New E&S Operation Kinsale Launched

The company, headed by Michael P. Kehoe, is applying for eligibility in the remaining states, and it currently employs 43 people in Richmond.

Mr. Kehoe, president and chief executive officer of Kinsale Insurance, was president of James River Insurance Company, another Richmond-based E&S company, until July 2008.

In a statement, Mr. Kehoe said: "The quality investors and employees at Kinsale give us tremendous confidence in our ability to execute our business plan, serve our customers and build our business. We are establishing a great platform, built around people, technology and an entrepreneurial business culture, on which we will develop a great company."

Kinsale Capital Group, the Bermuda-based holding company for the E&S insurer, said $66 million of the $80 million total capital it has raised has been invested in its insurance company subsidiary. Investors included Moelis Capital Partners, LLC and Virginia Capital Partners, LLC.

Kinsale Capital described New York-based Moelis Capital Partners as a private equity firm that specializes in investments in the middle market and has significant insurance and financial services industry expertise. It also said that Virginia Capital Partners, based in Richmond, has investments in more than 30 enterprises with significant experience investing in excess and surplus lines insurance companies.

Although the statement did not identify other insurance investments for either PE group, Virginia Capital Partners lists a prior investment in Front Royal, an E&S carrier that was sold to Argo Group in 2001, and a prior investment in James River, which was sold to D.E. Shaw in 2007.

In its announcement, A.M. Best noted the "solid initial capitalization" and said the "A-minus" financial strength rating also reflects "A.M. Best's expectation concerning the company's ability to successfully execute its business plan targeting specific niches of specialty classes of surplus lines business."

"Upon A.M. Best's review, Kinsale's business plan appeared reasonable, considering prevailing market conditions," the rating agency statement said, noting, however, that positive rating factors are offset "by the considerable challenges and execution risk associated with a start-up company, especially those commencing operations in the very competitive market for surplus lines business, which will be Kinsale's focus."

A. M. Best explained that Kinsale was formed via the purchase of American Healthcare Specialty Insurance Company from its ultimate parent, The Doctors Company, An Interinsurance Exchange, in a deal completed Feb. 5. AHSIC was then renamed Kinsale Insurance Company effective Feb. 11.

Best said it expects that Mr. Kehoe and the Kinsale management team will establish strong risk selection, underwriting, pricing and claim management controls to ensure adherence to the company's developed operating plan for serving the market for hard-to-place, largely casualty-oriented, smaller surplus lines risks. Best added that Kinsale's growth over its first few years in business is expected to be maintained at a level that its capital base can adequately support.

Kinsale's Web site similarly describes the carriers' target market as small-to- medium-sized, higher hazard accounts, and notes that the company will not participate in the contract/binding authority or program market–instead concentrating on individual risk business placed through surplus lines brokers.