US medical malpractice insurer Coverys has agreed to acquire R&Q’s Lloyd’s managing agency.

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.