Swiss Re’s rating upgraded
On 28th October, rating agency Standard & Poor’s upgraded the long-term counterparty credit and insurer financial strength ratings of Swiss Re, and its core subsidiaries, from A+ to AA- with a stable outlook, a rating the company last held in 2009.
Flagstone Reinsurance realigns strategy
On 24th October, Flagstone Reinsurance Holdings, S.A., announced a number of strategic initiatives designed to realign the Company's strategy and core capabilities. Through these initiatives, Flagstone intends to refocus its underwriting strategy to leverage its existing strengths, and streamline its corporate structure to reduce expenses and enhance capital levels. Flagstone said that over the past 18 months it has undertaken a thorough analysis of its underwriting strategy, and has determined to increase its focus on businesses that produce the highest returns on equity, while reducing its focus on businesses that absorb capital but produce less attractive returns. Accordingly, Flagstone now intends to concentrate primarily on its property and property catastrophe business, as well as its highest margin short-tail specialty lines of reinsurance business.
In addition, the Company will adjust its geographic diversification in order to decrease the threat of frequency risk. Flagstone believes that these initiatives will significantly lower its underwriting leverage. As a result of this realignment, Flagstone has commenced a formal process to divest its ownership positions in its Lloyd’s and Island Heritage operations. The Company expects that these divestitures will lower its gross written premium by approximately USD300m per year, without any impact on expected return on equity, as well as produce significant expense savings through reduced infrastructure and the consequent requirement for operational support.
Furthermore, these divestures, along with other strategic actions, are expected to create significant additional excess capital for rating agency capital requirements. The Company has retained Evercore Partners and Aon Benfield Securities, Inc respectively in relation to the Lloyd's and Island Heritage divesture processes, which are expected to be concluded by the end of 1Q2012. The Company intends to maintain its current investment strategy, which focuses on significant liquidity and security, to provide a stable capital base with which to underwrite.
As part of the realignment initiatives, Flagstone is taking a number of steps to streamline operations and to reduce its cost structure. The Company recently closed its offices in Dubai and Puerto Rico, and plans to divest its South Africa office by 1Q2012. Underwriting operations will continue to be centralised in Bermuda and Martigny.
Flagstone has previously undertaken measures to reduce global operating costs, and now it intends to take further steps to reduce back office expenses across the organisation. The Company believes these measures will result in significant annual cost savings.
Beachcroft LLP & Davies Arnold Cooper - merger
The previously announced merger between UK-headquartered law firms Beachcroft LLP and Davies Arnold Cooper LLP to form DAC Beachcroft LLP, formally took effect on 31st October. The new firm has more than 2,000 people across the UK, Europe, Asia Pacific and Latin America.
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RPC to open Singapore office
City law firm RPC (Reynolds Porter Chamberlain LLP) is to open an office in Singapore with the hire of insurance and reinsurance partner Mark Errington from Barlow Lyde & Gilbert (BLG).
Alterra Capital merges its Irish underwriting companies
On 1st November, Alterra Capital Holdings Limited, Bermuda, announced the merger of its Irish underwriting companies, Alterra Europe plc and Alterra Reinsurance Europe plc. Alterra Europe plc, the surviving entity, will underwrite business from its head office in Dublin, as well as from its branch offices in London and Zurich. W. Marston (Marty) Becker, President and CEO of Alterra, commented, "We are pleased to have been able to merge our Irish underwriting companies in order to operate our insurance and reinsurance businesses as a single platform. We believe there are benefits for all stakeholders in this single company structure that has been enabled by the Central Bank of Ireland relaxing its restrictions on the writing of reinsurance business by direct insurance companies. The new structure of Alterra Europe provides a stronger consolidated balance sheet for our Dublin insurance and reinsurance platform, allowing for greater operational efficiencies, and simplifying the implementation of Solvency II."
BIBA to join with IIB to provide one trade association
The British Insurance Brokers’ Association (BIBA) confirmed that it will join together with the Institute of Insurance Brokers (IIB) to provide a one trade association and lobbying voice for general insurance brokers. From 1st November 2011, BIBA and the IIB will merge with a number of the IIB board directors joining BIBA’s board. Barbara Bradshaw, the IIB Chief Executive, will also join BIBA’s board and become a member of the BIBA Executive, reporting to Eric Galbraith. The two brands will remain while the two organisations are brought together and IIB members will be integrated into BIBA’s membership.
Matters at Cotesworth and Co to be finalised
Over ten years after the appointment of Liquidators to Cotesworth and Co Limited, matters will be finalised shortly. Finalisation of the liquidation had previously been held up pending the resolution of an issue relating to tax clearance. The Liquidators intend that a first and final dividend will be declared within four months from 1st December 2011, the last date for proving debts. All of the assets of Cotesworth have been realised and the Liquidators currently hold some £900,000 cash.
