Transatlantic Holdings and Alleghany Corporation to combine
On 21st November, Alleghany Corporation and Transatlantic Holdings, Inc. announced that the companies have entered into a definitive agreement under which Transatlantic will combine with Alleghany. Thus a saga that began early last year with a plan for Transatlantic to merge with Allied World, followed by an offer for Transatlantic from Validus, a subsequent offer from National Indemnity (a member of the group of insurance companies of Berkshire Hathaway Inc., the entity headed by Warren Buffett), talks with several parties and some acrimony, appears to be heading towards a conclusion. Under the Alleghany deal, Transatlantic’s stockholders will receive aggregate consideration currently valued at USD59.79 per share in stock and cash, or approximately USD3.4bn. Following completion of the transaction, Transatlantic will become an independent stand-alone subsidiary of Alleghany. The companies expect that Transatlantic will maintain its current financial strength ratings of “A+” from Standard & Poor’s and “A” from A.M. Best, which will help Transatlantic preserve its franchise.
Catlin forms strategic partnership with China Re
On 18th November, Catlin Group Limited announced the formation of a strategic partnership with China Reinsurance (Group) Corporation - the largest reinsurance company in China - that will result in the establishment of a special purpose syndicate at Lloyd’s. The quota-share reinsurance underwritten by Syndicate 2088 will allow Catlin to increase premium volume in 2012 - “at a time when rates are expected to rise for certain classes of business” - without seeking additional capital from existing shareholders. Catlin said that furthermore, the partnership with China Re will allow the international specialty P/C re/insurer to expand its knowledge of insurance and reinsurance practices in China, allowing the Group to increase its presence in this rapidly growing marketplace. Catlin established offices in Hong Kong in 2006 and in Shanghai in 2007, and it is currently the largest participant in Lloyd’s China (Lloyd’s Insurance Company (China) Limited), which was also established in 2007. Some China Re employees are being seconded to Catlin. China Reinsurance (Group) Corporation was jointly founded by the Ministry of Finance of China and Central Huijin Investment Corporation with 15.09% and 84.91% stakes, respectively. The Group is the only state-owned reinsurance group in China with a paid-up capital of RMB36.408bn and gross premium income of RMB38.13bn in 2010. It has an ‘A’ (Excellent) rating by A.M. Best.
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Starr International Co. files lawsuit against US Government
On 21st November, the Maurice “Hank” Greenberg-led Starr International Co. filed a lawsuit (Starr International Co. et al v. US, US Court of Federal Claims, No. 11-00779) in the US Court of Federal Claims in Washington, D.C., against the US Government claiming that its takeover of American International Group Inc. (of which Greenberg was the former head) was unconstitutional. The suit alleges that in bailing out AIG the government failed to compensate existing shareholders and this violates the Fifth Amendment to the Constitution. A figure of USD25bn is stated. AIG is named as a nominal defendant in the suit.
Corporation of Lloyd’s anticipates job losses this year
As part of its plan to reduce its annual budget the Corporation of Lloyd’s anticipates around 60 job losses in 2012. Market service charges to managing agencies are to be frozen at 2011 levels.
SCOR France reportedly marketing another catastrophe bond
SCOR, France, is reported to be in the early stages of marketing another catastrophe bond in their Atlas VI Capital Ltd. series of transactions. This is expected to be the third such bond through their Dublin, Ireland, domiciled Atlas VI Capital Special Purpose Vehicle and their eighth cat bond in the Atlas bond series. The latest is thought to be issued in three tranches and covering USD100m of US hurricane and US earthquake cover and €75m of European windstorm cover over a three-year period.
A.M. Best Co. updating methodology for alternative risk transfer vehicles
On 28th November, rating agency A.M. Best Co. said it is updating its methodology for alternative risk transfer vehicles, including captive insurers, in a criteria report supplementing the Rating Captives section of Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition. The new methodology is likely to be finalised in 45 to 60 days.
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S&P places Toa Reinsurance on CreditWatch
On 29th November, Standard & Poor's Ratings Services placed the long-term counterparty and financial strength ratings on Toa Reinsurance Co. on CreditWatch with negative implications. The CreditWatch listing reflects S&P's view that Toa Re may post large incurred losses from Thailand's floods, given its high share in Japan's non-life reinsurance market, and the losses are likely to cause its financial profile to deteriorate to a level that is not commensurate with the current ratings. S&P currently does not have specific information about Toa Re's possible incurred losses from Thailand's floods.
