The rumoured acquisition of hybrid P&C program, fronting and risk transformation company Transverse Insurance Group by MS&AD Holdings, through its Mitsui Sumitomo Insurance unit has now been confirmed, as the firms made a joint announcement this morning.
The news was reported at the weekend by our sister publication Reinsurance News, with a $400 million price tag said to be the cost to Mitsui Sumitomo.
A price has not been announced today, but sources we’ve spoken to since the weekend suggest the rumoured amount is in the right ball-park for Transverse.
As we explained on Monday, Mitsui Sumitomo’s attraction to Transverse shows its interest in becoming a connector, in the insurance risk to reinsurance capital value-chain, which is an increasingly important role in the industry.
Transverse takes a hybrid approach to its program P&C business, also providing fronting and risk transformation services.
The company works with many sources of reinsurance capital, including alternative markets such as insurance-linked securities (ILS) specialists, and has always pitched itself as an underwriting platform with risk capital access, helping to connect underwriters to capacity and capacity, or investors, to risk.
Transverse has always had a stated aim to help facilitate access to risk for insurance-linked securities (ILS) funds and investors, as well as for traditional reinsurance capital sources.
Mitsui Sumitomo Insurance will acquire New Jersey headquartered Transverse from its current owners Virgo Investment Group.
Mitsui Sumitomo explained this morning that, “The acquisition underlines MSI’s long-term growth ambitions and is a significant step towards further building out its US presence and generating revenue diversification by accessing the fast-growing specialist managing general agent (‘MGA’), wholesale and other broker-led distribution channels for property, casualty, marine, and specialty business.”
On Transverse, Mitsui Sumitomo said, “Its recent growth trajectory and robust pipeline of MGA partners have allowed it to capture a meaningful share of the US fronting market in a short space of time.”
The US hybrid fronting industry has outpaced other segments at 30% growth during 2016 to 2021, the company said, driven by growth and demand for E&S markets.
“This creates substantial growth opportunities for companies like Transverse, that combine an attractive, profitable, and scalable business model, with genuine alignment of interest and underwriting appetite, alongside a commitment to retain a proportion of underwriting risk in the program,” they highlighted.
“MSI’s ownership of Transverse strategically expands its presence in the US market and provides rapid and flexible access to this fast-growing market by gaining both fronting and underwriting income from Transverse and its established network, creating a new source of diversified profitability for the Group’s operations,” they further explained.
The company said the acquisition of Transverse builds on other regional investments by Mitsui Sumitomo and supports its international growth strategy, which targets “synergistic benefits” among its different entities.
Transverse is also expected to be enhanced by Mitsui Sumitomo Insurance’s strong balance sheet and financial strength, “creating a differentiated proposition with considerable competitive advantage, and allowing it to explore new growth opportunities,” the company said.
This is a great opportunity for Transverse to position itself as a market-leader, with significant fire-power behind it.
But also to explore international opportunities with the backing of a major player, as the same hybrid program, fronting and transformation services are likely to become more important around the world as the industry becomes increasingly focused on the efficient connection of risk and capital.
Tamaki Kawate, Director, Head of International Business of Mitsui Sumitomo Insurance Co., Ltd. and Johan Slabbert, Chairman & CEO of MS Amlin Distribution Holdings Inc., stated, “This acquisition marks the start of a new phase for MSI as a market-leading global (re)insurance business. It not only demonstrates our commitment to sustainable growth in the US but highlights our differentiated proposition with the stability and financial strength of our parent company. This acquisition will allow Transverse to accelerate its competitive advantage by securing greater access to product lines and new distribution opportunities, serving the evolving and long-term needs of its MGAs and (re)insurer partners more effectively.”
Erik Matson, Chairman, CEO, Co-Founder of Transverse commented on the acquisition, “We are all very excited about this development, and what it will mean for our future growth opportunities. This is a significant milestone for everyone involved in our growth journey and we’re delighted to have found a home in MSI. Its balance sheet strength, rating, and international network will exponentially fast-track our development and innovation. This acquisition cements the success of our business and reiterates the value of our hybrid fronting model as a valuable tool that allows our partners to maximise the market cycle.”