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Transatlantic Holdings - latest
On 1st November, Validus Holdings Ltd., Bermuda, announced that it had extended its Exchange Offer for all of the outstanding shares of common stock of Transatlantic to 5:00 p.m., Eastern Time, on 25th November 2011, unless further extended by Validus. Validus and Transatlantic continue to exchange information and remain in discussions regarding a possible transaction, but Validus said there can be no assurance that a transaction will be consummated as a result of the ongoing discussions. On 3rd November, Transatlantic Holdings, Inc. confirmed that Validus had amended the terms of its exchange offer to acquire all outstanding shares of common stock of Transatlantic.
Pursuant to the terms of the revised exchange offer, Transatlantic stockholders would receive 1.5564 Validus voting common shares and USD11.00 cash for each share of Transatlantic common stock, which represents a current market value of USD53.35. Validus has also suggested that Transatlantic cease its current plan to return capital to its stockholders through stock repurchases in order to fund a USD2.00 pre-closing dividend that Validus suggests would be part of its consideration. Transatlantic said its Board of Directors, in consultation with its independent legal and financial advisors, will review and evaluate the revised exchange offer and Transatlantic advised its stockholders to take no action at this time pending the review.
Transatlantic confirmed that it remains in confidential discussions with other parties regarding potential strategic alternatives. However, also on 3rd November, Validus announced that it had increased its offer to acquire Transatlantic and that the Transatlantic board had not accepted the increased offer and consequently Validus is pursuing its Consent Solicitation to replace the Transatlantic board with three independent director candidates. Validus' Chairman and CEO Edward J. Noonan said, "Our increased offer provides compelling value to Transatlantic stockholders. It also allows Transatlantic stockholders, through a significant equity investment in the combined company, to share in what we believe to be greater future upside potential than Transatlantic could otherwise achieve. Given these benefits to Transatlantic stockholders, we are confident Transatlantic stockholders will share our disappointment that the Transatlantic board has failed to accept our compelling increased offer. Transatlantic stockholders should have the right to decide the future of their company and our Consent Solicitation is designed to provide them with this opportunity.”
On 4th November, Transatlantic Holdings, Inc. confirmed that its Board of Directors, after consultation with its independent financial and legal advisors, had unanimously recommended that stockholders reject Validus Holdings, Ltd.'s revised Exchange Offer. Following the announcement, Validus said it believes that by rejecting its increased offer, the Transatlantic board is not acting in the best interests of its stockholders and is attempting to frustrate stockholders' ability to realise the compelling value of Validus' increased offer. Validus' Chairman and CEO Edward J. Noonan went on to say, "The Transatlantic board's formal rejection of Validus' increased offer is not in the best interest of its stockholders. Transatlantic's ill-advised and questionable pursuit of an alternative theoretical transaction, a third party-sponsored run-off, a minority investment from a third party or a "go it alone" approach, presents significant risks and delays as compared to a Validus transaction. Because of the Transatlantic board's regrettable actions, we are moving forward with our Consent Solicitation and Exchange Offer, which will empower Transatlantic stockholders to determine the future of their investment and obtain the superior value of our increased offer."
On 8th November, Validus mailed a letter to stockholders of Transatlantic Holdings, Inc., urging them to preserve their right to obtain greater value for their Transatlantic shares and make their views known to the Transatlantic board. Inter alia, Validus noted that in the previous week it significantly increased its offer for Transatlantic. Validus said the increased offer was currently valued at USD57.67, comprised of 1.5564 Validus common shares per Transatlantic share; USD11.00 in cash per share, an increase of $3.00 per share from Validus' initial offer, through a pre-closing dividend financed from new borrowings; and an additional USD1.75 in cash per share through a pre-closing dividend funded from available cash on hand at Transatlantic, subject to the impact of additional Transatlantic share repurchases. Validus said its increased offer, including the full amount of the additional cash dividend of USD1.75 per share, represented a 5.5% premium to Transatlantic's closing share price on 7th November 2011, and a 31.0% premium to Transatlantic's unaffected closing share price on 10th June 2011.
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Gard closes 2008 policy year
On 1st November, P&I insurer Gard announced that: the 2008 policy year is closed with no supplementary calls being levied; no further deferred calls or supplementary calls are expected for the 2009 and 2010 policy years; and based on a combined ratio net target of 105 per cent for P&I, a general increase of 5 per cent for mutual P&I and FD&D entries is required. Claes Isacson, CEO of Gard, commented, “Our key responsibility is to manage our business to preserve the long term strength to the benefit of our owners and policyholders. A key part of that is the correct rating of our mutual book. General premium increases are used to ensure that income remains in line with expected claim costs, taking into account shipping liability trends and other claims inflation factors. Planning for a CRN of 105% means that Gard is helping members by running the P&I portfolio below cost. This is a part of our dividend strategy, alongside reducing the deferred call when our financial results exceed expectations. During the last two policy years the P&I mutual premium was reduced by approximately USD 68 million due to reductions in the deferred call.”
