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EC News (2nd November 2017)

November 02, 2017

Round-up of the weekly news and developments from the global insurance market with stories from Fidelis, Aon, AIG and more.

Fidelis launches first MGA Radius

Fidelis has announced the launch of its first managing general agent (MGA), Radius.

Radius will be run by former Hiscox Re head of specialty, Rob Ashton and will focus on niche specialty treaty excess of loss business such as cyber, nuclear and PA retro.

The MGA will commence writing business on 1 November, two months earlier than previously announced in July, Fidelis noted.  

Radius is the first MGA to be launched through Pine Walk Capital. The new subsidiary will be run by Rinku Patel, who brings a wealth of experience in the MGA and intermediary space, most recently at Hyperion Insurance Group.

Commenting on the announcement, Fidelis CEO Richard Brindle said: “We are delighted to have joined forces with Rob and Rinku furthering our strategy to sponsor specialist underwriting products. Rinku’s proficiency in managing MGAs together with our underwriting expertise, make Pine Walk a highly attractive destination for new or existing MGAs.”

Rob Ashton added: “It has been a pleasure collaborating with Rinku and the Fidelis team in establishing Radius – especially in achieving this sooner than expected.”

LMA/IUA agreement with DXC to save Lloyd’s & London market £100mn

The London Market Association (LMA), in conjunction with the International Underwriting Association (IUA) has struck a deal with DXC Technology for the provision of bureau services that will save the Lloyd’s and London market £100mn over the next five years.

According to a statement on the transaction, the renegotiated contract, which was independently evaluated by specialist contract consultancy Aecus, DXC will optimise their service delivery, enabling cost reductions to the market in exchange for a fixed five-year deal, delivering savings that were not possible under the previous one year rolling contract.  The cost savings will be apportioned on an 80 percent / 20 percent split between Lloyd’s managing agencies and those IUA companies that use the bureau.

DXC's relationship with the London insurance market dates back to the first agreements formed in 2001. At that time, Xchanging, now a DXC company, was contracted to provide the central utility business process and associated IT platform services through joint-venture partnerships formed with the IUA and the Corporation of Lloyd's. These partnerships remain the basis for delivery of services under the new agreement.

LMA CEO David Gittings said: “It is heartening to see the LMA and IUA leading a cross market initiative to deliver a material cost reduction, at a time when the market’s cost base is under constant pressure. I’d like to thank DXC for making the commitment to our market and delivering valued services whilst also committing to guaranteeing the ongoing quality of that service.”

Dave Matcham, CEO of the IUA said: “This agreement will help our members process business more efficiently and is an important part of London’s drive to modernise its systems and provide a better service for clients.”

Aon to acquire Henderson Insurance Broking Group

Aon has agreed to acquire Henderson Insurance Broking Group as it expands its UK retail presence.

The terms of the transaction were not disclosed.

Henderson is one of the UK’s largest independent brokers, focusing on general insurance, health and benefits and trade credit insurance and employing over 400 people across 16 offices, predominantly in the north of England, but with clients and business spanning the UK. Its clients range from large corporate businesses, through to mid-market and SME businesses.

Henderson Insurance Broking Group will join and become part of the firms Aon Risk Solutions UK (ARS UK) division, which is led by CEO Julie Page.

The acquisition supports Aon’s objectives to expand its UK retail insurance brokerage business, with a specific target on the mid-market and specialist sectors. It is the latest example of the firm’s commitment to allocate capital to high-value solutions that address emerging client needs, sharpen the firm's focus on delivering advice and solutions, and strengthen its global footprint.

Commenting on the acquisition, Page said: “I’m delighted that the Henderson Insurance Broking Group team is joining Aon, bringing more talented and experienced colleagues to our business. Henderson Insurance Broking Group’s success and the esteem in which it is held, both by clients and the market, is a real indication of the passion it puts into finding the best solutions for its clients. Its underlying ethos of putting clients at the heart of its business aligns perfectly with Aon’s approach, and I’m looking forward to working with the leadership team at Henderson Insurance Broking Group to empower results for clients of both firms.”

CEO and founder of Henderson Insurance Broking Group, Joe Henderson added: “Joining Aon provides a wealth of opportunities for both our colleagues and our clients. Our clients will benefit from new access to specialist and global expertise, and Aon’s commitment to continuing our excellent service levels. As for colleagues, I have no doubt that the talented people within our organisation will seize the opportunity to develop their careers within a firm of Aon’s stature.”

The deal is expected to close in December.

Toa Re receives Lloyd's in-principle approval for platform

The Toa Reinsurance Company (Toa Re) and Barbican Insurance Group have received in-principle approval from the Lloyd's Franchise Board to establish Toa Re Special Purpose Arrangement (SPA 6132) to be backed exclusively by Toa Re.

Subject to formal approval, SPA 6132 will commence underwriting on 1 January 2018.

Managed by Barbican Managing Agency (BMAL), Toa Re has an initial capacity of £31.4mn (USD$41mn).

The SPA will support the expansion of Toa Re’s international portfolio of business, serve to introduce new business into the London market and also expand Lloyd’s reach amongst the Japanese market.

Toa Re is the sole domestic professional reinsurer in Japan providing both life and non-life coverage. Over the last 77 years, the company has established a leading market position, and secured a highly diversified, well-balanced and stable portfolio of business.

BMAL has extensive experience in the establishment and management of special purpose arrangements, as well as a full syndicate application for Arcus 1856.

