Bidders Line Up To Buy Reinsurer While AIG Lacks Offers
April 03 2009 - 3:44PM
Dow Jones News
A fight between two would-be buyers over catastrophe reinsurer
IPC Holdings Ltd. (IPCR) contrasts with an apparent lack of
interest in the reinsurance business mostly owned by American
International Group (AIG).
For the chief executive of Validus Holdings Ltd. (VR), which is
competing with Max Capital Group Ltd. (MXGL) to buy IPC, the appeal
is all about which types of reinsurance prices are rising and which
aren't.
"We see a good opportunity to put our capital to work in short
tail lines of business," where prices are rising rapidly, said Ed
Noonan, chief executive of Validus in an interview Friday. "Looking
at IPC, we said it offers the opportunity to double our capital
base at a time when we have a great opportunity to grow."
That appeal is missing in property/casualty reinsurer
Transatlantic Holdings (TRH) because of the liability side of its
offerings, where Noonan said rates are falling. Transatlantic's
close business ties with AIG can't help. AIG's 59% ownership of
Transatlantic has been up for sale since the AIG's massive
government bailout first began in September, without any apparent
nibbles. AIG is a reinsurance customer of Transatlantic as
well.
"Casualty prices continue to go down," Noonan said. "I don't
know how many are looking" to expand into that line of
business.
A Transatlantic spokesman said that he could not comment on what
AIG might do with its stake.
Casualty coverage includes liability coverage such as workers
compensation, where claims can come up years after a policy is
written, as opposed to the shorter timeframe for property
coverage.
Max Capital, which writes property and casualty business, would
also increase its proportion of property and other short-tail lines
by a combination with IPC. It has argued that its offer is superior
to Validus Re's, in part because its combined business would be
more diversified.
In 2008, 70% of Transatlantic's total premiums came from the
casualty side of its business. In January, Transatlantic said that
despite AIG's uncertain future, the company managed to renew most
of the business it wanted to keep.
That could change, said one observer.
"Reinsurance is a little easier for a competitor to pick off"
than more long-term business deals, said Ernie Csiszar, insurance
industry director with Bridge Strategy Group, and the former
director of the South Carolina insurance department. He said that
reinsurance customers might be leery of AIG's future. "Why would
you want to buy the business when you can just take it away?"
-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141; lavonne.kuykendall@dowjones.com