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Issue 91 - 4th March 2010
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Max and Harbour Point merge to take high ground
Months after the failed attempt to merge with IPC Re Max Capital Group (Max) has announced it is to merger with fellow Bermudan underwriter Harbor Point Limited (Harbor Point), and begin trading under a new brand name. The statement said the boards of directors of both companies had unanimously approved “a definitive amalgamation agreement for a merger of equals”. The combined company will be now be renamed and rebranded as Alterra Capital Holdings Limited (Alterra). While it maybe a merger of equals only one man can take the top job in the new entity and the statement revealed that Marty Becker, Chairman and Chief Executive Officer of Max will be President and Chief Executive Officer of Alterra and serve as a Director, while John R. Berger, Director, Chief Executive Officer and President of Harbor Point will be Alterra’s Chief Executive Officer of Reinsurance Vice Chairman of the board of directors. Mr. Berger will also chair the Board’s Underwriting Committee. Mr. Becker said, “The Max – Harbor Point transaction is a true merger of equals and brings together two strong and vibrant organizations with good balance at both the Board and senior management level, and robust balance sheets to create Alterra Capital Holdings Limited, a diversified and balanced global insurance company with much greater scale, capital, and financial strength. We have chosen Alterra, ‘high ground,’ as our new brand name, as we believe the company will be a provider of superior security for our clients – a market leader at the pinnacle of our industry. With capital of approximately $3 billion, in a market that values strength and size as a sign of franchise safety and sustainability, Alterra will be well positioned to take full advantage of profitable growth opportunities in the P&C insurance and reinsurance markets.” Mr. Berger added, “Alterra will benefit from an exceptionally strong combination of global underwriting platforms with limited operating overlap, and outstanding management and underwriting teams. There are very few companies of Max’s size that have the diversification and global reach it enjoys. The combination of our companies will produce a highly diverse portfolio of specialty insurance and reinsurance business, including a mix of long and short-tail lines. As a result, we expect that Alterra will have less volatile underwriting results than either of its individual components, as well as more flexibility to efficiently manage capital.”
Mining not oil operations under political threat in Venezuela, insurers told
A leading expert on the political risks posed in Latin America has told London brokers and underwriters that international mining firms have more to fear from the government of Hugo Chavez in Venezuela. Carlos Caucedo, Head of Latin American Forecasting for exclusive Analysis told a meeting in London that the country’s president had seen his popularity dive as power outages beset the country in the run up to the presidential elections. While there was little chance that the president would not be reelected his government has received a major wake up call over the latest round of bidding to develop the Carabobo oil fields in the Orinoco Belt. “The estimate is that this is a huge amount of reserves in the belt,” he said. “But the lack of investment by the state oil company Petroleos de Venezuela (PDVSA) had seen the number of barrels produced per day drop to around 2.3 million from the government’s figures of 3.2 million. However when the latest tender process was undertaken the level of interest not only from the international oil companies but also the Russian and Chinese governments was so low that presi8dnhet Chavez has been forced to reduce the governments demands on the revenue to be generated. Mr Caucedo said fears that the Chavez government was set to nationalise the oil industry or seize drilling facilities was wide of the mark as was the perceived threat to oil tankers used to export the oil. “The feeling in the country is that Lloyd’s has badly overreacted in putting the country on an insurance blacklist in terms of the oil vessels post the strikes of 2002,” he added. However the Venezuelan government has turned its attention to the mining industry where it is increasingly using social and environmental concerns to remove concession from western companies with increasing moves to begin joint ventures with mainly Chinese and Russian mining firms. “The biggest losers look set to be the Canadian mining firms which have been working in the gold mines,” explained Mr Caucedo. “The best case at present is to participate in a joint venture but with the state holding a majority share.”
