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Tampa Housing Authority Wishes, Fired Developer Gets Another Crack At Building Tempo Housing Project

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TAMPA — The Tampa Housing Authority thought it had seen the last of the Siltek Group when in July it fired the contractor building a signature $25.6 million The Tempo at Encore was behind schedule and had fallen prey to shoddy workmanship and poor management, said Housing Authority officials. And Siltek owner Ana Silveira-Sierra continued to let her husband, Rene Sierra, work as project manager even after he had pleaded guilty in a multi-million dollar kickback scheme involving affordable housing in South Florida. So Housing Authority officials were outraged to learn that Berkley Surety Group, the firm that underwrote the project, has hired a new company owned by Silveira-Sierra to finish the seven-story building. Officially Berkley has contracted with Tron Construction. But records show that the firm was established by Silveira-Sierra less than one month after Siltek was terminated from the Tempo project and operates out of the same Plantation office. It means that completion of the 203-unit building intended to provide affordable housing will effectively be in the hands of the same developer that the Housing Authority and its development partner, Banc of America Community Development Corp., are suing for botching construction. Housing Authority attorney Felix Rodriguez expressed frustration at Berkley’s decision in an October letter. He said the underwriting agreement gives the New Jersey firm the right to choose its own contractor. “The Housing Authority was extremely disappointed with the surety’s selection,” he said. “We can’t do anything about it without losing our rights to surety.” The letter sent to Berkley by Rodriguez put it more bluntly: “In short, the owner has no confidence in Siltek’s or Tron’s ability to complete the job.” Silveira-Sierra declined to comment on the selection of her new firm. The decision to go back to the same developer is likely about protecting the bottom line, said Jack Neu, a surety bonding specialist with Nielson, Wojtowicz, Neu & Associates. “If they brought in someone new, that entity would have to investigate everything that was put in place previously,” Neu said. Still, he expects Berkley to keep close tabs on Tron’s work. Originally scheduled to open fall 2016, Tempo is part of a 28-acre, $450 million mixed-income housing development replacing Central Park Village. It will include public housing and market-priced apartments. The development partnership opted to fire Siltek with the project about 80 percent complete, stating in a letter to the firm that it was not employing enough construction workers or complying with inspectors. Siltek had also created an adversarial relationship with its subcontractors, the letter stated. Among other problems, drywall had been installed before the building had been closed off to rain, said Housing Authority chief operating officer Leroy Moore. After Siltek was fired, some drywall had to be removed because of dampness. Housing Authority officials were also concerned that Silveira-Sierra’s husband was still involved in Tempo even after he admitted to federal investigators that he conspired with Miami developers to inflate construction costs to earn additional federal tax credits and grants through his company, Siltek Affordable Housing. Sierra was officially removed from the project, but Housing Authority emails show that he returned to Tampa to work as project manager on Tempo. In December, he was sentenced to three years of probation including six months of home detention with electronic monitoring. He was also ordered to repay $1.2 million to the government. Tempo, which was partly funded through a Choice Neighborhood Grant awarded by the U.S. Department of Housing and Urban Development, is unlikely to be finished until at least the summer, said Rodriguez, the Housing Authority attorney. But after sitting vacant for months, the construction site is now bustling with about 60 workers each day. http://www.tampabay.com/news/against-tampa-housing-authority-wishes-fired-developer-gets-another-crack/2308312

