Swiss reinsurer Converium announced the completion of an aviation fronting arrangement with National Indemnity Company and Munich Re, which enters into effect on Oct. 1, 2005. The agreement ensures Converium’s continued participation in the pool of Global Aerospace Underwriting Managers Limited (GAUM) until Sept. 30, 2006.
Converium increased its stake in GAUM, the world’s largest managing agent in the aviation market, from 9 to 25 percent at the end of 2002, when Aviva and Royal & Sun Alliance both reduced their participation.
The company said the fronting agreement had become necessary “due to Converium’s current financial strength ratings [below ‘A’ grade].”
Converium added, however, that it “considers this arrangement beneficial, as it supports its commitment to aviation business, which constitutes one of its important lines of business.” The company also indicated it “is set to profit from access to a well-diversified portfolio and specific know-how through Global Aerospace Underwriting Managers Limited. The Company also believes that this arrangement will contribute to accelerating the restoration of a leading position in aviation reinsurance following a future ratings upgrade.”
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