Omega boardroom row to be decided next week
The long-running debate attempts by a group of investors to force change sot the board of Omega Insurance Holdings will come to a head next week when a special general meeting of shareholders is held. The meeting on March 12 will consider a proposal by a group of investors headed by Invesco Asset Management would look to remove current directors Walter Fiederowicz and Christopher Clarke and appoint John Coldman and five others as additional directors. Media reports that Omega has pointed the finger at its own broker Cenkos Securities as the prime movers behind what has been described as a proposed coup have been denied by Cenkos. A spokesman for the firm told the Wall Street Journal that the firm “refuted the allegations entirely, adding that the broker-company relationship was under review and it is awaiting the outcome of the general meeting”. The Wall Street Journal said Mr Coldman, who has been proposed as chairman, has requested the remaining non-executive directors--Clifford Palmer, Coleman Ross and Nicholas Warren--agree to stand down when he asks them to. Omega said lawyers acting as external counsel to Invesco told Omega’s external counsel that Cenkos asked Invesco to requisition the upcoming meeting because such a requisition needs to be made by a shareholder with a stake of more than 10%.
Underwriters under starters orders for Cheltenham charity night
The annual Cheltenham Festival of horse racing will take place in a couple of weeks and it has traditionally been a big day in the London market calendar with a large number of underwriters and brokers heading for the West country to be part of the event. This year is a vintage year with the much awaited showdown in the flagship race – the Gold Cup - between Denman and stable-mate Kuato Star on Friday March 19. But underwriter Markel is giving a lucky few the chance to get a head start with a special event in their Leadenhall Street offices next week. The insurer which entered the bloodstock classes last year has arranged for a start-studded panel to provide their views on the festival and the horses to watch out for. Guests will hear from Derek 'Tommo' Thompson, one of the leading racing correspondents in the UK and presenter of the 'At the Races'. However who better to give the inside track on the festival but jockey Sam Thomas, who is sponsored this year by Markel and won the Cheltenham Gold Cup in 2008. Leading race trainer Tom George will also form part of the panel and journalist on the UK horse racing publication Racing Post, Lee Mottershead, will complete the experts in attendance. The event will also look to raise money for charity with money raised going to The Riding for the Disabled Association.
Geneva report no surprise on systemic risk
A report by the Geneva Association released earlier this week found that the insurance and reinsurance industry does not pose a systemic risk to the world’s economies. It seems there are specific features of the industry which mean that in the highly unlikely scenario of the collapse of a major underwriter it will not hit the global financial markets in the systemic way which has been witnessed by the banking fraternity in the past 18 months. As global regulators look to push through tough new guidelines in an effort to avoid a repeat of the financial crisis the association which is the international association for the study of insurance economic has released a report of its findings which have been supported some of the world’s leading market figures. The report highlights that the industry is funded by paid up front premiums which drive strong operating cash flows and with policies generally long term with controlled outflows insurers if anything are a stabilising force in the global financial services sector not a systemic risk. The report also points out that during the worst of the crisis insurers were stable and kept pricing stable along with volumes and capacity. Its statement added: The report underlines that supervisors and policymakers should focus on activities rather then financial institutions when introducing new regulation and that upcoming insurance regulatory regimes such as solvency II in the European Union already adequately address insurance.” It did however highlight the dangers of two “quasi-banking” activities which were carried out by a limited number of underwriters which could if allowed to become widespread pose a risk. These are derivatives trading on non-insurance balance sheets and mis-management of short-term funding from commercial paper or securities lending. Richard Ward, CEO of Lloyd's and Geneva Association Board member, said: "We welcome the Geneva Association's well-researched and authoritative report on systemic risk in insurance. It recognises that the core activities of insurers and reinsurers do not give rise to systemic risk and explains how the insurance business model has proved to be a source of stability during the financial crisis. Ongoing regulatory debates can only benefit from the report's publication." Geneva association chairman and Munich Re CEO Dr Nikolaus von Bomhard added: “In the public debate, the business model of insurance is unfortunately not always sufficiently demarcated from the business models of other financial services model providers such as banks.“Just looking at the obvious differences, the conclusion can only be that the insurance industry in its core activities does not pose systemic risk for the economy.”
Jon Guy
Editor
Global Broker & Underwriter
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