U.S. Department of Defense Issues Memorandum Permitting Acceptance of E-Signatures for Surety Bonds During the COVID-19 Pandemic
https://www.acq.osd.mil/dpap/policy/policyvault/USA000941-20-DPC.pdf
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The Three C’s Of Surety Bond Underwriting And The Increasing Importance Of Character
BEFORE ISSUING A BOND, A SURETY WILL EVALUATE A COMPANY USING THE THREE C’S: (1) CAPITAL, (2) CAPACITY, AND (3) CHARACTER. AND WHILE SURETYSHIP IS NOT A FIELD THAT CHANGES OFTEN, A SMALL SHIFT TOWARDS RELYING MORE ON CHARACTER IN THAT EVALUATION HAS BEEN MAKING ITSELF MORE VISIBLE IN RECENT YEARS. Suretyship encompasses many traditional practices and is not always amenable to emerging trends. However, even the smallest change that occurs within the field can have a major impact. In evaluating a potential principal, sureties have gone back to focusing more on a potential principal’s character. As explained below, while construction companies seeking bonds have always focused on having sufficient capital and capacity, they now also must focus on having good character. Just like how homeowners need homeowner’s insurance in the case of a flood or earthquake, builders and developers need bonds when taking on projects in case they develop issues with things like design, subcontractors, or supplies. However, while insurance and bonds may seem similar, they are actually very different. Bonds are more analogous to a form of credit that involves three parties where the bonding company (the surety) guarantees to the owner of the project (the obligee) that the contractor (the principal) will perform all its obligations under the contract. Subsequently, if the principal does not perform its duties, the surety must step in to ensure completion of the project and will then look to the principal for all the losses it incurs in doing so. Due to the risks associated with underwriting a bond, a surety will meticulously evaluate a potential principal before deciding to issue a bond. In doing so, as is industry practice, the surety will focus on the three “C’s”: capital, capacity, and character. Capital A surety must ensure that a principal has the financial wherewithal to be able to complete a project and fulfill its obligations under a contract. As such, a surety will evaluate a principal’s cash on hand, its assets, and its current lines of credit. This is not, however, limited to a present-day analysis. It will also include an analysis of the principal’s future capital, because the surety will need to learn how much cash the principal may require from the surety in case someone makes a claim against a bond or if the principal may not have sufficient funds to complete the project. Capacity When a surety looks at a principal’s capacity, it looks at the ability of the principal to complete the project under the contract. In addition to examining financial ability, the surety looks at a principal’s technical ability and ability to close out the bonded contracts. A principal is technically able to perform the work if it employs or can secure the necessary manpower to timely perform it.1 Additionally, the surety must be assured that those people have the necessary expertise to do the work correctly. This includes on-site laborers, as well as administrative staff, such as accountants and project managers. A principal’s ability to close out the bonded contracts is even more important. To assess this, the surety will look to a principal’s past projects to see what projects were ultimately completed. In addition, the surety will attempt to learn how the principal performed on a project that was known to have difficult issues. Character While character has always been an important “C”, sureties are placing more and more weight on a principal’s character, because it is the key to a successful relationship between the principal and the surety. In evaluating character, a surety company will assess whether a company is trustworthy enough to fulfill its obligations under the contract. A surety will look to the principal’s reputation in the market, including successes with prior projects and operational integrity, such as promptly paying its suppliers. A surety will also look to whether the principal is good at communication, whether it is trustworthy, and whether it is honest in conducting business. The relationship between a surety and a principal is generally not a short one, especially if it involves multiple bonds for multiple projects, which is not uncommon. The surety and the principal must communicate regularly regarding any and all disputes that may arise, including those with supplies, laborers, or contractors.2 While the surety and the principal need not agree all the time, the surety must believe that the principal is doing everything it can to fulfill its obligations under the contract and that the principal will provide ready access to its books, records, and other necessary information.3 As such, communication, trustworthiness, and honesty are extremely important characteristics for a principal to have. Character is evaluated not only in the potential principal, but also in the individual indemnitors who are the personal guarantors for the surety bond. Specifically, if the surety incurs losses on the principal’s behalf and the principal has insufficient funds to indemnify the surety for the losses, the individual indemnitors are responsible for the rest. As such, it is important for the surety to assess the same characteristics for the indemnitors. Without good character in a potential principal and indemnitors, a surety will be extremely hesitant to issue a bond. Even if the principal has enough capital and the necessary capacity to complete a project, it means nothing if the surety cannot trust the principal to make a good-faith effort to complete the project and fulfill its obligations under the contract. https://www.jdsupra.com/legalnews/the-three-c-s-of-surety-bond-62597/
