If you build a better insurance trading platform, the world will beat a path to your door. Well, maybe not the world, but a group of sophisticated investors from “the City” (London’s financial heart) came knocking on the door of Brit Insurance, and came away with a majority stake in the UK insurer’s RI3K subsidiary.
The cash consideration payable to Brit was £8.3 million ($16.5 million). Brit and the Consortium have also subscribed for £5 million ($9.9 million) of convertible preference shares in the Company to satisfy its future funding requirements. Brit Insurance has subscribed for £1.3 million ($2.6 million).
RI3K media head Roddy Langley explained that after adjustments the consortium’s stake would be approximately 65 percent, with Brit, which has been granted additional warrants to purchase shares, retaining around a 22 percent stake, and RI3K’s management and staff 13 percent.
IPGL Limited, a private holding company of which Michael Spencer, Group Chief Executive of ICAP plc is the major shareholder, headed the purchase. The acquiring Group also includes the investment fund Eton Park, investment banking and broking group Numis Corporation, and Climate Exchange plc CEO Neil Eckert.
Brit funded RI3K’s establishment in May 2000. Its initial focus was to provide a trading platform for treaty reinsurance that would be quicker, surer and more accurate than the paper documents Lloyd’s and most of the London market has traditionally used. Despite initial resistance from brokers and underwriters, and the looming presence of Lloyd’s own Kinnect project, RI3K emerged as the winner in the race to provide practical electronic trading solutions to the London market in general, and Lloyd’s in particular.
“It supports all types and classes of reinsurance business, treaty as well as facultative and commercial insurance,” said the Company’s bulletin announcing the share sale. RI3K’s role recently expanded to provide paperless trading capabilities to Lloyd’s new Shanghai-based reinsurer (See IJ web site April 23). It’s has also concluded a long term trading agreement with Aon for the London market.
When Lloyd’s abandoned its Kinnect project, RI3K’s prospects rose, as it could offer what Kinnect couldn’t – individualized paperless trading capabilities, that the Lloyd’s market – in its drive to cut costs, assure contract certainty and become more competitive – imperatively needed.
RI3K’s Chief Executive, Alex Letts explained that “Migration to electronic trading at the London Stock Exchange increased volumes and remains a key factor in the City being the global center it is today. The same is happening in insurance as the industry faces its own transformation, this investment in RI3K secures vital infrastructure for the long haul.”
Expanding on that point in a telephone interview, Letts said, “with new money coming into the business, we’ll not only be able to improve and expand our present services, but we’ll now have the capability to explore other opportunities in the insurance sector. He cited the still as yet unexplored possibilities inherent in establishing secondary markets -primarily derivative transactions – for insurance linked products.
RI3K’s new majority owners are in a good position to both fund that potential expansion and to provide the expertise needed to bring it to fruition. Spencer has built his fortune (he was recently listed as the UK’s 88th richest person, with assets of £803 million [$1.6 billion]) on financial services, primarily hedge funds. “These are ‘blue chip’ investors,” Letts continued. “Their commitment puts RI3K on a stable footing, and provides a fascinating grouping of capital and expertise for future expansion.”
Spencer seemed equally pleased, calling the investment a way to “take RI3K on to the next stage of its development,” and a “very exciting” prospect. He also noted that the “insurance market is primed and ready for paperless trading and we can help RI3K add real value to the global insurance marketplace.”
Oliver Hemsley, CEO of Numis pointed out that “RI3K is the only viable trading service to serve this sector as it is able to handle the whole risk placement process electronically from data collection prior to placement, through quote, bind and endorsement. We think that RI3K is therefore poised quickly to become the market standard.
He also reiterated the ongoing observation, that “pressures are mounting in the industry to make business practices more efficient and cost effective. Contract certainty and the need for clear audit trails following regulatory investigations add further to RI3K’s value proposition. I am very pleased that Numis is able to participate directly in assisting this exciting industry development.”
Brit’s Chief Executive Dane Douetil indicated that the sale of its majority interest in RI3K “achieves our objective of focusing our business on its core activities. Furthermore, this transaction represents a significant step in the development of RI3K. Our continuing interest in the Company is testament to our belief in its successful future.”
One should also add that the “successful future” is firmly based on RI3K’s successful past, which is a direct result of the vision, hard work and dedication of its management and staff.
Was this article valuable?
Here are more articles you may enjoy.
Vintage Ferrari Owners’ Favorite Mechanic Charged With Theft, Fraud 
Harvard Study Again Stirs the Pot on Demotech Ratings of Florida Carriers 
USAA to Lay Off 220 Employees 
Supreme Court Makes It Easier to Sue for Job Discrimination 