Haverford fails to acquire Omega Insurance Holdings
After several exchanges and some harsh words, the somewhat drawn out attempt by Mark Byrne’s Haverford (Bermuda) Limited to acquire a 25% holding in Omega Insurance Holdings Limited came to nothing. What 2012 holds for Omega, after a difficult 2011, remains to be seen.
Syndicate 1965 will no longer accept new business
On 30th November, Singapore-based Lloyd’s Syndicate 1965 announced that it will no longer be accepting new business. The Syndicate, which operates exclusively in Asia, has been affected by the unprecedented frequency and severity of natural catastrophes in the region during 2011, culminating in the recent Thailand floods. Argenta Syndicate Management Limited (ASML), which is the provider of third-party managing agency services to Syndicate 1965, will work closely with the staff and capital providers of the Syndicate, as well as with Lloyd’s, to ensure the orderly resolution of all outstanding liabilities. ASML’s own underwriting operation, Syndicate 2121, is not affected by events relating to Syndicate 1965 and has minimal exposure to the Thailand floods. Syndicate 2121 is a specialist underwriter focusing on six core classes: property direct, property treaty, marine including cargo and specie, energy, utilities and terrorism.
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Hardy Underwriting strategy and trading update
On 1st December, specialist insurer and reinsurer Hardy Underwriting Bermuda Limited, issued a strategy and trading update. The Board of Hardy Underwriting Bermuda Limited announced that it had received several preliminary expressions of interest in its business. In view of this, and in the light of the incidence and size of catastrophe events in 2011, the Board concluded that it should undertake a strategic review; this review will include consideration of whether shareholder value might best be maximised and business opportunity might be enhanced by finding a buyer or strategic partner.
Allied World Assurance to start underwriting reinsurance business in Malaysia
Allied World Assurance Co. Ltd., which received a local operating license in July 2011, is to start underwriting reinsurance business in Malaysia from its Labuan branch with business lines being managed from Allied World’s Singapore branch office.
A.M. Best releases estimates for catastrophe-related losses in US
A.M. Best Co. has released its estimates for catastrophe-related losses experienced by the US property/casualty (P/C) industry during the first nine months of 2011, which show that losses so far have nearly doubled total year-end 2010 losses. For the 2011 period, Best estimates that total net pre-tax accident year catastrophe-related losses at USD38.6bn, up USD22.5bn, or 140%, from an estimated USD16.1bn in the first nine months of 2010. Best’s estimates total net pre-tax accident year catastrophe-related losses in 2010 at USD19.6bn.
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S&P places various insurers on CreditWatch
On 9th December, rating agency Standard & Poor’s said it had placed its ratings on various insurers (and certain related companies) on CreditWatch with negative implications; the decisions being directly related to the actions S&P took on 5th December, when it placed the ratings on 15 of the 17 eurozone member countries on CreditWatch with negative implications. The companies affected include Allianz Group (including the Euler Hermes group), Aviva Group, Axa Group, Caisse Centrale de Réassurance (CCR); Generali Group, Mapfre Group and RSA Insurance Ireland Ltd.
PICC Property and Casualty Insurance to partner with China National Offshore Oil Corp.
PICC Property and Casualty Insurance Co. announced a strategic partnership with state-owned China National Offshore Oil Corp. to provide non-life insurance coverage for offshore oil and gas related projects. The companies have agreed to cooperate in relation to upstream, downstream, power generation and certain other areas. Hong Kong-listed PICC has previously announced its plans to issue CNY5bn of new shares on the local stock exchange.
WELCAR 2011 policy form comments to be reviewed by the LMA/IUA Joint Rig Committee
In a 13th December letter to those parties who commented on the consultation draft of a revision to the Offshore Construction Project Insurance Wording (WELCAR 2001 policy form), Simon Williams, Chairman of the LMA/IUA Joint Rig Committee thanked recipients and advised that all the responses were being collated and put into a single document that can be reviewed. He also said that the JRC sub-committee will be reformed and it will be reviewing this document. Williams also said, “There is an intent to engage with our brokers to assist in the discussion and further development of the wording”. Williams is hopeful that significant progress can be made in January 2012.
A.M. Best Co. downgrades MAPFRE Re and Assicurazioni Generali
Rating agency A.M. Best Co. Inc. has downgraded its financial strength rating of MAPFRE Re, the reinsurance arm of MAPFRE S.A. of Spain, to A from A+. The decision relates to concerns over the company’s exposure to investments in several peripheral euro zone economies, particularly Spain and Portugal. A.M. Best has also downgraded the financial strength rating of Assicurazioni Generali S.p.A. and its main subsidiaries to A from A+, the decision driven by Generali’s exposure to investments in several peripheral eurozone economies, Italy in particular.
