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EC News (8th March 2018)

March 08, 2018

Round-up of the weekly news and developments from the global (re)insurance market with stories from AXA, Canopius, The Ardonagh Group and more.

AXA strikes $15.3bn deal to acquire XL

French insurance giant AXA has agreed to acquire Bermudian (re)insurer XL Group in a $15.3bn deal as it looks to shift its balance of business from life and savings (L&S) to property and casualty (P&C).

The transaction values XL at $57.60 a share, representing a 33 percent premium to the company’s closing share price on 2 March and 1.51x XL's fully diluted book value per common share of $38.04 as of 31 December 2017.

AXA said the deal would make it a leading global P&C commercial lines player across all lines, with combined gross written premiums of EUR30.2bn based on 2016 figures.

Following deal completion, the combined operations of XL Group, AXA Corporate Solutions, and AXA Art will be led by incumbent president and COO of XL Group Greg Hendrick who will assume the role of CEO of the combined entity and will join AXA Group’s management committee. Hendrick will report to AXA CEO Thomas Buberl.

In addition, XL Group CEO Mike McGavick will become vice chairman of the combined P&C commercial lines operations and also act as a special advisor to Buberl.

AXA said that the firm will now “accelerate” the exit strategy of its existing US operations through a planned H1 2017 IPO that will make the group “less sensitive to financial markets”.

It said that the deal will be financed by c.EUR3.5bn of cash in hand, c.EUR6.0bn from the planned US IPO and related transactions, c.EUR3.0bn of subordinated debt, while EUR9bn of backup bridge financing is already in place.

Buberl said the agreed transaction was a leap in its strategy: “This transaction is a unique strategic opportunity for AXA to shift its business profile from predominantly L&S business to predominantly P&C business, and will enable the Group to become the #1 global P&C Commercial lines insurer based on gross written premiums”,

“The future AXA will see its profile significantly rebalanced towards insurance risks and away from financial risks.”

Meanwhile, McGavick remarked: “Today marks an unrivalled opportunity to accelerate our strategy with a new strength and dimension.

“We are excited at the opportunity to build the scale, geographical footprint, product portfolio, and the unmatched commitment to innovation that relevance in the global insurance industry requires. In AXA we have found like-minded partners committed to the absolute necessity to innovate and move this industry forward,” he added.

The deal is expected to close in the second half of the year, subject to XL shareholder and regulatory approval.

Duffy named CEO of Canopius Managing Agents

Canopius has appointed Mike Duffy as chief executive of Canopius Managing Agents (CMA), the group's main regulated entity.

Effective immediately, Duffy will carry out his new role alongside his current responsibilities as group chief underwriting officer (CUO).

Concurrently, group deputy CEO Sarah Willmont will become CUO of CMA and active underwriter of Syndicate 4444.

Both appointments remain subject to relevant regulatory approvals.

Canopius executive chairman Michael Watson said: “I have worked with Mike for 12 years and he is a valued partner and greatly respected by the market and our staff. Moreover, Sarah has made a huge contribution to our underwriting leadership and strategy. It is clear they are the right team to lead us forward and it is very encouraging to be able to make promotions from within the group, demonstrating the strength and depth that we have at Canopius.”

The changes come as the Lloyd’ carrier prepares to become a standalone business once again, with the completion of its previously announced private-equity-backed management buyout scheduled for the first quarter of this year.

Mugge steps aside as Ardonagh CFO

The Ardonagh Group has announced that its CFO Mark Mugge will be moving out of his current role to work across the group “on a series of key strategic initiatives being prioritised during 2018.”

Mugge will transition into his new role this month, with deputy CFO Antony Erotocritou taking over his day-to-day responsibilities as group finance director.

Erotocritou joined Ardonagh in February 2017, having spent eight years at RSA as finance director of the carrier’s personal lines business.

Commenting on the changes, Ardonagh chief executive David Ross said: "2017 was a huge year for Ardonagh, with the creation of the Group providing us with a platform on which to build and grow incredible brands and businesses. Almost exactly three years since Mark entered the building, we find ourselves entering the next phase of the Ardonagh story, moving out of the fix and formation.”