Munich Re acquires coverage for US hurricane and European windstorm risks
On 31st October, Munich Re, Germany, said it had acquired coverage for US hurricane and European windstorm risks, with a total volume of USD100m, from the special-purpose vehicle Queen Street IV Capital Limited, which in turn has placed a catastrophe bond for this amount in the capital markets. The transaction was structured and arranged by Munich Re. The catastrophe bond matures on 9th April 2015 and was issued by SPV Queen Street IV, which is registered in the Republic of Ireland, while the risk modelling was developed by AIR Worldwide. With this bond, Munich Re obtains relief for losses from extreme events with a combined statistical return period of around 50 years. The bond has received a rating of BB- (sf) from Standard & Poor's, and the risk premium is 7.50%. In addition to the risk premium, investors will receive variable-rate interest paid from a US Money Market fund which collateralises this catastrophe bond. It carries Standard & Poor’s top AAAm rating. Loss events will be quantified on the basis of weighted market loss triggers. Market losses will be determined for US hurricanes by PCS, and for European windstorm by PERILS AG (Zurich). Queen Street IV has placed the bond globally among a broadly diversified group of international investors, mainly comprising investment funds and hedge funds, but also insurers and reinsurers. It is the third placement from the Queen Street programme this year.
JLT to combine existing Italian broking business with Marine & Aviation S.p.A. (M&A)
On 3rd November, Jardine Lloyd Thompson Group plc, UK, announced that it has signed heads of agreement to combine its existing Italian broking business - Jardine Lloyd Thompson S.p.A. - with the business of Marine & Aviation S.p.A (M&A). Following the transaction, JLT will have a 25% interest in the newly formed joint venture and will have representation on the Board with JLT senior employees forming part of the ongoing senior management team. As part of this transaction, JLT will also acquire a 25% interest in Marine Aviation & General (London) Ltd.
Marine & Aviation S.p.A. is one of the oldest brokers in the Italian insurance market, with offices in Italy and the UK. Since 1993, the operation has also been a Lloyd's broker, placing Italian wholesale and reinsurance business into the London Market. In total, Marine & Aviation's operations generated net revenue of €9.5m in 2010 and produced a profit before taxation of €1m. The agreement remains subject to contract and any necessary regulatory approvals. A further announcement will be made when contracts have been finalised; expected to be towards the end of 2011.
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Willis Group Holdings issues 2012 Marketplace Realities report
On 3rd November, Willis Group Holdings issued the 2012 edition of its Marketplace Realities report, which offers commentary and analysis on the insurance marketplace in North America for every major line and select industry sectors. Willis reports flat to modest rate increases or decreases across major and specialty lines of insurance, with the exception of catastrophe-exposed property programmes and employee benefits which are experiencing notable price increases.
Willis sees the stability of the current insurance marketplace as a harbinger of potentially explosive growth that the industry could experience around the globe in the next decade. In introductory comments, Willis Chairman and CEO Joe Plumeri suggests the industry’s ability to absorb recent catastrophe losses, which could top USD100bn for the first time, indicates a readiness for a surge in demand for insurance and risk-related services. This surge, he notes, has three sources: growth in the developing world, especially Asia; the potential decline of public insurance support through such programmes as federal flood insurance, terrorism reinsurance and federal disaster aid; and a growing need for sophisticated risk management expertise as the risk landscape continues to evolve globally. Risks including cyber, environmental, political, and supply chain feature prominently in this new landscape. “The assets of 21st century companies are increasingly intangible such as brand, data and intellectual property,” Plumeri writes. “Traditional insurance focuses on tangibles, such as buildings and machines. This shift in organizational risk calls for a change in risk management approach - another factor that should increase the demand for sophisticated risk management expertise.”
In addition to snapshots of Property, Casualty, Workers’ Compensation, Employee Benefits and all Executive Risks lines, the publication looks at key specialty lines: Aerospace, Cyber Risks, Construction, Energy (upstream and downstream), Environmental, Health Care Professional, Kidnap & Ransom, Political Risk, Surety, Terrorism and Trade Credit.
Lancashire Holdings Limited announces special dividend of USD 124m
When reporting results for 3Q2011 and the nine months to 30th September 2011, Lancashire Holdings Limited announced a special dividend of USD124m, or USD0.80 per common share. Including dividend equivalent payments to warrant holders, this is a total capital return of USD152m. Lancashire said it has given careful consideration to its capital requirements for the coming year, and the proposed dividend enables the company to return profits to shareholders, “whilst still equipping us well to capture potential compelling opportunities in the 2012 underwriting year.”