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sba

SBA Recognizes Surety Bond Companies; Increases Bond Guarantees to 90 Percent

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Several surety bond companies that are partners with the U.S. Small Business Administration (SBA) in helping small contracting businesses with their surety bond needs were recently honored by SBA’s Office of Surety Guarantees at a ceremony held at the Agency’s headquarters in Washington, D.C. Michael Konzen, with CCI Surety Inc., was recognized as Surety Agent of the Year. Carol Nevin with Tokyo Marine HCC Company, and Kenneth Turner, Bruce Allen and Greg Allen with KOG International Inc. were also honored as Surety Partner of the Year and Surety Agency of the Year, respectively. All three firms have excelled in their participation, activity, claims and recovery as well as in their commitment to continue growing and helping small businesses obtain and perform contracts with both government entities and the private sector. SBA increased its guarantee percentage for bonds issued in the Preferred Surety Bond Program from no more than 70 percent to no more than 90 percent, per Public Law 114-92 of the National Defense Authorization Act of 2016. SBA guarantees will be 90 percent if the original contract is $100,000 or less, or if the bond is issued on behalf of a small business owned and controlled by socially or economically disadvantaged individuals, veterans, service disabled veterans, or qualified HUBZone and 8(a) businesses. In all other cases, the guarantee will be 80 percent. The increase will be effective Nov. 25, 2016. The new guarantee limits will expand bonding opportunities for many small businesses. For more information about the Surety Bonds Guarantees Program, please visit https://www.sba.gov/surety-bonds. http://www.prnewswire.com/news-releases/sba-recognizes-surety-bond-companies-increases-bond-guarantees-to-90-percent-300365404.html

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New Program To Aid Small Firms Get Government Contracts

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Stanley and Jocelyn Tucker, founders of a nearly 20-year-old landscaping company in Central Jersey, know firsthand the difficulties that minority-owned small businesses face. So they welcome a new state program that will enable firms like theirs to compete for lucrative state and federal contracts. The husband-and-wife team, partners in Job One Lawn and Landscape LLC in Ewing, are among those voicing their support for legislation signed into law earlier this month by Gov. Chris Christie that created the Small Business Bonding Readiness Assistance Program. The program, under legislation passed unanimously by both houses of the Legislature, will be administered by the New Jersey Economic Development Authority and provide support services and assistance to small companies so they can secure surety bonding, a task that has discouraged many small businesses in the past. Surety bonds, which ensure a project’s completion in the event of a contractor’s default, may not be a sexy subject. But they are important because securing them is typically required for contractors, big or small, who want to bid on government projects. The new state program aims to make that bidding process less exclusionary — and more competitive — by making more players eligible. According to the the governor, 98 percent of all the businesses in New Jersey are small businesses, with fewer than 100 workers, and they employ more than 1.7 million people. And 28 percent, or 31,395, of Bergen County’s companies, are minority owned, while 36 percent, or 16,478, of Passaic County’s are minority owned, according to 2012 U.S. Census data. Jocelyn Turner described bonding requirements as both “the gateway” and the “big wall” for small businesses to win “larger and more substantial” contracts. “You could have done a lot of the leg work to prepare yourself in many ways, and then you’ll