He added that by stepping away from the CFO, Mugge is freed up to lead and advise on strategic, growth acceleration projects in what Ross described as a “market awash with opportunity”.

"Being able to give my full attention to these value creation projects is crucial to their compressed and ambitious timelines. I have complete confidence in Antony’s ability to continue to lead and grow our finance team to support the Group’s ambition,” said Mugge.

As part of the change, Erotocritou will succeed Mugge on the board of the Group Holding Companies, comprised of The Ardonagh Group Limited, Ardonagh Midco 1 Limited, Ardonagh Midco 2 Limited, Ardonagh Midco 3 plc, Ardonagh Finco plc and Towergate Insurance Limited.

Aon Benfield appoints capital advisory and terrorism specialty heads

Aon Benfield has hired a brace of senior executives from Guy Carpenter to head up its capital advisory and terrorism specialty units.

Eric Paire will lead the reinsurance broker’s newly formed capital advisory division, while Emma Karhan will become the firm’s new head of terrorism specialty and reinsurer relationships in London.

Paire will report to Aon Benfield UK CEO Nick Frankland, while Karhan will report to Bob Bisset, CEO of the broker’s Global ReSpecialty division.

Paire joins from Guy Carpenter, where he served as head of its strategic advisory and the EMEA global partners unit since 2007, developing and coordinating Guy Carpenter initiatives for enterprise risk management and its large global clients. During his career, he has also held senior positions at AXA Re and Scor.

The capital advisory unit will provide clients with services such as alternative risk solutions, capital provision, business intelligence, financial modelling, and rating agency expertise.

Karhan also moves over from Guy Carpenter, where she was managing director within the firm’s EMEA practice and led its international terrorism placements, and was a member of its Nordics business management team.

In her new role, she will be responsible for driving growth in the provision of effective terrorism coverage for clients, specifically in the pool and public entity space, and enhancing the firm’s relationships with the region’s leading reinsurers as part of Aon Benfield Broking Strategies, which is led globally by Jeremy Goodman. 

“Our capital advisory unit has been created specifically to advise clients effectively on both their asset and liability strategies, in order to help optimise the use of capital across their operations,” Frankland said.

“In addition, we are evolving our terror offering through enhanced modelling tools and coverage development, which will benefit hugely from Emma’s proven expertise and reinsurer relationships in the class.”

GRP appoints Nathan as CEO of MGA division

UK broker and MGA consolidator Global Risk Partners (GRP) has named Clive Nathan as CEO of its MGA division.

Nathan will join the business and assume his new role in April, succeeding Stephen Ross who has overseen the rapid growth of the MGA business to its current £100mn+ of gross written premiums (GWP).

As COO of GRP, Ross will focus on the Group’s M&A activity as GRP expands its UK footprint in both broking and underwriting.

Nathan joins GRP from Primary Group, the holding company of UK General Insurance, where he held a variety of senior roles including non-executive chairman of Rural Insurance and executive chairman of One Commercial.

From 2006 to 2016, he served as CEO of Towergate Underwriting, having joined the business in 2003 as a regional managing director.

GRP chairman Peter Cullum remarked: “Clive brings a wealth of experience to the rapidly growing MGA division following his executive roles at both Towergate and Primary Group.”

“Clive is joining the Group at a time when we are looking to expand significantly our MGA business with further acquisitions, hard on the heels of the investment in Camberford Law.”

Commenting on his appointment, Nathan said: “I am delighted to be joining the group as it continues its exciting trajectory in the UK insurance market. Its MGA division comprises a number of highly regarded specialty businesses and I look forward to working with them and the executive team at GRP.”

Channel and Canopius join Liberty to form $27bn consortium

The Channel Syndicate and Canopius have joined Liberty Specialty Markets (LSM) in establishing a consortium to provide capacity for Toredo, an online platform for single situation trade credit insurance.

The London Market Credit Consortium (LMCC) will provide up to $75mn of capacity per risk with a maximum two-year period.

At launch, the consortium will offer $27bn of capacity covering 418 financial institutions in 72 countries.