Tokio Millennium Re rating upgrade
Rating agency A M Best has upgraded the rating of Tokio Marine group subsidiary Tokio Millennium Re to A++.
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UAE Prime Minister signs law allowing any businesses to use the English language DIFC Courts
On 31st October, HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, signed a law allowing any businesses to use the English language DIFC Courts, the Dubai International Financial Centre’s (DIFC) independent, common law judicial system, to resolve commercial disputes. Thus the change means that parties in the region and internationally may incorporate the jurisdiction of DIFC Court into their contracts.
Howden Broking Group completes acquisition of Accette Insurance Group
On 8th November, it was announced that Hyperion Insurance Group Limited’s subsidiary, Howden Broking Group Limited, had completed the acquisition of the insurance operations of Accette Insurance Group in Hong Kong, Singapore, Thailand, Malaysia, and the Philippines. The deal means that Howden now has 14 offices in eight countries across Asia. The acquisition of Accette’s Indonesian operation remains subject to regulatory approval.
Hiscox Ltd, Bermuda, announces reduction in gross written premiums year-on-year
On 7th November, when issuing an Interim Management Statement for the first nine months of 2011, international specialist insurer Hiscox Ltd, Bermuda, said that its gross written premiums year-on-year have reduced as expected by 3.0% to £1,169.5 million (2010: £1,205.3 million) “as the Group maintained underwriting discipline and continues to walk away from poorly rated risks”. Bronek Masojada, Chief Executive, commented, “Hiscox is in good shape. Our strategy of balance and diversity gives us options in challenging times and the strength of our UK business is proof of this. Although the wider market is slow to turn, the cumulative effect of international catastrophes is pushing reinsurance rates upwards. As nearly a third of our income comes from reinsurance, we are ready to benefit at the January renewal season.” Hiscox London Market plans to increase Syndicate 33’s 2012 capacity to £950m (2011:£900m), a £50m reduction from the figure announced at the half year. Hiscox said that, “With the wider insurance market still under pressure, this area will continue to underwrite for profit over volume.”
Alterra Capital, Bermuda, rating upgrade
Ratings agency Standard & Poor's has upgraded the core subsidiaries of Alterra Capital, Bermuda, from A- to A.
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Amlin plc announces rates within its London Marine business are up
In an interim management report issued on 17th November, Amlin plc said that rates within its London Marine business were up 2.0% to 31st October, with marine liability and energy classes achieving healthy rate increases of 7.5% and 6.0% respectively in the ten month period, and that modest rate increases were evident for most other marine classes.
AmWINS Group, Inc. declares intent to acquire 100% share capital of THB Group plc
On 14th November, the board of insurance and reinsurance broking and risk management group THB Group plc confirmed that AmWINS Group, Inc. has formally declared its intent to acquire 100% of the share capital of THB at 80.55 pence per share. As previously reported, THB Group Inc. announced on 12th July that it was in discussions with AmWINS which may or may not lead to an offer for the entire share capital of THB. THB is based principally in the London market, serving clients and markets across the UK and internationally through its network of offices worldwide. THB was established in 1968 and floated on the London Stock Exchange, Alternative Investment Market (AIM) in October 2002. In 2008, THB acquired the Lloyd's broking interests and certain overseas shareholdings of PWS. THB described AmWINS as a leading wholesale insurance distributor of specialty products and services, placing more than USD5bn in premiums and employing over 2,000 people across more than 70 offices in 17 countries, including 50 locations in the US.
Hardy envisages 2012 premium growth in existing market sectors
On 14th November, Hardy Underwriting Bermuda Limited said, when issuing an interim management statement, that the 2012 business plan envisages premium growth in existing market sectors, as well as the introduction of the offshore energy account, which will be underwritten by Paul Dawson and his team. The incremental capital needed to support this growth will be provided by third party capital, with ARIG increasing its interest from 7.5% of 2011 capacity to 10% for 2012 and Tower Group providing 15% of 2012 capacity. Hardy added that it will receive fees and profit commissions relating to these third party syndicate participations which will enhance the return on equity.
Catlin - average weighted premium rates for cat-exposed business increased during 3Q2011
On 14th November, Catlin Group Limited, Bermuda, said, within an interim management statement, that average weighted premium rates for catastrophe-exposed business increased by 10.5% during the third quarter of 2011, following on from the rate increases at 1st June and 1st July as reported in the Group’s 1H2011 results. Average weighted premium rates for non-catastrophe business were broadly flat during the 3Q. Catlin expects improvement in rates and conditions for many of the classes of business it underwrites.
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