hit that roadblock,” she said. “We are still in that same space and have not been given a surety bond or been able to bid where one is required to date. Years in the making The legislation had bipartisan support and involved several years of work and meetings between the African American Chamber of Commerce of New Jersey and state officials, including Christie, according to John Harmon, president and chief executive of the chamber. The bill also had the support of the Statewide Hispanic Chamber of Commerce of New Jersey and the New Jersey Chamber of Commerce. “You hear about public projects and then wonder, ‘Why isn’t the small-business community participating?’” Harmon said. “It’s because the law says that in order to do a public contract over $200,000, you need a bond. So this was in response to a growing need to have more of New Jersey small businesses participating in economic opportunity.” The bonding assistance program will walk small-business owners through the necessary steps to obtain a surety bond, he said. “The bonding is a strong vetting process,” Harmon said. “They sit down with you and want to know your history of work done and completed. How many jobs have you done over the last year? What was the size of those jobs? Did you complete those jobs? How good is your record-keeping, your financial management? How good is your understanding of estimating and contract law? What we proposed is the state of New Jersey start a program that will take small businesses, contractors, through this process and then introduce them to sureties so they will be bonded.” Under the new law, the EDA will also create a $250,000 fund to award grants to small businesses that participate in the program. Governor’s support When Christie signed the bill at a ceremony at the chamber’s headquarters in Trenton, he called the new program “another avenue for small, minority-owned and women-owned businesses to have greater access to job creating opportunities.” The governor added, “Increased competition for public contracts will lead to lower costs and a more diverse pool of small businesses performing public services.” The Tuckers are likely to avail themselves of the program, and they have turned to the EDA for assistance in the past. “Legislation like this is meaningful because when you think of a situation where the majority of a minority group or minority groups face the same consistent obstacles historically over time, then there needs to be this kind of a door opener,” Jocelyn Tucker said. “And that’s what I equate this legislation to.” Her husband, Stanley Tucker, added, “A program like this would just help us get over the top.” Carlos Medina, chairman of the state’s Hispanic Chamber of Commerce, said that his group has members, “mostly in the construction industry — painters, Sheetrock guys, carpeting guys, flooring guys — where the surety bond becomes an issue.” The process can be onerous because “you have to have a certain amount of sales, it’s paperwork, it’s a combination of things,” according to Medina. The new EDA program “definitely eliminates one of the hurdles” for small firms to land government contracts, he said. Sponsor speaks up The lawmakers who sponsored the bill, including Assemblyman Jamel Holley, D-Union, said it was in response to feedback from minority-owned small businesses, adding that they will now be able to tap into the fund created by the new program. Tom Bracken, president and chief executive of the New Jersey Chamber of Commerce, said he has witnessed the problems small companies have getting surety bonds. “When I was in the banking business, if a small business went to a bonding company to try to get a bond, it was pretty much a quick conversation because they couldn’t qualify,” he said. “So, the new program is a way to open up new avenues of potential revenue for small business.” http://www.northjersey.com/story/money/small-business/2017/01/24/new-program-aid-small-firms-get-government-contracts/96724648/