The capacity will initially support short-term trade finance business and can be accessed by any Lloyd’s accredited broker signed up to the Toredo platform.

LSM announced plans to launch Toredo last month. The launch date for both Toredo and the LMCC will be confirmed shortly alongside full details of its product range and instructions for accessing the platform.

Chris Hall, who was hired by LSM in January as consortium underwriter, said: “By forming this consortium we’re able to bring together like-minded underwriters who can provide significant capacity to the underwriting of short-term trade finance business.

Bernie de Haldevang, head of specialty at Canopius added that providing dedicated capacity to the Toredo e-trading platform would create greater efficiencies in the underwriting of short-term trade finance risks.

“It will give brokers and their clients better access to a significant amount of capacity that has been rather dormant in this interesting part of the class to date,” he said.

Meanwhile, Kade Spears, divisional head of specialty at The Channel Syndicate commented: “Our market needs an online, quote-to-bind platform for short-term trade finance. This will allow clients and brokers to transact in a more efficient and secure manner. Toredo provides that solution.”

Pool Re expands retro programme to include cyber terrorism

Pool Re has renewed its retro programme and extended the cover to include material damage and direct business interruption (BI) caused by acts of terrorism using remote digital interference.

Brokered by Guy Carpenter, the renewed cover has been increased by £100mn to £2.1bn and has been placed with an expanded panel now containing 47 reinsurers, with Munich Re remaining the largest market.

The three-layer programme matches the cover provided to Pool Re member insurers, with cyber terrorism now included along with chemical, biological, radioactive and nuclear risks.

This represents the most comprehensive and largest terrorism retro placement in the world.

Pool Re chief executive Julian Enoizi commented: “This retrocession programme represents a significant milestone for Pool Re and the culmination of months of collaboration, not only with our reinsurance panel and Guy Carpenter, but also with Cambridge Centre for Risk Studies who provided the research into cyber terrorism.

“We have sought to make the cover we provide truly reflective of the risks our member insurers face and also to future proof the scheme to ensure it represents the most comprehensive terrorism reinsurance cover possible. The appetite to engage with the programme has been exceptional and reflects the reinsurance market’s comfort with the risk and the modelling information provided by Pool Re. It also highlights their support for the pool model, which provides them with sufficient information to determine the level of capacity they are comfortable providing. We will continue to seek to extend our programme, in line with our cost and security parameters.”

Sompo to launch speciality operation in Barcelona

Sompo International has revealed it is launching a new European specialty insurance underwriting operation in Barcelona.

The new operation will initially focus on management liability, professional indemnity and financial institutions lines of business.

The new team will be spearheaded by executive vice president Thomas Mannsdorfer, which will partner with brokers across Continental Europe. Mannsdorfer will be joined by senior vice president Mathieu Borneuf.

Both Mannsdorfer and Borneuf will be based in Barcelona.

Mannsdorfer joined Sompo International in October 2017 from ANV where he served as a director of M&A insurance for six years and more recently also as international chief underwriting officer. He has also held various roles at HCC Global, AIG, and Allianz in Spain, France and Switzerland.

Meanwhile, Borneuf joined Sompo International in January 2018 from Navigators where he served as head of management and professional liability for Continental Europe as well as Paris branch manager since 2014. Before that, he held a similar position at Torus having initially joined the carrier as head of management liability in 2010. He has also held roles at Marsh Paris, AIG Australia and AIG Europe.

Commenting on the announcement, Sompo International London Market Insurance CEO Graham Evans remarked: “We are excited to build out our underwriting capabilities in Continental Europe under Thomas and Mathieu and plan to introduce several additional professional lines products and underwriters to the new operation over the next few months.”

“The new team will work closely with our established London Market Insurance operation to offer a full suite of products to our international clients underwritten through both our company platform and Lloyd’s syndicate.”

Global Insurance CEO Jack Kuhn added: “Europe is a key area of growth for Sompo International and we continue to build a strategic presence on the continent. As we add specialty underwriting talent, we will be able to more effectively deliver a broader range of products to clients in these markets. Local presence and a distributed producer network will be critical to successful growth, especially as we plan for the post-Brexit environment.”