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EC News (14th December 2017)

December 14, 2017

Round-up of the weekly news and developments from the global insurance market with stories from Brit, Sedgwick, Third Point Re and more.

Brit launches collateralised vehicle Sussex Capital

Brit has launched a new Bermuda-domiciled collateralised reinsurance platform, Sussex Capital.

Sussex Capital, via a newly set up Bermuda-domiciled special purpose insurer, will write direct collateralised reinsurance for third-parties while also providing collateralised reinsurance to Brit’s reinsurance portfolio and Lloyd’s syndicate.

The platform is aiming to start writing business on 1 January 2018 with an expected initial capacity of $100mn. 

Brit CFO Mark Allan said that Sussex Capital was the “next step” in the company’s strategy to build long term relationships with the capital markets. He added that it will complement the carrier’s existing Bermuda-domiciled collateralised reinsurance vehicle, Versutus Re, which it launched in 2015.

Brit also revealed that former Axis Re CEO Jay Nichols would join the board of Sussex Re and Brit Re as non-executive director. He will also become chair of the audit committee of Brit Re and join the Brit Ltd audit committee.

Nichols most recently served as CEO of the reinsurance operations at Axis Capital. He previously spent 15 years at RenaissanceRe, culminating as the president of RenaissanceRe Ventures. He was responsible for the formation of DaVinci Reinsurance and Top Layer Reinsurance, as well as numerous sidecars and other joint ventures and strategic investments.

Before joining RenaissanceRe, Nichols also held various positions at Hartford Steam Boiler, Monarch Capital and the accounting firm of Matson, Driscoll and D'Amico. 

Brit executive chairman Mark Cloutier said: “The launch of Sussex Capital and establishment of Brit Re are both important milestones in the development of our platform in Bermuda and the appointment of someone of Jay’s calibre to their respective boards is a strong statement of intention.

“Jay brings to Brit an impressive track-record within the reinsurance arena, and his experience of working across the capital markets will prove extremely valuable as we continue to build on our Bermuda presence and capabilities.”

Sedgwick to acquire Cunningham Lindsey

Claims management firm Sedgwick Claims Management Services has agreed to acquire loss adjuster Cunningham Lindsey.

The terms of the transaction were not disclosed.

Cunningham Lindsey comprises a number of business segments specialising in loss adjusting, third party claims administration, forensic engineering and repair consulting. It employs 6,000 people operating in 600 offices spanning 60 countries.

Cunningham Lindsey said that its range of services complement the existing offerings of Sedgwick and subsidiary Vericlaim.

Cunningham Lindsey global CEO Jane Tutoki said: “Joining forces with Sedgwick and Vericlaim presents an opportunity to provide our clients an end-to-end service solution around the world.

“Our vision is to align our complementary services and further grow the reach to a scale that will help redefine the expertise and talent we can offer.”

Meanwhile, Sedgwick group president Michael Arbour said the strategic acquisition of Cunningham Lindsey enhances Sedgwick’s status as the leading global provider of innovative risk and benefit solutions and broadens the company’s international footprint.

“Bringing the incomparable talent, expertise and robust global capabilities of Sedgwick, Vericlaim and Cunningham Lindsey under one umbrella is among the greatest stories to emerge from the claims industry in many years,” he said.

“This exciting development puts us in an optimal position to meet the increasingly complex needs of clients around the world.” he added.

Sedgwick’s majority shareholders include KKR, Stone Point Capital LLC and Caisse de dépôt et placement du Québec.

The closing of the transaction is subject to customary conditions and regulatory approvals. Following deal completion, Sedgwick will have more than 20,000 employees.

Third Point Re appoints McConachie to its board

Fidelis co-founder Neil McConachie has rejoined Third Point Re’s board of directors, replacing Christopher Collins who has now stepped down from the board.

Collins is a managing director at Kelso & Company, a founding private equity investor of Third Point Re. He had served on the total return reinsurer’s board since November 2011, shortly after the company's founding, before stepping down on 12 December.

Having worked at Lancashire Group from 2006 to 2012 in a variety of senior positions including CFO and president, McConachie originally joined Third Point Re's board in November 2013, serving as the chairman of the governance and nominating committee and as a member of the audit, compensation, and risk committees.

He then stepped down in 2015 to co-found Fidelis with former Lancashire founder and CEO Richard Brindle and held the position of the group's CFO. In January this year, McConachie resigned as Fidelis CFO on account of personal reasons but will remain on the board as a non-executive director when he leaves in January 2018.

From January 2002 to January 2006, McConachie was senior vice president, treasurer and chief accounting officer of Montpelier Re.

Commenting on the changes, Third Point Re president and CEO Robert Bredahl said that Chris had been a “valuable” director. “We appreciate his many contributions and dedicated service to the company over his tenure and wish him all the best,” he said.

