China Buys U.S. Surplus Lines Industry

China has closed on its previously announced acquisition of the top 25 surplus lines insurers in the U.S. for $21 billion.

As a group the 25 insurers write $26 billion, which is about 80 percent of the entire U.S. surplus lines market, according I.M. Best.

The new entity will be known as The People’s Excess and Surplus Lines Insurance Company of China Holdings Company (PESLICC). Overnight it becomes the world’s largest surplus lines carrier.

The insurers acquired include American Supernatural, Hemlloyd’s, Zooitch, R.W. Barkley, Marky Mark, Moonitch and Alleyed, as well as the surplus lines units of well-known brands including Revelers, Chump, Ironpoor and Burpshire Throwaway.

The industry’s 62,000 employees will be detained and transported to the city of Wenzhou on a slow boat and then fast train, said chief negotiator Mi Quak Do.

The sale comes after the fourth consecutive year of declining premiums for the surplus lines industry — an unprecedented slide. Despite this, the sector, which has freedom to set its own rates and dictate its own terms on policies, is still highly profitable.

With the deal, the Chinese gain ownership of the industry that insures most of the products made in their country.

The deal was delayed for 24 hours because it had to be approved by all state regulators. The Chinese won over the states by promising to handle all tax collection on multi-state risks.

Within minutes of the closing, Goldman Sachs announced it would buy a 10 percent stake in China’s newest insurer.

Copyright 2011 Rooters

Topics Mergers & Acquisitions USA Excess Surplus China