Quanta in Deal with Lloyd’s Chaucer to Manage Syndicate 4000

Quanta Capital Holdings Ltd. has signed a non-binding “Heads of Agreement” with Chaucer Holdings PLC, a specialist Lloyd’s insurer, and the senior underwriting team of Syndicate 4000 under which a new managing agency, Pembroke Managing Agency Limited, will be created.

The announcement comes shortly after A.M. Best lowered Quanta’s ratings (see IJ Website June 8) following a series of financial setbacks, that have resulted in the major portion of its specialty insurance and reinsurance lines being put into an “orderly run-off”, excluding its Lloyd’s and ESC operations (See IJ Website March 3, May 26 and 31).

“Pembroke, which will provide technical and administrative support and oversight to Syndicate 4000, is a joint venture among Quanta, Chaucer and the Syndicate 4000 underwriting team,” said the announcement. “Quanta believes that Pembroke will enable Syndicate 4000 to maintain, and grow, a long-term underwriting presence within Lloyd’s without requiring direct technical or administrative support from Quanta. It also enables the Syndicate to utilize the significant market capabilities of Chaucer and assures the long-term alignment of incentives with the underwriting management team. The agreement provides for Chaucer to hold a majority interest in Pembroke.”

Chaucer is one of the leading Syndicate managers in the Lloyd’s market. Its wholly owned subsidiary CSL is the third largest managing agency at Lloyd’s for 2006 with a total syndicate capacity under management of £919 million ($1.7 billion)

Quanta said that under the terms of the heads of agreement, its “capital remains committed to the syndicate, while Chaucer and Quanta will work together closely to diversify the provision of capital to the syndicate to ensure an orderly transfer of the business management to Pembroke. Chaucer will agree to provide up to 10 percent of the secured capital to support underwriting capacity for 2007.”

Quanta Chairman Jim Ritchie indicated: “I believe that the best way to assure the long-term financial success of the Syndicate is to align the underwriting team with Chaucer and Quanta around the common goal of providing superior underwriting results. The Pembroke structure, along with the exceptional skills of the Syndicate 4000 underwriting team, are designed to do just that.”

Bob Lippincott, Quanta’s Interim Chief Executive Officer, stated, “This agreement is consistent with our previously stated support of Syndicate 4000 and its efforts to diversify its base by attracting new capital into a good market serviced by a great underwriting team. This new joint venture accomplishes three key objectives: it preserves the value of Quanta’s investment in Syndicate 4000, enables us to realize the underwriting results from the Syndicate’s existing portfolio and allows us to share in the results of future underwriting while building intrinsic value. We believe that the Syndicate management team has built an impressive operation and we look forward to the continued success of Syndicate 4000.”

The transaction is subject to FSA and Lloyd’s approval, completion of definitive agreements and any necessary shareholder approvals of the parties.

Topics Excess Surplus Underwriting Lloyd's