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How Chubb Is Navigating Coronavirus and Its Impact on Growth
Chubb Chairman and CEO Evan Greenberg insists his global P/C insurer has strong fundamentals, but warned at the same time that the ongoing pandemic crisis will spur unpredictable revenue challenges affecting many lines of coverage. Broadly speaking, the insurer will likely take hits on the liability side and earnings via at least a temporary reduction in premium revenues, Greenberg explained during an April 22 investor call held to discuss Chubb’s Q1 2020 earnings. “Our growth momentum, particularly in our commercial [property/casualty] business globally, continued into April, and we continue to experience improved rate to exposure,” Greenberg said. “As we go forward, offsetting that, will be a meaningful impact to growth from the health and economic crisis as exposures in important areas shrink for a time, with the impact varying by country.” Reduced Exposures Consumer-related lines including travel insurance, A&H “discretionary purchases” and automobile insurance will all take hits, as customers ride out stay-at-home orders or quarantines. Commercial lines are also vulnerable, he said, “where exposures are reduced while businesses are closed, or as they reopen and are diminished, or simply go out of business.” He expects trade credit, surety and workers compensation to also be affected by reduced exposures. “It will be pretty broadly based,” Greenberg said, noting the pandemic “has created exposures for clients and industries broadly.” Beyond that, Greenberg emphasized that the company does not give specific forward guidance, and that it is hard to specify how much of a revenue impact it will face in the months ahead. “In this case the degree of revenue impact is simply unknowable,” Greenberg said, though he added that Chubb’s fundamental condition is otherwise solid and thriving. “We are and will continue to benefit in terms of growth from improved technical conditions, as many insurance companies take actions to reduce exposures or improve their rate to exposure to correct for inadequate underwriting,” Greenberg noted. In trying to draw a parallel to past events, Greenberg said that for now, the COVID-19 crisis seems manageable even with its uncertainties. “From what we know now, this will be a manageable, cat-like event,” Greenberg said. “However, from an exposure we really don’t discretely price for … its impact is additive to our normal projected loss exposure. In a sense, it is like terrorism exposure was before 9/11.” Business Interruption Greenberg emphasized multiple times that the insurer’s capital position is “strong,” and insisted “Chubb will continue to operate at a high level.” He noted, for example, that the insurer is working to keep its 33,000 employees around the world safe by way of “aggressive work-from-home protocols” and reiterated that they have secure jobs with no-layoffs during the crisis. He also said the company is maintaining standards about how it supports customers and distribution partners, and also extending payment terms and taking other measures to support clients and others facing pandemic stresses. “We are operating around the globe as a normal company during abnormal times,” Greenberg said. Greenberg strongly opposed the pressure from states and trial attorneys to force carriers to retroactively cover business interruption claims for COVID-19 losses. He spoke on the topic recently. “That is retroactively changing contract and increasing our exposures,” Greenberg said. “That is unnecessary harm and would do great damage.” He had harsh words for trial attorneys seeking to force the change through the court system. “Lawyers and the trial bar would come to torture the language on our standard industry forms and try to prove something exists that actually doesn’t exist, and try to twist the intent when the intent is very clear,” Greenberg said. “The industry will fight this tooth and nail. We will pay what we owe.” https://www.insurancejournal.com/news/national/2020/04/27/566365.htm
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Uncertain Surety: Expiration Of A Limitation Against A Principal Is Not A Defence To A Bond Claim
