U.S. excess and surplus lines market attracts international attention

September 24, 2007

The United States excess and surplus lines market presents opportunities that are not lost on the rest of the world. Lloyd’s is the second largest U.S. surplus lines writer with a 14 percent market share. Direct written premiums were $4.675 billion in 2005, according to A.M. Best’s survey. AIG is the largest with a 21 percent market share and $6.977 billion in premiums.

But large segments of the surplus lines market are more suitably served outside of Lloyd’s — a fact several United Kingdom insurers have discovered. With their existing expertise and full pockets they’re in a good position to compete in the U.S. E&S market.

Beazley, Catlin and Hiscox lead the parade, but they’re not alone. If one includes the Bermuda-based insurers — XL, ACE, AXIS, Endurance, Arch and others as well as Zurich, Allianz and Fairfax, along with Australia’s QBE, more than a quarter of all U.S. surplus lines coverage is derived from outside the U.S.

A partial listing of what some of those companies have done so far in the U.S. market in 2007 reads as follows:

QBE Insurance Group became a major player in the U.S. market with the closing in June of its acquisitions of Praetorian Financial Group from Hannover Re and Winterthur US from France’s AXA Group. QBE paid slightly more than $800 million for Praetorian (the successor to Hannover Re’s Clarendon subsidiary), and $1.156 billion to acquire Winterthur’s U.S. business.

Hiscox Ltd., the holding company established in Bermuda last year through which Hiscox now operates, acquired a portfolio of kidnap and ransom business from Aon Limited. The business, which is substantially underwritten by Hiscox, principally comprises Latin American risks from third party intermediaries.

In February Hiscox USA, which is now active in several areas of specialty insurance, announced it will provide stand-alone privacy protection insurance to middle-market U.S. companies, including financial and professional services, retail, health care and manufacturing businesses, directly from its two New York locations.

Hiscox also continued to expand its specialty coverage of the fine arts. In February the company acquired the renewal rights of Eriks Assuradeuren, a Dutch insurer specializing in commercial fine art.

In April Hiscox USA announced received a license to provide media liability coverage to U.S. businesses, including publishers, broadcasters, production companies, and marketing and advertising agencies. The non-admitted insurance will be written on Hiscox paper from its three U.S. locations in New York City, Armonk, N.Y. and San Francisco.

In June Hiscox acquired, subject to regulatory approval, ALTOHA Inc., an insurance holding company, and its subsidiaries, including American Live Stock Insurance Co., a live stock insurer in the United States. Hiscox also acquired Harding & Harding Inc., the Group’s affiliated insurance agency as part of the deal. American Live Stock is an admitted insurance company with licenses in all 50 states, so it isn’t strictly-speaking in the E&S market. Nonetheless the acquisition underlines Hiscox commitment to that market, and its plans to expand beyond Lloyd’s.

Catlin Group Limited, which has been domiciled in Bermuda for more than 10 years, established an Equine Underwriting Unit in Lexington, Ky., staffed by a four-member underwriting team. The new facility will underwrite various classes of equine business, consisting primarily of mortality, named perils, theft, prospective foal, barrenness, stallion AS&D, stallion first season infertility, stallion availability, stallion loss of income and major medical-surgical coverages.

In July Catlin received news from A.M. Best that it had assigned a financial strength rating of “A” (Excellent) to Catlin Insurance Co. Inc. and upgraded the financial strength rating of Catlin Specialty Insurance Co. Inc. to “A” (Excellent) from “A-“.

In June, another predominantly Lloyd’s insurer, R.J. Kiln, successfully transferred its domicile to Bermuda with the formation of Kiln Ltd., as its new ultimate holding company. Kiln is restructuring its organization with an eye towards expansion, particularly in the United States.

The United Kingdom’s Beazley Group entered the U.S. market for specialty lines in 2005, after purchasing Omaha Property and Casualty Insurance Co., a 50 state U.S. admitted insurer. In March it acquired Sapphire Blue, an agency specializing in professional liability insurance for U.S. health care institutions, particularly long-term care facilities. The transaction significantly strengthens Beazley’s presence in this market.

Lancashire Insurance Co. Ltd., another Bermuda-based/U.K. origin carrier, gained approval to provide insurance coverage on an excess and surplus basis for properties located in South Carolina. It will focus primarily on coastal windstorm and earthquake coverage for all classes of insureds, including schools, municipalities, condominiums and apartment complex owners, as well as all classes of commercial and industrial insureds.

World Access, one of the largest travel insurance and assistance providers in the United States, a subsidiary of Mondial Assistance, acquired Jefferson Insurance Co. from Allianz Global Risks US. All of the companies are members of Germany’s Allianz Group. Jefferson is currently an inactive P/C insurer, which World Access plans to reactivate to offer products in all 50 states and the District of Columbia later this year.

In May Bermuda-based Ironshore Inc. entered the professional liability market with the launch of IronPro, based in New York. It will initially focus on directors and officers liability insurance, with additional professional liability products to be introduced in the near future.

In April, Bermuda-based Max Re Capital Ltd. announced that its subsidiary, Max USA Holdings Ltd., had completed the acquisition of a U.S.-based excess and surplus lines company based in Richmond, Va., which, will operate under the name Max Specialty Insurance Co. It complements the company’s existing insurance and reinsurance operations based in Bermuda and Dublin.

Bermuda’s AXIS Capital agreed to acquire the assets and operations of Media/Professional Insurance (Media/Pro), a managing general underwriter specializing in professional liability lines of business, from Aon Underwriting Managers. Media/Pro, headquartered in Kansas City, is a managing general underwriter with operations in the U.S., Canada and the U.K. Professional liability lines written by Media/Pro include media liability insurance, cyber-technology insurance and miscellaneous professional liability insurance. Media/Pro will become part of the newly established AXIS Select Markets division of AXIS Insurance.

Watch this space for further expansion news.

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Insurance Journal West September 24, 2007
September 24, 2007
Insurance Journal West Magazine

Salute to Surplus Lines Brokers/NAPSLO; Personal Lines Markets; Product Liability