"I am very pleased that Neil will be rejoining the Board given the valuable service that he provided when he served in that role from 2013 to 2015 and look forward to his partnership and counsel once again,” he concluded.

Ardonagh announces two appointments

The Ardonagh Group has appointed Janice Deakin as deputy group CEO, whilst Iain Laws has been named CEO healthcare.

Deakin, who takes up her new position with immediate effect and is subject to regulatory approval, will continue to lead distribution as CEO of that segment, a role she has held since the creation of Ardonagh in June 2017. 

During that time she has overseen the acquisitions of Healthy Pets, Carole Nash and Mastercover, having played a central role in the refinancing and formation of the Group. 

As part of her new role, Deakin will work more closely with Ardonagh CEO David Ross as the group looks to drive value and create opportunity.

Commenting on the appointment, Ross said: “Janice’s appointment into the Deputy CEO role is a hugely significant day for us. That we are able to announce this change today not only reflects the quality of leadership joining our firm but it also highlights the progress we have made in our evolution as a business, moving from fixing to building.

“The entire Group is now poised to benefit from her extraordinary skillsets as a formidable dealmaker, an unshakeable inspirer of people and a really important part of the Ardonagh story.”

As part of the announcement, the firm also confirmed the hire of former Jelf general insurance head Rob Worrell as CEO of insurance broking, who joined Ardonagh this week.

Meanwhile, Laws will join the company in January 2018 and will lead the healthcare segment, a division which joins together Towergate Health and Chase Templeton.

In his new position, he will report to Worrell.

Like Worrell, Laws also joins from Jelf, where he spent the last five years of his career, most recently as managing director of healthcare and group risk.

In a move previously agreed during the group’s acquisition of Chase Templeton, the firm’s CEO Warren Dickson will work with Laws over a period of months into the New Year prior to his departure.

Commenting on the news Deakin said: “When we started to think about bringing together Chase Templeton and Towergate Health, we envisaged the creation of the largest independent health broker in the UK. The combined businesses working in partnership with our Advisory branch network have significant cross sell opportunities, leveraging impressive track records and significant scale across the Group.

Stress tests suggest nat cat model weaknesses

The General Insurance Stress Test (GIST) carried out by the UK’s Prudential Regulation Authority (PRA) has suggested weaknesses in the natural catastrophe modelling of insurers.

The scenarios included in the stress test were designed, in part, to test risks that are either absent or not well captured in catastrophe models, for example flooding from rain associated with hurricanes or tsunamis following earthquakes.

The PRA noted that the results suggested few firms go beyond a simple loading to reflect weaknesses. The regulator encouraged firms to improve their ability to reflect these risks as their models evolve whilst it encouraged boards to understand what the limitations are with the catastrophe modelling, and their inherent uncertainty when applicable, especially for their key perils.

Additionally, for some firms, the stress test indicated areas for improvement in the way accumulations of exposures are captured, monitored and reported to the board. Specifically, the ability of firms to identify concentrations of exposures and adhere to their own risk appetite limits is an important risk management tool that should complement regular reporting of modelled loss output, according to the PRA statement.

Furthermore, the regulator said that numerous firms would benefit from being more granular in planning the management actions they would take in the event of a major loss, including reinstating exhausted reinsurance cover when appropriate. In addition, firms would benefit from considering asset liquidity, capital fungibility and strengthening their resolution planning.

The 26 largest general insurers in the UK, 16 large syndicates and the Society of Lloyd’s, participated in the GIST 2017.

Between them, they accounted for some £80bn of gross written premium (GPW), representing approximately 82 percent of the UK general insurance sector by GPW, and held some £61.5bn of eligible own funds (EOF) as at 31 December 2016.

The stresses included four natural catastrophe scenarios and an economic downturn scenario. In addition, GIST 2017 contained a separate section capturing the insurance exposures of UK general insurers to the different sectors of the UK economy.

Swiss Re CFO steps down; names Dacey as successor

Swiss Re has announced David Cole is stepping down from his position as group CFO, naming group chief strategy officer John Dacey as his successor.

The reinsurer explained that Cole was relinquishing his role to pursue a non-executive career, including remaining a board member of a number of Swiss Re subsidiaries.

Dacey, who will take up his new role effective 1 April 2018, joined Swiss Re's group executive committee five years ago as group chief strategy officer, successfully leading multiple strategic initiatives across the Group.

He has over 20 years’ experience within the (re)insurance industry, during which time he has assumed several senior executive positions.

From 2007 to 2012, Dacey served as AXA's group regional CEO and group vice chairman for Asia-Pacific and was a member of their group executive committee. Before this he was a member of the group executive board at Winterthur Insurance, first as its CFO from 2000 to 2004 and subsequently as the company's chief strategy officer from 2005 to 2007 and member of its risk and investment committees.