Sometimes failing to arbitrate a dispute with a binding arbitration provision can be fatal to a claim under a construction contract, particularly if the limitation period to commence the arbitration has expired. But, in the case of a project with a performance bond, things can sometimes become more complex. Performance bonds are a common tool on major construction projects. They are three-party contracts: the obligee (the party to whom the obligation under the bond is owed; typically an owner, although can be a general contractor on large projects in which multiple levels of bonding are in place); the principal (the party performing the work under the bonded contract; typically a general contractor, although can be a subcontractor on large projects in which multiple levels of bonding are in place); and the surety (an insurance company). If the bonded contract proceeds without issue between the obligee and the principal, then the surety plays no role in the project. However, if issues arise between the obligee and the principal and the principal is declared to be in default of the bonded contract, then the surety is required to step in and investigate. The surety can either deny or allow the bond claim. If the claim is allowed, then the surety essentially steps into the shoes of the principal, and has the same defences available to it as against the obligee as did the principal under the bonded contract prior to its default. A Surety Cannot Rely on the Expiration of a Claim against the Principal to Deny a Bond Claim However, the Alberta Court of Appeal in HOOPP Realty Inc v Guarantee Company of North America, 2019 ABCA 443 held that the expiry of an obligee’s limitation period to sue the principal does not provide the same limitations defence to a surety in the face of a bond claim lawsuit. In that case, Clark Builders (“Clark”) was the principal/general contractor, HOOPP Realty (“HOOPP”) was the obligee/owner, and The Guarantee Company (“GCNA”) was the surety. Clark was hired to construct a warehouse. HOOPP was unhappy with the warehouse floor. Clark replaced the floor at its own cost, but argued it was not required to do so under the bonded contract. The parties agreed the performance bond would extend to the floor replacement if Clark was in default of the bonded contract. In litigation between HOOPP and Clark, the Court of Appeal held that the dispute was subject to a mandatory arbitration clause, and HOOPP could not maintain a Court action. Subsequently, the Court held that HOOPP was limitation-barred from commencing an arbitration against Clark, and as such, HOOPP could not maintain any claim, in Court or arbitration, against Clark. HOOPP had commenced a separate, parallel action against GCNA under the bond, which it continued to pursue notwithstanding the dismissal of its claim against Clark. The issue then was whether GCNA was also immune from liability to HOOPP, given that HOOPP’s claim against Clark was limitation-barred. The matter was heard via summary trial. The trial judge concluded that GCNA was not relieved of liability, as the expiry of a limitation period does not necessarily extinguish the underlying debt, but only bars the remedy against the defendant. In addition, the trial judge held that HOOPP had distinct claims against Clark and GCNA, even if those claims may overlap. The Court of appeal upheld this decision. It noted that the general statement that a surety is entitled to any defence available to the principal is accurate when related to the principal’s liability under the bonded contract. However, when the issue is whether the surety is directly liable to the obligee, that is a separate issue. The Court confirmed that the surety’s liability under the bond required that the principal had defaulted under the bonded contract. But in the facts at bar, where there was an alleged default by the principal, the obligee had a potential independent claim against both the principal and the surety. This was supported by the bond wording in this case, which provided that the surety and principal were jointly and severally liable under the bond. In addition, the Court noted that an obligee is not required to exhaust all remedies against the principal in order to advance a claim against a surety. While HOOPP in this case had made an attempt to sue Clark, the Court noted that the outcome of the appeal would have been the same even if no such attempt had been made. Finally, the Court rejected GCNA’s argument that by permitting HOOPP’s claim against GCNA to proceed, it was allowing HOOPP to indirectly pursue Clark. GCNA argued that if HOOPP made a successful claim against GCNA, GCNA would then have an indemnity claim against Clark; i.e. in the end, Clark would still be liable for HOOPP’s claim despite the expiration of HOOPP’s limitation period to sue Clark directly. The Court held that Clark, as principal, did not have the protection of a limitations defence until the limitation had expired against both it as principal and GCNA as surety. Similarly, GCNA, as surety, did not have the protection of a limitations defence until the limitation had expired against both it as surety and Clark as principal. In other words, if GCNA was held liable to HOOPP, GCNA could then pursue an indemnity claim against Clark. While many of the Court’s comments were general principles applying to all performance bonds, in the end it was clear that the result on this appeal depended on the wording of the GCNA bond. In particular, the Court noted there was nothing in this bond requiring HOOPP to exhaust its remedies against Clark in order to maintain a bond claim against GCNA. The Supreme Court of Canada has now refused leave to appeal for this matter, so it remains the law applicable in Alberta. The case adds another level of complexity when trying to assess limitation periods in the context of projects with mandatory arbitration provisions coupled with separate performance bonds. https://www.jdsupra.com/legalnews/uncertain-surety-expiration-of-a-74015/