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Does The Accessory Principle Apply To Surety Bonds?

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China’s surety bond market underwent significant development in 2016 and surety bonds have become one of the most important methods for securing a financial guarantee. However, due to a lack of clear Supreme Court guidance on the matter, the laws that apply to surety bonds issued by insurers in China are still the subject of much debate. This update addresses whether the Guarantee Law’s accessory principle applies to surety bonds issued by insurers in China. Governing laws for interpreting surety bonds A ‘surety bond’ is a written agreement that usually provides for monetary compensation to be paid to the obligee if the principal fails to perform acts as promised. In China, surety bonds can be issued by banks (ie, bank guarantees) and insurers (ie, guarantee insurance). One difference between the two is that bank guarantees are drawn from a company’s credit lines on the bank’s terms, whereas, if an insurer issues a bond to guarantee performance, payments are made in the form of a premium and are not drawn from the company’s credit lines. One of two Chinese laws could apply to the issuance of surety bonds, depending on whether the surety is regarded as: a security instrument governed by the Guarantee Law, which came into force in October 1995; or an insurance product governed by the Insurance Law, the most recent amendment to which came into force in April 2015. Suretyship, guarantee contracts and guarantee insurance Article 6 of the Guarantee Law defines ‘suretyship’ as an agreement between a surety and an obligee that the surety will perform the obligation or bear liability according to the agreement if the obligor fails to perform its obligations to the obligee. Article 5 of the law provides that a ‘guarantee contract’ is “an accessory contract to the principal contract. If the principal contract is null and void, the guarantee contract shall be null and void accordingly. Where it is otherwise agreed in the guarantee contract, such agreement shall prevail.”(1) Under the Guarantee Law, a guarantee contract is an agreement between an obligee and a surety that is different, and yet ancillary, to the principal contract between the obligee and the obligor. The establishment, amendment and termination of a guarantee contract is premised on the principal contract. Where the principal contract is null and void, the guarantee contract shall also be null and void, unless otherwise agreed by the parties or stipulated by law. Conversely, ‘guarantee insurance’ is a type of insurance policy that can be issued only by insurers. Even though guarantee insurance is regarded as being within the scope of ‘property insurance’ under Article 95 of the Insurance Law,(2) Chinese law provides no standardised legal definition of guarantee insurance. The Supreme Court’s decision in a guarantee insurance dispute between two financial institutions held that ‘guarantee insurance’ is a type of insurance through which the insurer provides a guarantee to the insured (obligee) on behalf of the policyholder (obligor), in case the policyholder cannot perform its obligations as agreed in the contract with the insured and causes the insured to suffer an economic loss. In such cases, the insurer will bear the liability to compensate the insured in accordance with the agreement between the insurer and the policyholder. The Supreme Court further held that, even though guarantee insurance is a type of insurance, it is, in effect, a type of suretyship provided by the insurer to the insured. In the China Insurance Regulatory Commission’s (CIRC) decision in the same case, it stated that “guarantee insurance is a type of property insurance”. This classification was later adopted by the Insurance Law. Differing views Although the Supreme Court and the CIRC have each provided definitions, disparity remains among law practitioners and scholars regarding the nature of guarantee insurance. Article 36 of the Draft Interpretations of the Supreme Court on Issues in Trying Insurance Disputes provides that the courts “shall apply the Contract Law and the Insurance Law to ascertain the legal relationship between the parties when trying guarantee insurance contract disputes; the Guarantee Law shall be referenced where the Contract Law and the Insurance Law do not stipulate”. Article 34 of the draft interpretations provides that “guarantee insurance contracts serve to guarantee the performance of the contractual obligations, which has the nature of suretyship”. Article 38 of the draft interpretations provides that: “Guarantee insurance contracts shall be null and void where the principal contract is null and void, and the insurer is not to be held responsible for the insured liability. However, if the insurer knows the principal contract is void and still agrees to issue the guarantee insurance, the insurer shall assume the liability of compensation.” Although the interpretations have yet to come into force and the extent of the official version is unknown, the draft interpretations have substantially influenced the views of some local courts regarding: the nature of guarantee insurance contracts; and the legal relationship between a guarantee insurance contract and its so-called ‘underlying contract’. Specifically, the courts have applied the Guarantee Law in some guarantee insurance cases, holding that: a guarantee insurance contract is an ‘accessory contract’ to the underlying contract; and that guarantee insurance contracts are null and void where the underlying contract is null and void. However, some courts have maintained the opposite view that: a guarantee insurance contract is independent from the principal contract; and its validity does not depend on the principal contract. The ultimate reason behind this disparity is the absence of legislation and legally binding guidance in the guarantee insurance field. Are guarantee insurance contracts insurance contracts? Notwithstanding the above disparity, a guarantee insurance contract should arguably be regarded as an insurance contract governed by the Insurance Law, rather than a guarantee contract governed by the Guarantee Law. The reasons for this view, which is held by the majority of law practitioners and scholars in China, are as follows: The parties to a guarantee insurance contract are the insurer (surety) and the policyholder (obligor). The obligee to the principal contract, which is normally

