Leading Lloyd’s insurer (Syndicate 2001), Amlin Plc. announced that it is in the process of forming a new, wholly owned, Bermuda reinsurance company with an initial capitalization of $1 billion. The company is aiming to participate in the forthcoming first quarter of the 2006 renewal season.
Amlin cautioned that its announcement pertains only to the U.K., and is in no way intended as an offer for sale of securities in the U.S., Japan, Canada, or elsewhere outside of the U.K.
The new company, which will operate independently of Lloyd’s, intends to “focus on underwriting regional US and international catastrophe reinsurance, leveraging the expertise and relationships of Amlin’s London based underwriting business,” said the bulletin.
Amlin cited the “hardening in rating environment expected for 2006, as a consequence of the severe windstorm-related losses in 2004 and 2005,” as the impetus behind the move. The company forecasts incremental gross premium income (net of brokerage) at around $350 million, increasing to $500 million in 2006 and 2007.
The new company will be funded through a rights issue, offering 7 new ordinary shares for every 22 existing ordinary shares. The rights issue will raise approximately £215 million ($373 million) – net of expenses. It has been fully underwritten by Hoare Govett Limited.
Amlin indicated that the proceeds from the rights issue would be used to provide part of Amlin Bermuda’s underwriting capital. The remainder of the capital is to be funded “through Amlin’s internal resources and additional borrowings.”
Amlin also noted that it will increase Syndicate 2001’s capacity for 2006 by 17.6 percent to £1 billion ($1.733 billion).
Commenting on the initiative, Amlin’s Chief Executive Charles Philipps stated: “The formation of Amlin Bermuda will fulfil our strategic objective of establishing a strong underwriting platform outside the Lloyd’s market, which will both support and complement the activities of Syndicate 2001. We believe that this is an opportune time to make this move, in view of the significant rating increases which are expected as a result of the unprecedented windstorm losses incurred in 2005 and 2004. We intend to be up and running in Bermuda by 1 January 2006, at the start of the key first quarter renewal season.
“Together with our existing cash resources and new borrowings, the rights issue will enable us to achieve sufficient scale in Bermuda at the outset, with US$1 billion of paid up capital in Amlin Bermuda. We believe that this will be a vital component in our attracting business of the right quality, which is consistent with the existing book of Syndicate 2001.
“Our confidence that we will achieve this has been bolstered by the strong encouragement and indications of support we have had to expand our business in this way from a number of the major insurance and reinsurance brokers.We expect that the operating environment in 2006 and beyond will be conducive to the continuance of the strong returns on equity which Amlin has achieved over the past three years. We look forward with confidence and excitement to this next phase of Amlin’s development towards our vision of becoming the global reference point for quality in our markets.”
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