M&A deals keep rolling inReprints
Consolidation has been a major factor in the excess and surplus lines market, and mergers and acquisitions are expected to continue, experts say.
“We’re at an historical high point in M&A, so there’s more firms for sale in the specialty E&S arena than there ever has been,” said Timothy W. Turner, Chicago-based president and CEO of R-T Specialty L.L.C., a division of Ryan Specialty Group L.L.C.
The consolidation is driven by product distribution and the change in buying trends, he said. “Retailers are buying E&S solutions from fewer wholesalers and (managing general agencies). They’re consolidating their use of intermediaries.”
In August, wholesaler U.S. Risk Insurance Group, L.L.C. said it had acquired Dallas-based B&H Risk Services Inc. In April, New York-based AmWINS Group Inc. announced a definitive agreement to acquire Partners Specialty Group L.L.C., based in Stamford, Connecticut.
Other deals include the acquisition of Manhasset, New York-based NIF Group, a managing general agency, by New York-based JenCap Holders L.L.C., a specialty insurance distributor, which was announced in December.
In addition, in July, JenCap said it had agreed to acquire Sterling Heights, Michigan-based Specialty Risk Facilities Inc., a managing general agency/contract binding authority and wholesale insurance brokerage. And Toronto-based Allied World Assurance Co. Holdings A.G.’s acquisition by Toronto-based Fairfax Financial Holdings Ltd. was completed in July.
“We have got a couple of transactions that we’re working on right now, but there’s always opportunity,” said James Drinkwater, AmWINS’ property/casualty brokerage division president.
“Our focus has been the small-business space because there’s plenty of opportunity in small business for a broker that is going to strive for greater efficiency” using technology, he said.
“You don’t yet see any major changes in the supply/demand equation, so the fact you have fewer distributors of that insurance capital has not yet resulted in changes in price, but it may over time,” said David J. Bresnahan, Bostonbased executive vice president of Berkshire Hathaway Specialty Insurance Co.
“You’ve got to think there’s a lot of uncertainty as a result of all of these acquisitions that you didn’t have a year ago,” he added. “Nothing seems terribly broken, but people are left to wonder what it all means.”
“Some customers are trying to get ahead of it and taking a little bit of control over what’s happening” and “looking at their options, and trying to evaluate whether that particular company is more or less likely to be around in a year,” or bought up by somebody else, Mr. Bresnahan said.
More activity is expected, say experts.
“There’s a lot of private equity money, which is behind a number of wholesale entities” that are looking for additional opportunities to expand, said John Edack, San Francisco-based senior executive vice president of E&S casualty for Arch Capital Group Ltd.’s U.S. insurance group.