Earlier today it was announced that Arthur J. Gallagher & Co. had reached agreement to pay at least $3.25 billion to acquire the treaty reinsurance brokerage operations of Willis Towers Watson’s Willis Re unit.
It’s a deal that offers synergies on the capital markets and insurance-linked securities (ILS) side of the Gallagher (AJG) business, given it already has expertise in broking to ILS markets, as well as being a leader in the ILS management and fund related services side of the market, through its Artex and Horseshoe specialist divisions.
We’ve had it confirmed by an AJG spokesperson that the acquisition does include insurance-linked securities (ILS) and capital market specialist unit Willis Re Securities, so providing Gallagher with a new, ILS related string to its bow.
Gallagher’s reinsurance broking unit, Gallagher Re has expertise in placing reinsurance and retrocession business with ILS fund markets and trading in collateralized structures as well.
But the Willis Re Securities team has specific expertise in structuring and bookrunning catastrophe bonds, as well as in reinsurance sidecar arrangements and other capital market instruments and transactions.
So Gallagher’s reinsurance related acquisition has the potential to greatly expand its activities in the insurance-linked securities (ILS) space.
Willis Re Securities advises and provides structuring or sales support to insurance and reinsurance industry participants on capital markets related product offerings.
A registered broker dealer, Willis Re Securities’ product offering includes catastrophe bonds and other ILS securities, as well as derivatives structuring and issuance, capital raising activities and advisory related to mergers and acquisitions (M&A).
Willis Re Securities also has its own private catastrophe bond platform, which helps sponsors access groups of ILS investors for reinsurance or retro capacity through fully securitised transactions.
On the catastrophe bond side of the marketplace, we currently have the Willis Re Securities team listed in our leaderboard as sole or joint structuring agent or bookrunner on 13 outstanding transactions, representing outstanding catastrophe bond issuance amounting to roughly $2.38 billion of limit.
So this acquisition enhances Gallagher’s expertise for the ILS market, especially in the catastrophe bond structuring and bookrunning space where it was not active before.
There is also cross-over with the ILS specialist Horseshoe, in terms of private cat bond platform, but bringing together the Willis Re Securities ILS structuring and offering expertise with Horseshoe’s expertise in managing or administering structures and funds, gives Gallagher a far more robust ILS market offering.
The Willis Re Securities team worked closely with the Willis Re broking units to offer clients access to capital market risk transfer solutions, securitisation and other alternative capital related options for their placements.
Willis Re Securities’ business is made up of Willis Securities, Inc., a licensed and FINRA regulated US broker dealer;, Willis Re Securities Europe Limited which is regulated by the UK Financial Conduct Authority; and Willis Re Securities (Hong Kong) Limited.
The original merger remedy-linked acquisition did not include Willis Re’s Hong Kong and China business, but this time the acquisition announced today does, so it now seems the Hong Kong unit of Willis Re Securities will be transferred to Gallagher as well.
A rebranding of the division to Gallagher Re Securities would seem possible, as the company integrates its new acquisition and looks to maximise on the ILS synergies this will offer.