Berkley Forming U.K. Company International Editor
London
W.R. Berkley Corporation plans to form a U.K. insurance company, which will specialize in domestic U.K. casualty business.
If the U.K. regulatory approval process goes according to plan, "we should be ready [to write business] in the third quarter," said Eugene Ballard, chief financial officer for the Greenwich, Conn.-based W.R. Berkley, which is a casualty specialist.
Mr. Ballard said Berkley has yet to finalize the total capitalization for the new company, but he expected that it will reach a level close to 100 million ($160 million) within the first few years of operation.
He said the company, which has not yet been named, will focus on casualty liability business, specifically on professional indemnity and not on employers liability. "Were still not too comfortable with what weve seen and heard about that market in terms of competition and price adequacy," Mr. Ballard continued.
The hardening of the U.K. casualty market is a little behind the U.S. market, "but moving very much in the right direction," he said. "We think the U.K. market is about where it was in the United States at the end of 2001."
The U.K. market has had the same kind of disruption that has had occurred in the United States, he said. "A lot of the European insurers are being constrained and having to withdraw some of their capacity."
Mark Hewlett, managing director, European insurance for Moodys Investors Service in London, said it is good timing for a startup specializing in U.K. casualty business. "Theres a terrible lack of capacity and premiums as a rule are at an all-time high," he said.
Casualty is the area that is "holding its ground the most and has been correctly repriced to compensate for a period of not just under-pricing, but also adverse development," Mr. Hewlett said.
Kiln plc, the London-based insurance and reinsurance group with a Lloyds operation, announced it is in discussion with Berkley about holding a minority interest in the new company. Currently, Berkley holds 20.1 percent of Kilns share capital.
Edward Creasy, chief executive officer for Kiln, said the potential investment in the new company would establish another "income stream for Kiln plc [via] a minority holding in an insurance company."
He emphasized that such an investment is not part of any "grand plan" to move part of Kilns business out of Lloyds.
Mr. Ballard said Kiln will have the opportunity to own 20 percent of the new company.
In an announcement, Kiln said it intends to finance the investment without recourse to shareholders. Further, Kiln said it will seek shareholder approval.
Mr. Ballard said Berkley Corp. did not consider starting up a Lloyds operation due to the three-year accounting system used by Lloyds, which doesnt fit with Berkleys casualty business.
He affirmed that the new company could provide a platform for entry into the continental European market. "We dont have any immediate plans, but this will be an opportunity for us to be closer to Europe and look for business there down the road," Mr. Ballard said.
Reproduced from National Underwriter Edition, March 10, 2003. Copyright 2003 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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