Pioneer Underwriters to join with K2 Insurance Services LLC

Pioneer Underwriters, the specialist underwriting services organisation that looks to match its risks with various sources of capital, has agreed terms for a strategic transaction that will see it combine with specialty insurance services holding company, K2 Insurance Services LLC.

Pioneer Underwriters had recently shuttered its Syndicate 1980 at Lloyd’s, saying that “the syndicate structure is no longer economically efficient when compared with its other capital arrangements.”

The company had also closed down a number of underwriting teams, as it reverted to a core focus on profitable lines and a number of executive departures have also clouded the horizon for the company in recent weeks.

But the transaction announced now positions Pioneer Underwriters as part of a much larger, ambitious underwriting and risk servicing platform.

For K2 Insurance Services, this is its first acquisition outside of the US.

Pioneer underwriting teams are set to form the core will of a new international platform for K2.

The initial focus will be on the remaining Pioneer offerings in Property Catastrophe Reinsurance, Financial Institutions, International Property Facultative and Marine Specialty, as well as support staff.

These businesses together will underwrite roughly £150 million of gross written premium in 2020, all of which is backed by high quality capacity providers. Pioneer has been known to work with a range of reinsurance capacity providers, including some alternative market sources.

Pioneer has been exploring capital options since November 2019 and its Board decided that the proposed transaction with K2 offers “an exciting opportunity to build on the business’ strengths in improving market conditions.”

The transaction is expected to be concluded in the coming weeks and remains subject to regulatory approvals and due dilligence.

Andrew McMellin, chief executive officer of Pioneer, commented on the news, “K2 is a highly successful business in the US and its vision of building a broad, high quality and service driven group of expert underwriting businesses, now with an expanding international focus, has clear appeal for our underwriting teams and support staff, as well as significant benefit for our customers and capacity providers.”

Bob Kimmel, CEO of K2, added, “Pioneer’s underwriting leadership have the skills, customer commitment and capital relationships that are an excellent fit for K2. We look forward to working closely with them as we build an international distribution platform to complement our successful existing US business.”

Pioneer Underwriters has always been open to other forms of capital, underwriting some collateralised reinsurance business and even industry loss warranties (ILW’s). In recent months the firm had increased its discussions with alternative sources of reinsurance capital, including ILS funds and investors, in particular in relation to its catastrophe facilities.

As it becomes part of a larger platform, it will be interesting to see whether the use of alternative capital becomes more or less of a focus for the company’s underwriting teams.