabilities of its Syndicate 1084 and enhance its competitive position in Australia.
The terms of the transaction were not disclosed.
SLE, which is known as SLE Worldwide Australia and was founded in 2009 by Brad French, writes a broad range of specialty property and casualty products, with a focus on the sports, leisure and entertainment markets.
"This acquisition is an excellent strategic fit,” remarked Chaucer CEO John Fowle.
“It will enable us to increase our presence in this important market, giving us greater access to high-quality business and bringing us closer to our customers, while providing for a broader distribution of other Chaucer products in the future,” he added.
SLE includes Pacific Underwriting, a specialist commercial/industrial managing general underwriter.
Davies named Darag executive chairman
Run-off specialist Darag has named former Sompo Canopius CEO Stuart Davies as executive chairman.
He will succeed Claus Stenbaek, who has been chairman of the company since 2014. Stenbaek will remain on the board as non-executive deputy chairman.
Davies currently also serves as an investment partner at private equity firm Disruptive Capital, which he joined after leaving Sompo Canopius last November following Sompo's $6.3bn acquisition of Endurance.
Prior to joining Sompo Canopius, Davies was managing director of AEGIS London and began his career at Ernst & Young.
Commenting on his new role, Davies said: "With ambitious growth plans and a substantial deal pipeline, Darag is currently in the process of optimising its management structure, including the appointment of a new CEO, to prepare the company for the next stage in its ongoing expansion.”
The news comes after Darag announced in March that Arndt Gossmann has stepped down as group CEO following eight years at the helm.
Darag has established a new leadership team including chief financial officer Simon Minshall, chief liability officer Zsolt Szalkai and chief operating officer Tim Braasch.
Fidelis and Ashton create specialty joint venture
Fidelis has formed a new specialty joint venture with Rob Ashton, the former head of specialty at Hiscox Re Specialty.
The new venture will begin writing business on 1 January 2018 and will focus on niche specialty excess of loss business, particularly cyber reinsurance.
Fidelis said that it will provide the working capital and the cornerstone capacity to the venture.
Ashton, who has now joined Fidelis as a specialty reinsurance underwriter, will underwrite on Fidelis’ account while the new venture is being finalised.
He moves over from Hiscox where he served as head of specialty at Hiscox Re Specialty for over four years.
Ashton joined Hiscox in 2003 from AIG, where he wrote accident and health business. In 2011, he became line underwriter for special risks and personal accident excess-of-loss reinsurance.
Richard Brindle, Fidelis group CEO, said: “The creation of this venture, signals the beginning of our strategy to identify and attract specialist underwriting talent with innovative and closely defined products. Our unique market vision and entrepreneurial pedigree will mean that we will be a high value destination for these underwriters.”