Mr Tomoatsu Noguchi, President and Chief Executive of Toa Re, said: “Establishing a strong platform within the Lloyd’s market is a key strategic step in our ongoing efforts to grow and diversify our international portfolio. Sponsored by Barbican with a successful track record in this area, we are confident that through SPA 6132 we will build a long-term, secure presence in the London Market.”

Group CEO of Barbican Insurance Group, David Reeves added: “Barbican is committed to building mutually beneficial relationships with like-minded and forward-thinking corporate partners. We are delighted to be working with Toa Re to support their ambitions, while also looking to expand our footprint in Asia where we see significant opportunities to develop strategic business relationships and gain more in-depth market knowledge.”

AIG names Townsend as international GI CEO

Chris Townsend is returning to AIG in the newly created role of CEO of international general insurance, it has been announced.

Townsend will lead the international operations of AIG’s general insurance business and will be responsible for executing its growth strategy and building on the carrier’s extensive international footprint to support a profitable, client focused organisation.

He will report to general insurance CEO Peter Zaffino and become part of the general insurance leadership team. He is expected to join the US insurance giant in the first quarter of 2018.

Townsend returns to AIG having served as CEO of the AIG's Asia Pacific region from 2010 to 2012 after which he left to join Metlife, where he was most recently president of MetLife's Asia region.

Townsend also serves on the board of the Japan Society and holds a number of advisory positions, including as adviser to the Asia Society, vice chairman of the U.S.-Korea Business Council, and a member of the international advisory council to the Guangdong Government.

Commenting on Townsends return to the company, Zaffino said: “We are extremely pleased to welcome Chris back to AIG,

“He is a highly experienced leader in the insurance industry who knows our company well. He brings deep international expertise to our team, as well as a proven track record of delivering strong financial and operating results. I look forward to partnering with Chris as we strategically position General Insurance for the future.”

R&Q strikes deal with ProSight to novate management of Syndicate 1110

R&Q has reached an agreement with ProSight Specialty Insurance (ProSight) to novate the management of Syndicate 1110 to R&Q Managing Agency Limited with day to day claims handling on non-US business outsourced to R&Q Central Services.

At the same time R&Q will acquire, for a nominal sum, the 100 percent shareholding of the ProSight corporate members; ProSight Specialty (TSMC) Limited (“TSMC”) and ProSight Specialty (ECUCM) Limited (“ECUCM”) that provide capital support to Syndicate 1110. ProSight will continue to meet Funds at Lloyd’s (FAL) obligations in respect of Syndicate 1110 until a reinsurance to close by R&Q in early 2020.

However, ProSight has the option of requiring R&Q to provide up to 30 percent of the FAL with four months’ notice in exchange for annual payments to cover R&Q’s cost of capital. Based upon current expectations, the amount of FAL that R&Q could be required to provide is circa £9.4mn, with the majority sourced from external funding providers.

As part of ProSight’s exit from Lloyd’s, all of Syndicate 1110’s reinsurance of ProSight’s US based insurance companies was commuted, and business sourced by ProSight coverholder ProSight Specialty Insurance Solution to Syndicate 1110 is being reinsured back to the ProSight Group via 100 percent quota share reinsurance provided by ProSight’s subsidiary New York Marine and General Insurance Company (NYMG) which is A- rated by AM Best.

In addition, Syndicate 1110 will have the benefit of an aggregate stop loss reinsurance on the non-US business by NYMG in excess of current syndicate reserves of circa £76mn.

As owner of the corporate members, R&Q will have the benefit of 75 percent of any future reserve savings, with ProSight continuing to hold a 25 percent profit interest.

Subject to regulatory approvals, R&Q will also acquire ProSight Specialty Underwriters Limited (PSUL) and ProSight Specialty Managing Agency Limited (PSMAL).

PSMAL will be de-authorised ahead of the completion of the acquisition by R&Q. The consideration payable will be equal to the tangible net asset value of the two companies, approximately £1.1mn, satisfied in cash.

R&Q chairman Ken Randall said: “We are delighted to have reached agreement with ProSight in respect of S1110. Our appetite for using our expert claims administration skills in the run-off of legacy Lloyd’s portfolios continues and this transaction is evidence of that. The ongoing collaboration with RQMA and Coverys, its proposed new owners, provides R&Q with continued access to the infrastructure required to manage syndicates with legacy business and we look forward to completing further transactions as the pipeline in this segment continues to grow.”

ProSight CEO Joe Beneducci commented: “We are pleased to have completed this transaction enabling us to recapture our well performing US book of business and also retain a profits interest on the UK portfolio. We look forward to working together with R&Q on the run-off of the UK book.”

Aioi Nissay Dowa Insurance selects Luxembourg for EU hub

Japanese insurer Aioi Nissay Dowa Insurance (ADI), the subsidiary of MS&AD Insurance, has become the latest carrier to announce plans to set up an EU hub in Luxembourg in response to Brexit.

In a statement, MS&AD said it will restructure its European business organisation and move Aioi Nissay Dowa Insurance Company of Europe Limited (ADE) to Luxembourg as an insurance company in continental Europe.

Further to the move to Luxembourg, the company announced it would establish Aioi Nissay Dowa Europe (ADE HD) as a holding company in Britain in February 2018, as well as Aioi Nissay Dowa Insurance (UK) a new UK-based insurance company in September 2018.

Mike Swanborough will act as CEO for both of these units.

Both the new UK insurer and the unit moving to Luxembourg will be subsidiaries of the new UK-based holding company.

Aioi join the likes of, AIG, CNA Hardy, FM Global, Liberty, Hiscox, RSA and Tokio Marine in selecting the Grand-Duchy as the location of post-Brexit EU bases.