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Complexities of Construction Risks Make Surety Bonds More Crucial

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Risks in the construction industry and commercial markets highlight the growing importance of surety bonds The evolving complexities of risks in the construction industry and commercial markets highlight the growing importance of surety bonds, a joint study by the Associated General Contractors of America (AGC) and consulting firm FMI found. The survey, entitled “Surety Bonding and Risk Management Forum,” polled 83 of the best-in-class construction companies with an aggregate annual volume nearing $50 billion. The poll found a majority of contractors believe the current construction risk environment is drastically different than it was five years ago. The finding is a complete turnaround from previous experiences of the construction industry, which for several decades has not seen a sudden shift in the pace of change and productivity gains like other industries. Industry players have noticed a rapidly changing landscape in the construction sector from Public Private Partnerships (PPP) to alternative delivery methods, including Integrated Project Delivery (IDP). As new technologies are introduced into the sector, construction projects are becoming more complicated, posing new challenges that are forcing the industry to adapt. But the industry as a whole is not in sync in adapting to the changing times, with some still clinging to what they have been used to, while others have embraced the change. According to the survey, contractors consider the risk for subcontractor default one of the top three risks facing the industry, together with a shortage of skilled craft labor and one-sided contract language. Other risk factors identified by those surveyed include: construction firms are managing risk differently today, risk management effectiveness varies and mitigating and managing risk has become a strategic priority. To mitigate hazards and to allow contractors to transfer some of the performance or payment guarantee risks, surety bonds play a more crucial role than ever, the survey suggested. Contractors are guaranteeing their investors and clients they can complete their projects within the terms of the contract by buying a surety bond or construction bond. A surety bond also provides additional protection to owners and an increased level of guarantee because sureties are expected to carefully scrutinize a contractor’s capacity to finish the project as specified in the contract, as well as conduct due diligence on its financial capability. Failing to do so means sureties would assume the claims against the bonds posted by the contractor. Greg Rynerson, CEO and founder of full-service surety bond company Surety Authority, commented on the issue, “To be sure, no contractor can afford to use the same business model he was using five years ago. The market environment has changed and is still changing. You have to adapt your strategy and accept an entirely new playing field, from rebuilding, retooling and refitting.” Luckily for clients, the surety industry has been at the forefront in recognizing the evolving risk landscape of the construction sector. In response, surety firms, including brokers and insurance firms, have expanded their teams of experts over the past several years. Their years of experience have allowed them to gain more in-depth knowledge of the complex construction risks. In turn, contractors are getting the necessary tools from surety experts that allows them to mitigate the performance and payment risk posed by their projects. The FMI and AGC study said, “Still, we can cautiously point to a number of positive trends that are taking place. For example, the industry did not witness nearly as many surety losses or large contractor failures as expected during the downturn—a sign that contractors, sureties and banks are more conservative in their underwriting approaches. Contractors are exercising more self-discipline and both sureties and banks are resisting the temptation to let contractors overextend themselves. Recent experience also indicates that the industry is getting more sophisticated. Leaders are better-educated, think more strategically and, thus, are apt to run their organizations more effectively. However, with the risk of contractor default higher in a recovering economy compared to other economic phases, the industry needs to keep a close eye on the potential for an increase in default claims going forward.” Rynerson added that looking at surety bonds from a pricing perspective, the surety industry is still a buyer’s market. Since 2007, the price for surety premiums is on a downward spiral, mimicing the downturn experienced by the construction space. He added that new entrants in the surety markets are also increasing the amount of capital to the surety line, dwarfing the revenue growth of the space. Despite all this, Rynerson stressed that Surety Bonds have become more important than ever to guarantee protection that projects are completed by contractors within the specified contract. “Simply put, construction bonds provide assurance that the project developer will recover any financial losses if the contractor does not complete a contract,” Rynerson said. http://www.gurufocus.com/news/457977/complexities-of-construction-risks-make-surety-bonds-more-crucial

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Arch Claim

Hartford Ballpark Surety Insurer Sues Former Developer

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The Arch Insurance Co. has filed a federal lawsuit against the former Hartford ballpark developer to recover what it describes as more than $8.4 million in losses as it pursues completion of the stadium. Arch last week sued Centerplan Development Co. of Middletown, the former developer of the Dunkin’ Donuts ballpark along with a host of related development companies associated with Centerplan CEO Robert Landino, over liability the surety insurer says it has incurred with respect to the ballpark, and potentially with a phase two of the Storrs Center mixed-use development near UConn. Centerplan was the original developer of the Hartford minor-league baseball stadium, which didn’t open on time this year, forcing the Yard Goats to play their inaugural 2016 season entirely on the road. Centerplan was eventually fired as the stadium developer by Hartford Mayor Luke Bronin after construction delays and cost overruns. Arch in mid-October signed an agreement with the city of Hartford to complete the stadium, and said it had hired Baltimore-based Whiting-Turner Contracting Co. to finish the job. As early as 2010, and at different points later on, Centerplan and Landino in his various capacities at related companies signed “General Indemnity Agreements” that guarantee Arch Insurance would be reimbursed for out-of-pocket costs. In its Nov. 16 complaint, filed in the U.S. District Court’s Connecticut District, Arch, the surety for the two projects, asserts that it anticipates more than $18 million worth of potential liability for them, and has made payments so far exceeding $8.4 million to resolve some of the claims associated with the bonds issued for the stadium. Those bond claims have not been resolved, the complaint states, and Arch state it continues to incur losses, fees, costs and expenses, while also facing potential liability. Arch is seeking monetary damages and injunctions to force the developers to honor collateral security provisions and disclose financial information related to their current assets. Centerplan attorney Raymond Garcia declined comment. http://www.hartfordbusiness.com/article/20161121/NEWS01/161129994/hartford-ballpark-surety-insurer-sues-former-developer