The Importance of Reviewing and Complying with Performance Bonds
As we continue to cope with the economic impacts of the COVID-19 pandemic, it is important for participants in the construction industry to take affirmative actions to protect your investments in current and planned construction projects. One of the ways owners and contractors can protect themselves is by ensuring that you understand how to enforce any performance bonds that you have required for your projects. Performance bonds are intended to act as a guarantee that performance, as required by the relevant construction contract, will be completed. Generally, it is the owner of the construction project who requires its general contractor to acquire a performance bond as assurance and protection against default by the general contractor under the prime contract. It is also possible, and common on large projects, for a general contractor to require its subcontractors to obtain performance bonds. There are three parties to performance bonds in the construction context: the “obligee,” which is the entity who is owed the contract performance and who is protected by the bond; the “contractor,” who owes obligations to the obligee to complete its contract work in accordance with the contract requirements; and the “surety,” generally an insurance company that engages in the practice of suretyship, that agrees in the case of contractor default to complete the work of the contractor, pay others to complete the work of the contractor, or pay the obligee the amount of the performance bond. In North Carolina, performance bonds are mandatory on public projects that exceed $300,000.00 in cost for a local governmental project, or which exceed $500,000 in cost for a State department or agency project. Additionally, they are sometimes required by the owners of private commercial construction projects. In fact, due to the negative economic impact of the current coronavirus pandemic, we can expect the frequency with which performance bonds will be required on commercial construction projects to increase. Performance bonds are paired with payment bonds on government projects and are almost always paired with payment bonds on private projects. When paired together, these bonds are commonly referred to as “P&P” bonds. Payment bonds are distinguishable from performance bonds in that they are intended to protect lower-tier contractors from the threat of non-payment by the general contractor or the contractor above them in the construction chain. This article focuses on performance bonds, but a future Ward and Smith article will cover payment bonds. Critically, while a performance bond is intended to guarantee contract performance in accordance with contract terms, it can be rendered void and useless if the obligee fails to comply with any requirements contained in the bond. Thus, it critical for construction project owners and general contractors to read your performance bonds carefully to ensure that you do not take actions (or fail to take actions), which might negate your rights and protections under your bonds. Performance bonds are treated and interpreted as contracts and can be breached and enforced like contracts. If there is a contractor default, the terms of the bond will lay out any actions that are required of the obligee before the surety’s obligations to correct the contractor’s default arise. Additionally, the terms of the bond set out the surety’s liability and provide the actions it may take in responding to a contractor default. Notably, many performance bonds contain provisions that require the obligee to provide the surety with notice of the contractor’s default before the surety’s obligations to cure the contractor’s default under the bond arises. As an example, the form AIA 312-2010 performance bond requires the obligee to do at least the following before the surety’s obligations under the bond arise: (1) declare the contractor in default, terminate the contract, and notify the surety that such actions have been taken; and (2) to agree to pay the balance of the contract price in accordance with the contract terms to the surety or to a replacement contractor the surety selects. In some instances, the surety must also provide the contractor and the surety notice when it is considering declaring the contractor to be in default, in which case the surety can request a conference with all parties to the bond in an effort to reach a resolution which allows the contractor to correct and continue its performance of the contract. Only after complying with these notice requirements, does the surety’s obligations under that performance bond arise. Upon receipt of proper notice in conformance with the terms of the bond, the surety’s obligations become due, and it can elect one of multiple courses of action to correct the contractor’s default. The surety can either: attempt (with the consent of the obligee) to arrange for the original contractor to cure the default; undertake to complete the contract work itself; obtain bids or negotiate proposals from qualified contractors to complete the contract work; waive its right to complete