Leadenhall invests in Australian life insurer Integrity Group

London-headquartered specialist insurance-linked securities (ILS) and reinsurance linked investment manager Leadenhall Capital Partners LLP has backed a new start-up life insurance operation in Australia, named Integrity Group Holdings Limited.

Integrity Group aims to disrupt the Australian life insurance market at a time when the sector is consolidating to only a few, very large players.

Led by Chris Powell, former Chief Financial Officer of Zurich Australia and Chief Operating Officer of Centric Wealth, Integrity Group sees an opportunity to leverage the latest technology as well as efficiency in its operations and capital backing, to break into the market and take share away from the major players.

Powell explained, “The Top 10 life insurers hold 96% market share – we are about to see their number reduced to a top seven or six. This means there is a place for new operators to disrupt the market with differentiated products and services.”

Integrity Group has received over $165 million of backing, both equity and debt, from investors in Australia and overseas, with one of the overseas backers being $4.5 billion ILS investment manager Leadenhall Capital Partners who has represented certain investors.

Leadenhall has participated in the debt arrangement part of the financing of Integrity Group, on behalf of and representing certain of Integrity’s key investors. The debt facility features loss absorbing features against mortality and lapse rates deviating significantly from expectations, which is a requirement of the Australian Prudential Regulation Authority.

Commenting on the investment, Dan Knipe of Leadenhall Capital Partners, said that the investment, “Provides diversifying risk exposures, such as mortality risk, to the firm’s investors. Through our life strategies we continue to provide innovative and flexible solutions for the capital needs of life insurers around the world.”

Integrity plans to leverage technology and financial advisers in its approach to life related insurance product sales. The insurer has acquired QBE Life (Australia) Limited from QBE Insurance Group Limited for $21.7 million, as a vehicle to kick-start its operations and after it has been renamed to Integrity Life Australia Limited it will underwrite the life insurance component of QBE’s consumer credit insurance suite sold through Financial Institutions.

Powell of Integrity Group commented, “Integrity will use QBE Life as a launching pad to provide new and intuitive products and processes to the Australian market using latest technology. Life insurers in Australia are hamstrung by their legacy technologies, whereas we have no legacy systems.”

Leadenhall Capital Partners has already backed another life insurance start-up that is embracing technology, in the insurtech so-called “insurance challenger” Gryphon.

By investing in these life insurance start-ups that are targeting high-growth, Leadenhall can bring life insurance linked returns to investors, an area Leadenhall is already a specialist investor, having life insurance linked funds and mandates.

As these start-ups gain scale they will require access to efficient reinsurance risk capacity, with life reinsurer being a role that Leadenhall could also play in future.