Commenting on the news, Swiss Re chairman Walter Kielholz said: "We are grateful for David's leadership and outstanding contribution to Swiss Re over seven years. As Group Chief Financial Officer, he has transformed our fnance division into an efficient allocator of capital across the Group. While we will miss having him in our group executive committee, we are delighted that he will stay involved with Swiss Re and that we will continue to benefit from his experience."

Kielholz continued: "John Dacey, who has a very strong track record both within and outside Swiss Re, is the ideal candidate to pick up on the momentum created by David Cole and lead our finance division forward. He has been instrumental in shaping Swiss Re's strategic framework and launching the Swiss Re Institute – both of which strongly position Swiss Re as the leading risk knowledge company."

With these changes, Swiss Re’s board of directors has decided to merge the positions of group CFO and group chief strategy officer. As of 1 April 2018, Swiss Re's group executive committee will consist of 12 members.

Validus regroups business; announces new leadership roles

Validus has revealed a number of leadership appointments to reflect a reorganisation that has resulted in three new reportable business segments: reinsurance, insurance and asset management.

Among the changes, Talbot CEO Peter Bilsby has taken on the additional role of global head of insurance. Validus said the insurance segment focuses on specialty insurance within both the Lloyd’s insurance market and the US commercial insurance market.

Lixin Zeng assumes the added role of global head of asset management business alongside his position as CEO of AlphaCat Managers Ltd. This segment’s results reflect the company’s Bermuda-based investment adviser, managing capital for third parties and Validus through insurance-linked securities and other property catastrophe and specialty reinsurance investments.

Meanwhile, Kean Driscoll has been appointed global head of reinsurance while remaining as Validus Re CEO and president of Validus Holdings. The reinsurance segment operates globally and is primarily focused on treaty reinsurance.

Furthermore, Validus said in a regulatory filing that it had changed its primary lines of business from property, marine and specialty to property, specialty - short-tail, and specialty – other to “better align the company’s disclosures with its current strategy.”

Additionally, Validus revealed further leadership changes in the insurance segment as the carrier continues to focus on building out its US insurance platform.

Western World Insurance Group CEO Bob Livingston has additionally been appointed as chairman, whilst

Validus Specialty CEO Jonathan Ritz has been given the added role of president of Western World Insurance Group.

Validus chairman and CEO Ed Noonan said that these internal appointments are a “strong reflection of the depth of the Validus management team.”

He added that the Bilsby, Driscoll and Zeng will be responsible for developing strategy and driving profitable growth across the three new reportable segments.

LSM to redomicile its UK insurance company to Luxembourg

Liberty Specialty Markets (LSM) has revealed plans to redomicile its UK insurance company to Luxembourg, while maintaining its substantial London presence.

The decision was taken in preference to setting up a separate insurance company, the carrier said.

In July, LSM announced that it would be establishing its post-Brexit European HQ in Luxembourg. Whilst many other carriers have also announced plans to set up EU hubs in the Grand Duchy in a bid to safeguard access to the EU following Brexit, most have not redomiciled existing operations, instead choosing to establish subsidiaries of their UK operations in the EU.

“Our European insurance and reinsurance businesses are highly valued at LSM.  The structure that we are announcing today will set us up perfectly to take advantage of the opportunities that we have in Europe in the post-Brexit environment,” remarked LSM president and managing director Matthew Moore.

Moore explained that moving the insurance company from the UK to Luxembourg will minimise any disruption to LSM’s clients and staff by providing continuity of its insurance company paper, adding that the company has "ambitious growth plans" for Europe.

"LSM will continue to be able to offer company and Lloyd's paper throughout the UK and Europe, and one company paper for pan-EU/UK risks,” he added.

Moore also reinforced that the company remained “committed” to London. LSM said it will retain a substantial presence there via a UK branch of the Luxembourg company. No jobs will move from London to Luxembourg and LSM’s worldwide headquarters will remain in London and will become a branch of the Luxembourg-domiciled company.

Meanwhile, LSM announced that Eric Daout had been appointed as the general manager of its Luxembourg companies. Daout was formerly the managing director of CIGNA insurance Europe. 

LSM’s European businesses will be led by Cologne-based Dieter Winkel, president of LSM reinsurance, and Kadidja Sinz, European head of insurance based in Paris.

LSM has already established and licensed an in-house coverholder in Luxembourg, Liberty Specialty Markets Europe S.à r.l. (LSME), which began underwriting on behalf of LSM’s UK insurance company Liberty Mutual Insurance Europe Limited (LMIE) from branches throughout Europe on 1 November. It is intended that LSME will also underwrite on behalf of Lloyd’s Brussels when it commences business.

The move of LSM’s UK insurance company to Luxembourg, the establishment of a UK branch, and the appointment of Daout are all subject to regulatory approvals.