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china

Aviva CEO Sees Asia Insurance Agents Disappearing on Digital

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Aviva Plc’s Chief Executive Officer Mark Wilson said the number of insurance agents in some of Asia’s most developed markets could halve over the next three years as digital sales start to eat into their commissions. The agents, used by some Chinese mainlanders to avoid capital controls, have been a key driver of earnings for insurers in Asia including in Hong Kong, where people have flocked to buy policies. Wilson, a former CEO of Hong Kong-based AIA Group Ltd., said numbers will also fall as more experienced agents approach retirement age. His comments contrast with competitors including Prudential Plc, which generate about half of its earnings in Asia, much of that from its 500,000-strong agency force. “Most of the Asia growth story has been on the back of agency,” Wilson said in an interview at Aviva’s headquarters in London. “The agency era in a lot of those markets is now over; you have extraordinarily high commissions and an aging agency force.” The agents, used by some Chinese mainlanders to avoid capital controls, have been a key driver of earnings for insurers in Asia including in Hong Kong, where people have flocked to buy policies. Wilson, a former CEO of Hong Kong-based AIA Group Ltd., said numbers will also fall as more experienced agents approach retirement age. His comments contrast with competitors including Prudential Plc, which generate about half of its earnings in Asia, much of that from its 500,000-strong agency force. “Most of the Asia growth story has been on the back of agency,” Wilson said in an interview at Aviva’s headquarters in London. “The agency era in a lot of those markets is now over; you have extraordinarily high commissions and an aging agency force.” Aviva, which doesn’t rely on agents to sell its products in Asia, competes with both AIA and Prudential in seven markets in the region including China, Hong Kong and Singapore. Wilson, a 50-year-old New Zealander who has spent 14 years working in Asia, says it’s “ripe for disruption.” That should lower costs and boost profits for insurers in some markets including Singapore, according to Panmure Gordon & Co. analyst Barrie Cornes. A typical commission for the first five years of a 20-year life insurance contract in Hong Kong could be anywhere from 100 to 160 percent, industry figures show. Consultancy firm EY says the average age of an agent in Asia is about 45 with the most successful senior agents closer to 55. Chinese Clampdown In China, agents face an additional threat. Regulators are making it harder for mainlanders to buy insurance from an agent in Hong Kong, where there are 59,000 registered, to try and prevent them from moving money there. Capital outflows from China reached $1 trillion last year, Bloomberg Intelligence estimates. Still, not everyone in the industry agrees that the agents’ days are numbered. Prudential, the U.K.’s largest insurer, said at an investor day in London earlier this month that it had ramped up its recruitment in the region. AIA, which operates in 18 countries, has more than 5,600. Aviva has stepped up its investment in technology, opening a Digital Garage in Singapore to help it sell insurance directly to the customer online. Wilson is also betting that financial advisers will increasingly replace agents as sellers of insurance. The U.K. company, which lost its bancassurance deal with Singapore’s DBS Group Holdings Ltd. in 2015, launched a financial-advisory firm in the city-state in July. It started with 280 former insurance agents who can sell Aviva products and those of its competitors. They cost Aviva 10 percent of what they had offered to pay DBS to sell policies, Wilson said. ‘Mature Agents’ In Singapore, “we are becoming the home for mature agents who have 20 years of experience and want more freedom and independence,” Wilson said. Older agents in Asia “don’t want to be in tired pyramid agency structures,” he said. There’s also a high turnover of younger advisers who’ve lost enthusiasm, according to EY. Even so, Wilson isn’t looking to “put a lot of capital” into the region that accounts for less than 10 percent of Aviva’s operating income. The CEO has repeatedly said he will only do smaller deals after buying Friends Life Group Ltd. in 2015. Still, that didn’t stop his appointment of Chetan Singh as head of mergers and acquisitions this year from fueling speculation that Aviva may have bigger ambitions. Singh previously led deal-making for financial institutions in Southeast Asia for JPMorgan Chase & Co. While Wilson has reduced Aviva’s markets to 16 since joining in 2013, some businesses including Spain, Italy, Taiwan and Friends Providential International may still be put up for sale. The company operated in 28 markets in 2011. “I will sell as much as I buy this year,” he said. “Everyone assumes that I will go and buy stuff in Asia and I haven’t. I’m pragmatic.” https://www.bloomberg.com/news/articles/2016-11-28/aviva-chief-sees-end-of-asia-s-agents-as-market-is-disrupted?