or arrange for completion of the work and agree to pay the obligee the costs it incurs to complete; or deny liability and state the basis for denial. If the surety fails to perform its obligations in a reasonable time, the form AIA 312-2010 performance bond requires the obligee to provide additional notice to the surety demanding that the surety perform its obligations under the performance bond before the surety will be deemed to be in default with respect to the surety’s obligations under the bond. While not all performance bonds are as demanding of the obligee as the AIA 312-2010, it provides a good example of requirements that might be contained in your bond, which, if not complied with, could result in a loss of your rights under the bond. North Carolina case law does not directly address the consequences of an obligee failing to provide notice as required by a performance bond, but numerous cases from the federal courts and other state jurisdictions have made clear that such a failure constitutes a material breach of the performance bond and excuses the surety from its obligations under the bond. This is because the purpose
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SBA Recognizes FY19 Most Active Surety Companies and Agencies
WASHINGTON, DC – The U.S. Small Business Administration announced on Wednesday its most active surety companies and agencies for fiscal year 2019, which contributed to increases in the Surety Bond Guarantee (SBG) Program’s activity. “The SBA is very fortunate to partner with sureties and agents with a shared vision of assisting small and emerging businesses,” said Peter C. Gibbs, Director, SBA’s Office of Surety Guarantees. “Every year I am amazed by the level of commitment from our partners to increase opportunities for the small business community.” The SBA’s Surety Bond Guarantee Program, in direct partnership with surety companies and their agents, provides surety bond guarantees for small businesses on federal, state, local and private projects. Commercial construction, service and supply contracts and subcontracts are eligible if the contract requires a surety bond. In FY 2019, the SBA’s guaranteed bid and final bonds were more than $6.4 billion in total contract value. With the work of the SBA’s top-performing surety partners and bond agencies, over 1,900 small businesses were assisted and over 30,000 jobs were supported. The standing of each surety partner and agent was determined by the number of bond guarantees they wrote through the SBG Program. The top-performing surety partners for FY 2019 are: American Contractors Indemnity Company, Calif.United States Fire Insurance Company, PaU. S. Specialty Insurance Company, Calif.Travelers Casualty & Surety Company, Conn.United States Surety Company, Md.Markel Insurance Company, TexasDevelopers Surety & Indemnity Company, Calif.Contractors Bonding and Insurance Company, Wash.Navigators Insurance Company, N.J.The Guarantee Company of North America, Mich. The top-performing bond agencies for FY 2019 are: CCI Surety, Inc., Minn.KOG International, Inc., N.J.Nielson, Hoover and Company, Fla.The Fedeli Group, OhioValley Surety Insurance Agency, Calif.Preferred Bonding & Insurance Services, Calif.Pinnacle Surety & Insurance Services, Inc., Calif.The Surety Place, Ariz.Brunswick Companies, OhioCapstone Brokerage, Inc., Nev. https://www.prnewswire.com/news-releases/sba-recognizes-fy19-most-active-surety-companies-and-agencies-300991626.html
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Intact Financial Corporation to acquire leading specialty insurer The Guarantee Company of North America and Frank Cowan Company Limited
Bolsters Intact’s leadership position in Canada Brings Intact’s North American specialty lines platform close to its $3 billion annual Direct Premiums Written objective Adds attractive surety business and expertise on both sides of the border Enhances specialty lines with public entity capabilities and adds an MGA to the platform Expands Intact’s personal lines offering in Canada with high net worth products Delivers a return on capital above Intact’s threshold and immediate accretion to NOIPS Strong financial position maintained, with over $1 billion of capital margin after closing TORONTO , Aug. 15, 2019 /CNW/ – Intact Financial Corporation (IFC.TO) (“Intact” or the “Company”) announced today that it has entered into a definitive agreement with Princeton Holdings Limited (“Princeton Holdings”) to acquire The Guarantee Company of North America (“The Guarantee”), a specialty lines insurer in Canada and the U.S., and Frank Cowan Company Limited (“Frank Cowan”), a managing general agent (“MGA”) focused on specialty insurance for a cash consideration of approximately $1 billion . The transaction is expected to close in the fourth quarter of 2019, subject to regulatory approvals. In Canada , the acquisition bolsters Intact’s position and adds new products for the high net worth customer segment. It meaningfully advances Intact’s North American specialty lines platform solidifying prominent positions in public entity and surety. The transaction will also contribute to additional distribution-related earnings. The Guarantee is a Canadian-owned insurance company with customers in Canada and the U.S. Two-thirds of its business is specialty lines and surety and one-third