Capsicum Re reinsurance broker coming from AJ Gallagher & Chilton

by Artemis on December 4, 2013

Interesting news has broken this evening that reinsurance broking industry veteran Grahame “Chily” Chilton is teaming up with Arthur J. Gallagher (AJG) to launch a new reinsurance broker brand, Capsicum Re.

Arthur J. Gallagher International is launching the new reinsurance intermediary alongside Chilton, who was previously CEO of Benfield and latterly Chairman of Aon Benfield. Chilton left Aon behind in 2012 and has identified what he sees as a substantial growth opportunity for a new independent broker in the intermediation of high value reinsurance programmes.

The new broker Capsicum Reinsurance Brokers LLP, trading as Capsicum Re, is being launched by Chilton’s private office Capsicum Private Office LLP, which he established with ex-Benfield COO Rupert Swallow, in association and partnership with AJG. The new provider of bespoke and specialised reinsurance advice and products will leverage AJG’s infrastructure and be based in its Walbrook offices in London.

According to the Telegraph newspaper, which broke the news earlier this evening, a team of 14 employees from AJG Re will transfer into Capsicum Re.

Chilton clearly sees an opportunity to offer a new challenge to the three major brokers, in a sector which is often said to lack choice. He told the Telegraph; “There are three very major reinsurance brokers, and there’s a demand from clients for an independent challenger brand to be created. The idea is to build out a global reinsurance broking business. There’s a need in the marketplace because there’s little choice and I think we have the opportunity with the Gallagher platform to deliver a conflict-free service. Bringing the two together should make us a real challenger to the big three brands at the moment who are making themselves a little bit unpopular at times through squeezing commissions and reinsurance and anything they can get.”

Chilton said that reinsurance customers he has spoken with have told him they are looking for an alternative and that with Capsicum Re he intends to offer them one.

Chilton commented on the coming launch of Capsicum Re, which will be announced more widely tomorrow; “I am delighted to have had the opportunity to meet Pat Gallagher and David Ross and in a very short period we have created a trusted partner relationship. Having sold Benfield to Aon and had first hand exposure to the experience of being a customer of one of the big 3 players, I am convinced there is a demand in the market for a niche reinsurance intermediary to supply highly bespoke and specialist services. We are working with Arthur J. Gallagher to build a new brand in the reinsurance market, Capsicum Re – I can’t wait to get my sleeves rolled up and start our new venture together.”

Matt Fitzgerald, Managing Director of AJG Re, said; “The team and I are excited to be working alongside Chily and Capiscum Re.”

David Ross, CEO of Arthur J. Gallagher International, added; “Partnership with such a legendary market figure as Chily will allow us to create a really compelling alternative to the big players. We see a massive opportunity for a specialist reinsurance provider. By linking his team’s talents, experience and extensive network to our established platform, we will add considerable firepower to this new offering – allowing us to really hit the ground running.”

J. Patrick Gallagher, Jr., Chairman, President and CEO of Arthur J. Gallagher & Co, commented; “Chily has a strong reputation and proven track record as one of the reinsurance market’s pre-eminent players. His team will add immediate value to our organisation and we are truly excited about this new partnership.”

The launch of a new broker offers new choice to customers and will force incumbents to sharpen their pencils. With the reinsurance market facing a period of change, as new capital sources and ILS change the dynamic while meaning brokers have to be capital agnostic, more choice can only be a good thing.

Additional competition for the major brokers will force them to innovate and to maintain customer service levels. That’s not to say Capsicum Re will have it easy, others such as JLT Towers Re, formed by the acquisition of Towers Watson’s reinsurance brokerage by JLT Group, and Tiger Risk are also seeking to grow.

Interestingly, Arthur J. Gallagher has capital markets abilities and a year ago bought capital markets focused reinsurance brokerage Execution Re. It will be interesting to watch how Capsicum Re develops and whether it seeks to compete on brokering and structuring capital markets and ILS business, or follows a more traditional approach.

Whichever route it takes, delivering the most efficient underwriting capital to its clients and being agnostic about the source will be a key area for Capsicum Re to focus to compete with the three majors, even on more traditional placements, with alternative capital a growing feature of the reinsurance market.

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