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General Indemnity Group Announces the Acquisition of United Casualty and Surety Insurance Company

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General Indemnity Group, LLC, (“GIG”), a subsidiary of Boston Omaha Corporation (OTC: BOMN), announced today that it has completed the previously disclosed acquisition of United Casualty and Surety Insurance Company (“UCS”), of Quincy, Massachusetts. UCS is a leading provider of both contract and commercial surety products, and has earned a reputation for strength and service with its agents and clients. The business and its employees will remain in their current location outside of Boston, under the continued leadership of Todd Carrigan. As a surety specialist since 1989, United Casualty and Surety has solutions for any situation, offering innovative structures and terms for even the most difficult cases. For more information on UCS, or for any surety needs, please visit: www.unitedcasualty.com This acquisition continues GIG’s entry in the surety space, after its purchase earlier this year of The Warnock Agency, whose site www.EZSuretyBonds.com offers bonds in all 50 states. General Indemnity Group, LLC General Indemnity Group, LLC, and its subsidiaries offer a broad range of insurance and related services. For more information on General Indemnity, please visit: www.gi.insure. United Casualty and Surety Insurance Company United Casualty and Surety Insurance Co., is a leading provider of both contract and commercial surety products. Established in 1989, UCS has a financial strength rating of A- (excellent) from A.M. Best, and is approved by the United States Department Treasury for Federal Bonds. http://www.businesswire.com/news/home/20161207006299/en/

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Fairfax Financial Acquires Allied World For $4.9bn

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Canada-based Fairfax Financial Holdings, a property and casualty re/insurer, is acquiring Allied World Assurance Company Holdings for $4.9 billion in cash and stock as the two companies have entered into a merger agreement approved by their boards. The offer price represents a premium of 18 percent to the closing price of $45.77 per Allied World Share on December 16, 2016. Allied World will operate within the Fairfax group on a decentralized basis after closing. The acquisition will diversify Fairfax’s group risk portfolio, and Allied World will leverage from Fairfax’s presence in the international re/insurance markets. Allied World’s growing international reach is highly complementary to Fairfax’s existing worldwide operations and the acquisition further diversifies Fairfax’s group risk portfolio, a press release said. In addition, Allied World will be able to leverage Fairfax’s expertise in Canada, the United States and international insurance and reinsurance markets, thus enhancing Allied World’s global product offering and providing it with expanded underwriting opportunities and support. “We are excited to have Allied World join the Fairfax group,” said Prem Watsa, chairman and chief executive officer (CEO) of Fairfax. “Allied World is a high-quality company with an excellent long-term track record and an outstanding management team led by Scott Carmilani. We are looking forward to supporting Scott and the entire team at Allied World in growing their business over the long-term.” Carmilani, the CEO and Chairman of Allied World, added: “This is a tremendous opportunity for Allied World. Our shareholders are being rewarded for the strong performance of Allied World over the last 10 years since going public. “We are strategically aligning ourselves with Fairfax, one of the premier companies in the insurance industry which has a great track record of supporting their operating companies and creating value for shareholders. We are excited to be joining the Fairfax organization – we share their passion for underwriting excellence and their entrepreneurial approach to growing the business with a long-term orientation. “Our shareholders will benefit from Fairfax’s tremendous investment capabilities as demonstrated by its superior long-term investment track record. The success of Fairfax’s decentralized approach in empowering their management teams to drive profitable underwriting and combining Fairfax’s investment philosophy will position us to create long-term value for shareholders,” he continued. Fairfax provides a great home for Allied World to continue to build a strong business for our customers, business partners and employees.” http://www.intelligentinsurer.com/news/fairfax-financial-acquires-allied-world-for-4-9bn-10595?utm_source=Insurance&utm_campaign=eee83840b8-Intelligent_Insurer_Daily_19_12_2016&utm_medium=email&utm_term=0_f246694353-eee83840b8-27488653