personal lines including a high net worth home and auto insurance portfolio in Canada . It adds more than $560 million in Gross Premiums Written1, including over $100 million in the U.S., bringing Intact’s annual North American specialty lines Direct Premiums Written close to $3 billion 2. Frank Cowan Company Limited is an MGA that is a leader in providing specialized insurance programs to public entities across Canada . It offers coverage placement, risk management consultation, and claims services for municipalities, healthcare, education, community, children’s and social service organizations. Frank Cowan places business with several insurers including The Guarantee. Princeton Holdings will continue to retain full ownership of its other businesses: Cowan Insurance Group, Cowan Asset Management, and Fountain Street Finance. “The acquisition of The Guarantee Company of North America and Frank Cowan Company is strongly aligned with our strategic and financial objectives,” said Charles Brindamour , Chief Executive Officer, Intact Financial Corporation. “We are delivering on our objectives to grow in Canada and build a leading North American specialty platform. I’m enthusiastic about what we will accomplish by leveraging the combined expertise of our teams and our expanded offering.” The transaction is expected to deliver strong economics for Intact through loss ratio improvements, expense savings, and optimization of reinsurance and capital. In addition, the combined platform offers top-line expansion opportunities. “The Guarantee Company of North America and Frank Cowan Company have built a strong customer-focused specialty and personal lines business over almost 150 years, of which we are very proud. After careful consideration, we believe that combining our strong customer focus and the expertise of our employees in specialty lines and surety, with Intact’s resources, in particular its advanced analytics capabilities, provides tremendous opportunities for the combined entities to leverage one another’s strengths to build an outstanding, Canadian owned, North American specialty insurer,” said Maureen Cowan , Chairman of the Board, Princeton Holdings Limited. Intact expects the acquisition to generate a return on capital above its threshold and expects the acquisition to be immediately accretive to net operating income per share (“NOIPS”) with low single-digit NOIPS accretion within 24 months after close. To finance the transaction, Intact has access to its own capital resources and bank facilities and may evaluate capital markets alternatives. Intact will maintain a strong capital position at closing with an estimated capital margin above $1 billion , estimated MCT at 195% and a debt to total capital ratio below 25%. The debt to capital ratio is expected to return below the target level of 20% within 24 months following closing of the acquisition. https://finance.yahoo.com/news/intact-financial-corporation-acquire-leading-153800063.html
With takeover agreement in place, library construction to continue
It took about a month, but the Broadview Public Library Board of Trustees voted 5-1 to approve a takeover agreement with Travelers Casualty and Surety Company, which will allow construction on the library at 2226 S. 16th Ave. in Broadview to resume within two months. Library Trustee David Upshaw, who serves as Broadview’s building commissioner, cast the only vote against the takeover agreement. The vote took place during a special meeting on June 13 at Schroeder Park, 2600 S. 13th Ave. in Broadview. According to the library staff, much of the work on the lower level has already been completed, but there’s still work to do on the library’s main floor and exterior. Library board members said that the remaining renovation work may take up to seven months to finish. The $5.4 million Broadview Public Library renovation project has been years in the making. It includes the renovation of the library’s existing 17,000-square-foot facility, the construction of a new 3,000-square-foot building built on an empty lot adjacent the current facility and the installation of a new facade to flow seamlessly in front of the old and the new buildings. Library officials broke ground back in March 2018, At the time, they estimated that construction would be finished by June 2019. In May, however, Poulos Construction Company, the general contractor for the project, defaulted. The takeover agreement will allow Travelers to act as a general contractor under virtually the same contract given to Poulos. Travelers will hire Massachusetts-based Vertex to do the actual day-to-day construction and renovation work. The library board had originally scheduled to vote on the takeover agreement during the May 16 meeting, but the vote got pushed back several times. In an earlier e-mail, library board president Katrina Arnold indicated that they needed more time to finalize certain aspects of the agreement. At the June 13 meeting, Arnold was replaced as board president by former board vice president Eric Cummings. During the meeting, Arnold explained that, before construction can resume, Vertex will need to go in and figure out exactly how much work it would still need to do. That process, she explained, could take about a month. In response, some trustees raised concerns about whether there would be enough accountability to make sure that Vertex doesn’t bill the library unnecessarily. Robert Lafferty, the library’s assistant director, responded that Keisha Hester, the library’s director, has been keeping careful track of how much work was done by Poulos on any given week. In a follow-up interview, Arnold said that the library won’t need to allocate any extra money for the remaining construction work. She said that about $1.4 million has already been spent, and the remaining work would cost around $1.2 million. https://thevillagefreepress.org/2019/06/16/with-takeover-agreement-in-place-broadview-library-construction-to-resume/
