Daily Willis Review – January 4, 2018

A.M. Best revises U.S. commercial lines insurance outlook to stable
A.M. Best has revised its outlook of U.S. commercial lines insurance from negative to stable due to embedded change in the sophistication of the segment’s pricing and underwriting infrastructure and the segment’s resilience.

The ratings agency, which has had a negative outlook on the commercials lines segment since 2011, expects the sector to post an underwriting loss for 2017, but still record net profits.

While the pricing environment remains challenging, most companies within the sector have adopted tools that allow for greater insight into business profitability.

A.M. Best does note that challenges remain that could drive longer-term deterioration for the segment but does not anticipate any substantial deterioration in the market in 2018.

The ratings agency said: “Changes in underwriting and pricing fundamentals have resulted in core underwriting results that coupled with overall strong risk-adjusted capitalization levels are allowing companies to absorb shock losses that previously would have strained capacity.”

Sompo International to acquire Lexon Surety Group
Sompo International U.S. has entered into an agreement to purchase the operating subsidiaries of Lexon Surety Group, the second largest independent surety insurer in the U.S.

The subsidiaries are comprised of Lexon Insurance Company, Bond Safeguard Insurance Company, and Fortress National Group.

The company said that all of Lexon Surety Group’s staff and office locations will be retained and the transaction is expected to close in March 2018, subject to regulatory approvals.

David Campbell, President of Lexon, will continue his role and be appointed Vice Chairman of the Lexon Board. Meanwhile Brian Beggs of Sompo International will become the Chief Executive Officer of Lexon.

Mr. Christopher Sparro, CEO of U.S. Insurance at Sompo International, said: “Lexon has a strong reputation in the surety market, and this acquisition will position us to substantially accelerate the growth of our U.S. primary surety portfolio and our presence in this specialized market.”

Armour announces $500 million investment
Armour has announced it has raised $500 million in equity commitments in partnership with an investor group, led by Aquiline Capital Partners, Reinsurance News has reported.

The investment is to fund a new reinsurer, Armour Group, which will co-invest in global property and casualty run-off transactions in parallel with the investor group’s affiliates.

Through the investment, Armour will receive expansion capital for the new reinsurance group, as well as a platform to execute on the growing run-off market opportunities.

Brad Huntington, Founder and Chief Executive Officer of Armour, said: “We are excited to have Aquiline as a partner as we enter our next phase of growth.

“Given Aquiline’s deep insurance industry experience, we believe they are an ideal partner to help us grow the team and scale our operation.”

Jeff Greenberg, Chairman and CEO of Aquiline, said: “Aquiline’s investment in Armour reflects the growing demand for run-off as an option for insurance companies that are looking to solve deteriorating reserve positions and optimize their capital.”

Qatar Re acquires Markerstudy Group
Qatar Reinsurance Company (Qatar Re) has signed an agreement to purchase Markerstudy’s Gibraltar-based insurance companies, Markerstudy Insurance Company, Zenith Insurance, St Julians Insurance Company and Ultimate Insurance Company.

Currently Markerstudy underwrites more than 5% of the UK motor insurance market and generates premiums of about £750 million ($1.01 billion), the company said.

The Qatar Insurance Company Group has an existing relationship with Markerstudy through Qatar Re and QIC Europe (QEL).

Gunther Saacke, Qatar Re’s Chief Executive Officer, said: “This transaction builds on the strong foundation of our existing relationship.

“It provides Qatar Re with a greater share of lower volatility business that has performed consistently well for us, balancing our specialty and catastrophe book.”

Kevin Spencer, CEO of Markerstudy Group, said: “For a long time we have had a tremendous relationship with Qatar Re.

“Their proactive approach has assisted our development and this is a natural evolution; to combine our strengths to establish a primary player in the UK insurance sector.”