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libertymutual

Liberty Mutual to Acquire Ironshore from China’s Fosun for $3 Billion

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Liberty Mutual Insurance has agreed to acquire specialty lines insurer Ironshore Inc. from China’s Fosun International Limited. Liberty Mutual will acquire a 100 percent ownership interest in Ironshore. According to the announcement, the purchase price will equate to 1.45x Ironshore’s actual tangible book value as of year-end 2016, and is estimated to be approximately $3 billion. The purchase price is subject to closing price adjustments. Once the transaction is closed, Ironshore will continue to operate with CEO Kevin H. Kelley, the same management team and brand name, but as part of the larger Liberty Mutual organization, which is growing its specialty lines operations. The transaction is expected to close in the first half of 2017. “Ironshore has a track record of profitably underwriting global and diverse specialty risks insurance and is an ideal complement to Liberty Mutual, providing additional scale, expertise, innovation and market relationships to our $5 billion global specialty business,” said David H. Long, Liberty Mutual chairman and CEO. Ironshore CEO Kelley called the transaction “beneficial for all three parties involved” in a statement. “We have aimed for the best possible outcome for our employees, clients and business partners and are confident this transaction achieves these goals and more,” he said. “Ironshore will become part of another ‘A’ rated company with a global reach, a strong balance sheet, wide client base and a much greater capacity to drive profitable growth. In Ironshore, Liberty will gain access to a profitable specialty insurer that will enhance Liberty’s current specialty markets profile. The transaction also speaks to the value of the Ironshore franchise and to Liberty’s view of the value that the management team brings to their organization,” Kelley said. New York-based Ironshore, which was founded in 2006, had gross premiums written of $2.2 billion in 2015 and is among the largest excess and surplus lines insurers in the U.S. The company, which has approximately 800 employees located in 15 countries worldwide, is organized into three operating hubs based in the United States, Bermuda and London. Last November, China’s Fosun International Ltd. paid $1.84 billion for the remaining 80 percent stake of Ironshore Inc. that it did not already own when it became a 20 percent owner earlier in the year. Last December, officials at the Committee on Foreign Investment in the United States (CFIUS), a government unit that oversees deals over national security concerns, contacted Fosun with concerns over how Fosun would operate Ironshore’s Wright & Co., which provides professional liability coverage to U.S. government employees including the Central Intelligence Agency, even though Wright was a small portion of Ironshore’s overall business. After that inquiry, Fosun delayed its initial public offering of Ironshore. The conflict was apparently eliminated last month when Starr Companies agreed to acquire Wright USA from Ironshore. Starr Companies is headed by Maurice Greenberg, former CEO of American International Group (AIG). According to a spokesperson for Ironshore, the Wright acquisition by Starr has closed and the acquisition of Ironshore by Liberty Mutual does not affect this transaction. In July 2015, A.M. Best placed Ironshore under review with negative implications due to the then-planned $1.84 billion acquisition of Ironshore by Fosun. A.M. Best said it was worried about Fosun’s credit profile and financial leverage and how it would affect the insurer. However this past June, A.M. Best changed its mind and restored the financial strength ratings of “A” (Excellent) and issuer credited ratings of “a” for Ironshore. A.M. Best said the affirmation of its ratings nearly a year later reflected its view “that Ironshore has strong standalone attributes as a specialty insurer, will continue to build a relevant franchise in the specialty sector and is capable of delivering strong operating results.” However, A.M. Best said that negative outlook will hang over Ironshore for the foreseeable future due to “the drag related to the credit profile and high debt leverage measures” Fosun has. Fosun has accumulated significant debt in a 20-year acquisition spree, mostly in Europe and the United States. Ironshore was founded in December, 2006 by Robert Clements with more than $1 billion in private equity backing. Kelley joined the firm as CEO from Lexington Insurance, AIG’s surplus lines insurer, in 2008. Boston-based Liberty Mutual is a diversified insurer with operations in 29 countries. As of December 31, 2015, Liberty Mutual had $121.7 billion in consolidated assets, $102.5 billion in consolidated liabilities, and $37.6 billion in annual consolidated revenue. Its growing surplus lines operation, Liberty International Underwriters, operates in 18 countries. In 2014, Liberty International contributed 16 percent of the company’s $36.3 billion in net written premium for the year.

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