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PartnerRe Tohoku Earthquake exposure
On 14th December, PartnerRe Ltd., Bermuda, announced it expects to record a charge of approximately USD88mn to reserve the full limit of its Tohoku Earthquake exposure related to its largest Japanese cedant. The decision to reserve the full limit of its exposure to this particular cedant follows a recently completed intensive on-the-ground audit by PartnerRe of the cedant’s exposures and claims processes. This charge is expected to be reflected in the reinsurer’s 4Q2011 results, and will impact its catastrophe sub-segment, is pre-tax, net of retrocession and reinstatement premiums. Separately, PartnerRe said it is in the process of assessing its losses related to the flooding in Thailand, which occurred during 4Q2011. Given its total exposures and market share in Thailand, the company continues to expect that its losses related to this event will be in the range of 0.5% - 1.0% of the total insured industry loss.
Lloyd’s publishes its Three Year Plan 2012-14
On 14th December, Lloyd’s published its Three Year Plan 2012-14 with its ‘Vision’ stated as: “To be the market of choice for insurance and reinsurance buyers and sellers to access and trade specialist property and casualty risks”. The Corporation’s key priorities for 2012 were summarised as: Market oversight - a resolute focus on underwriting discipline and risk management; Solvency II - implement and embed Solvency II to protect and, where possible, enhance Lloyd’s capital structure and efficiency; Claims Transformation Programme - transform the way the Lloyd’s market handles claims to enhance the experience of the customer; and Market Operations Review - agree and implement an evolutionary roadmap that renews the current back office processes and technology. The Plan can be downloaded from http://www.lloyds.com/.
Beazley plc renews interest in Hardy Underwriting
Beazley plc has renewed its interest in Hardy Underwriting Bermuda Limited. A 21st December statement from Beazley said that following the announcement by the Board of Hardy on 1st December that it is to undertake a strategic review of its business, Beazley has confirmed its interest in entering into exploratory discussions with Hardy regarding a possible offer to acquire the entire issued share capital of Hardy.
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A.M. Best upgrades Swiss Reinsurance Company financial strength rating
Rating agency A.M. Best has upgraded the financial strength rating (FSR) to ‘A+’ (Superior) from ‘A’ (Excellent) and issuer credit ratings (ICR) to “aa-” from “a+” of Swiss Reinsurance Company Ltd. and its subsidiaries. Best has also upgraded the senior and subordinated debt of Swiss Re and its subsidiaries. The outlook for all of the ratings has been revised to stable from positive.
Aon Corp agrees to a settlement with the US DOJ and the US SEC
On 20th December, Aon Corporation said it had agreed to a settlement agreement of approximately USD16.3mn with the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) relating to certain payments made in overseas jurisdictions between 1983 and 2007. Specifically, Aon has agreed to pay USD1.76mn to the DOJ as part of a non-prosecution agreement and approximately USD14.55mn to the SEC in disgorgement and interest to settle a civil action. In the non-prosecution agreement, the DOJ cited Aon's extraordinary cooperation; its timely and complete disclosure of the facts; the early and extensive remedial efforts undertaken by the firm, including the substantial improvements Aon has made to its anti-corruption compliance procedures; and Aon Limited's prior settlement of these matters with its UK regulator. Aon said that since beginning an internal review of these issues in 2007, it has put in place a comprehensive, global and robust anti-corruption programme designed to prevent and detect improper conduct.
AMIR expands capacity for upstream energy risks
Sydney, Australia-based Asia Mideast Insurance and Reinsurance Pty Ltd (AMIR), headed by Adel Dawood, has recently expanded its capacity for upstream energy risks with the addition of a binder underwritten by the Skuld 1897 Syndicate at Lloyd’s. It is understood that the new USD5mn facility will be used as surplus capacity to AMIR’s main upstream energy binder (underwritten by the Catlin Syndicate) with capacity of USD25mn.
A.M. Best places Labuan Re under review
Labuan Re, Malaysia, has become the latest Asian insurer to have its financial strength rating (FSR) placed under review with negative implications by rating agency A.M. Best due to the anticipated impact of claims arising from the floods in Thailand. Labuan Re presently has an A- financial strength rating.
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