Velocity launches rated E&S insurer to accelerate MGA-carrier hybrid strategy

Velocity, the catastrophe exposed property insurance specialist managing general agency (MGA) and holding company operation, has now launched its new E&S carrier Velocity Specialty Insurance Company after securing an A- (Excellent) rating from AM Best.

The new Velocity Specialty insurance carrier received an initial equity capitalisation from Oaktree Capital Management LLC, Velocity’s majority shareholder.

Recall that we reported recently that Velocity Holdco, LLC was set to acquire Independent Specialty Insurance Company (ISIC) from its parent United Specialty Insurance Company (USIC), which is a fronting carrier of the State National Group, a division of Markel.

That insurance carrier had previously been a State National fronting insurer that had been a source of paper for underwritten business that was channelled to Velocity’s former owner Nephila Capital’s ILS investment funds.

Now, that carrier has been renamed as Velocity Specialty Insurance Company and rebooted as a start-up carrier for Velocity’s growing E&S underwriting focus.

Also recall that we reported that Velocity Risk Underwriters, the catastrophe exposed property insurance MGA, is set to exit the homeowners insurance marketplace, with commercial and E&S business the target going forwards, for now.

With the launch of A- rated Velocity Specialty Insurance Company, Velocity now had a rated balance-sheet to utilise alongside its work underwriting with other capital providers.

The move now positions Velocity to accelerate its MGA-carrier hybrid strategy.

The company explained, “Operating as an MGA-carrier hybrid empowers Velocity Risk with greater control over underwriting, policy forms and pricing, and claims management while benefiting from carrier advantages. This model allows for what Velocity Risk highly values: increased flexibility, speed, and customization in underwriting.”

The new rated carrier is licensed in all 50 states and removes the need for Velocity to access fronting facilities for underwriting qualifying business.

Velocity said the carrier launch “marks Velocity Risk’s commitment to expanding its presence in the specialty insurance market.”

Adding, “This strategic move reflects Velocity Risk’s expansion in offerings of best-in-class-insurance solutions to the specialty property insurance industry, unlocks significant value for the Velocity enterprise, and demonstrates clear alignment of interest with risk bearing partners. Velocity Specialty facilitates the connection of customers to all forms of global risk capital.”

Velocity Specialty has already begun operations and started issuing policies, the company explained.

It’s another signal that MGA’s are looking to take increasing ownership of their market infrastructure, while demonstrating their alignment through operating insurance balance-sheets alongside their use of other third-party reinsurer and often investor capital sources.