NU Online News Service, April 9, 12:47 p.m.EDT

The Main Street America Group says it has entered into anagreement to make Austin Mutual Insurance Co. anaffiliate.

Terms were not disclosed and the deal still needs approval byregulators and Austin Mutual policyholders.

The deal is scheduled to close by midyear, says Main StreetAmerica, in a statement. Main Street America will provide AustinMutual with quota-share reinsurance.

Austin Mutual will maintain its brand and continue to sellproducts through its network of independent agents.

Jeffrey Kusch, Austin Mutual's chief executive officer, willcontinue to oversee the insurer while reporting to Tom Van Berkel,chairman, president and CEO of Main Street America.

Minneapolis-based Austin Mutual is a regional property-casualtyinsurer with direct premiums of more than $175 million.

The 115-year-old insurer writes primarily in Minnesota, Arizona,Wisconsin, Washington, Oregon, Montana, South Dakota, Utah, andIdaho.

Jacksonville, Fla.-based Main Street America says it is asuper-regional insurer that operates eight P&C carriers servingabout 600,000 policyholders in 27 states.

The deal will “complement our existing relationships with2,000-plus agent-customers,” says Van Berkel. An affiliation withAustin Mutual increases Main Street America's scale throughgeographic diversification, Van Berkel adds.

Early in 2011, Austin Mutual also had geographic diversificationon its mind when the company announced its merger withCooperative Mutual Insurance Co. of Nebraska. Before merging, theinsurers had an affiliation agreement.

Affiliation and mergers may become more common among smallercarriers after a catastrophe-laden 2011 and a tornado-filled startto 2012, according to industry analysts.

Because many small and regional insurers follow the mutualbusiness model, they can only grow from within, without access tocapital markets.