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W.R. Berkley Corporation launches surety and specialty units in Mexico
W.R. Berkley Corporation has announced the formation of two units focusing on surety and specialty commercial, Berkley International Fianzas México S.A. and Berkley International Seguros México S.A., after receiving authorization to start operating by Mexican regulator Comisión Nacional de Seguros y Fianzas (CNSF). Berkley International Fianzas México S.A. will focus on surety business with Guillermo Espinosa Barragan named as general director, while Berkley International Seguros México will offer an array of specialty commercial insurance products and services, under the leadership of Javier Garcia Ortiz de Zarate as newly appointed general director. W. Robert Berkley, Jr., Chief Executive Officer (CEO) and President of W. R. Berkley Corporation, commented; “Mexico is a vibrant market with relatively low insurance penetration that provides significant opportunities. “Guillermo and Javier both have extensive knowledge of the surety and insurance markets, respectively, in Mexico, and their experience will enable us to develop a superior offering of products and services tailored to the specific needs of clients in the region. We are pleased to welcome them to our team.” Espinosa boasts nearly 25 years of experience in the property casualty insurance industry, focused mostly in the surety segment. He most recently served as regional director for a Mexican surety subsidiary of a leading insurer. Garcia has experience in underwriting in Mexico and Argentina and over 15 years of experience in the property casualty insurance industry, most recently, he served as regional director for property casualty insurance in Mexico for a major insurance company. The appointments have been made with immediate effect and the insurers are set to commence operations in Mexico in the coming weeks. https://www.reinsurancene.ws/w-r-berkley-corporation-launches-surety-specialty-units-mexico/
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White Mountains Closes $2.6B Sale of Sirius to China Minsheng Investment
White Mountains Insurance Group Ltd. completed its $2.6 billion sale of Sirius International Insurance Group to a division of China Minsheng Investment Corp. Ltd., nine months after the deal was first announced.Out of that total, White Mountains used $160 million to buy out some Sirius assets it plans to keep, including some OneBeacon shares, according to White Mountains. White Mountains is a Bermuda-based financial services holding company. Its sale of Sirius to the Singapore-based investment arm of China Minsheng Investment gives the latter company a foothold in the Bermuda reinsurance market. As Bloomberg reported last year, a number of international firms have been pursuing expansion in Bermuda reinsurance, in part, to gain access to risks not correlated with stock and bond markets. In March, for example, Italian investment firm EXOR closed a $6.9 billion acquisition of Bermuda-based reinsurer PartnerRe. Fitch Ratings, meanwhile, affirmed White Mountains’ issuer default rating of ‘BBB+’, after the Sirius sale closing. The affirmation also notes that White Mountains recorded a $658 million gain when it sold Symetra Financial Corp. to Sumitomo Life Insurance Company on Feb. 1 “Fitch’s rational for the affirmation of White Mountains’ rating reflects the company’s low financial and operating leverage, opportunistic business approach, platform of property/casualty special insurance, and favorable financial flexibility,” the ratings agency noted in its affirmation. White Mountains now has “considerable levels of cash,” which Fitch believes will be “used to evaluate potential acquisitions, share buy backs, or increased dividends.” Until the sale, Sirius was White Mountains’ single largest holding in terms of equity, Fitch added At the same time, Fitch downgraded its IDR rating for Sirius to ‘BBB’ from ‘BBB+’, the senior debt rating to ‘BBB-‘ from ‘BBB’, and the insurer financial strength ratings of its operating subsidiaries to ‘A-‘ from ‘A’, It also removed all ratings from rating watch negative, and maintained a stable outlook. Fitch said it views the new ownership as less strategic than White Mountains, in that it is at “a lower level of credit quality” and also is a “company with a limited track record.” “This creates added uncertainties with respect to Sirius’ financial flexibility and access to capital if needed, and business and operating profile, until there is a period of seasoning under CMI ownership,” Fitch said. http://www.insurancejournal.com/news/international/2016/04/19/405802.htm
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