Brokers Look To Offset Capacity Shortage
Two of the world's major brokers have announced plans to deal with new demands for coverage growing out of the Sept. 11 terrorist attacks.
New York-headquartered Marsh and McLennan Companies announced the formation of AXIS Specialty Ltd. by its subsidiary MMC Capital, Inc.
AXIS is expected to be capitalized at approximately $1 billion and would begin underwriting in Bermuda during the fourth quarter of this year. Trident II, L.P., a fund managed by MMC Capital, would be the lead investor with $200 million, with the rest to be raised from other sources, said Teryce James, a representative for MMC Capital, Marsh's private equity company.
MMC Capital said the new insurance and reinsurance company was formed in response to a capacity shortage resulting from the terrorist attacks.
While there were conditions in the marketplace already creating capacity shortages prior to Sept. 11, the attack has magnified those conditions, said Ms. James, laying the conditions for the creation of AXIS.
The company would be open to all agents and brokers seeking coverage for specialty lines risk for aviation, political and war risk, and others to be named later, said Ms. James. The company is to be operationally independent from MMC, she said.
Leading the management team at AXIS is John Charman, who will be chief executive officer, and Robert Newhouse Jr., who will be chairman. Mr. Charman was president of ACE International and CEO of Tarquin Ltd. Mr. Newhouse was chairman of Mid Ocean Ltd. and vice chairman of MMC.
In the 1980s, MMC responded to the insurance needs of its clients by creating ACE Ltd. in 1985 and XL Capital Ltd. in 1986. Both were Bermuda domiciled insurance and reinsurance companies. The companies provided excess liability and directors and officers coverage. In 1992, MMC established Mid Ocean Ltd. in response to a shortage of property-catastrophe reinsurance.
Meanwhile, London-headquartered Willis Group Holdings announced that its International Accident and Health Division has developed products to assist organizations in securing war risk and malicious risk coverage.
Clients whose employees are aid workers or media personnel, for example, going into or working in a high-risk area, could obtain coverage on either a country-specific or worldwide basis, the firm said. Policies would cover death or disability caused directly or indirectly by war, hostilities (whether war is declared or not), terrorism, sabotage or riots, Willis said.
Nicola Fraccalvieri, executive director of Willis International Accident and Health Division, estimated that less than a third of organizations exposed to war and hostilities risk have such coverage. He said such policies are no longer an option for them, but a requirement.
Among the top brokers, Aon has yet to announce any new coverage programs. A representative with the firm said that Chicago-based Aon, at press time, was not ready to release information about new programs in this area.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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