Convex Group Limited, the awaited start-up specialty insurance and reinsurance firm being launched by Stephen Catlin and colleagues, has now secured its all-important A- ratings from A.M. Best for its subsidiaries.
Convex Group Limited is the non-operating holding company of the Convex group and its subsidiaries Convex Re Limited, the Bermuda based reinsurance vehicle of the group, and Convex Group UK Limited, the UK specialty insurance and reinsurance entity, have both received Financial Strength Ratings of A- (Excellent) and Long-Term Issuer Credit Ratings of “a-” from A.M. Best.
Convex Group has been in the works for some months now and perhaps the worst kept secret in the market, given the considerable news flow about senior executives taking new positions at the firm.
As we’ve explained previously, Stephen Catlin, previously the founder of Catlin Group that was sold to XL making him the Executive Deputy Chairman of XL Group, has teamed up with a number of former Catlin executives, including Paul Brand, Benjamin Meuli and Adrian Spieler to launch Convex Group in both Bermuda and London.
The expectation was for a diversified underwriter of non-life insurance and reinsurance business to emerge with Convex Group, and now it’s clear just how large the firm could be as well.
Convex Group will launch with a $1.8 billion war chest of capital, provided as a facility by a consortium of investors led by private equity investor Onex Corporation.
Convex has already drawn down on $1.6 billion of the facility as common shareholders’ equity, A.M. Best explained.
Convex’s UK entity is expected to be the main source of insurance premium income for the group, which suggests much of its underwriting will be in the London market, while Convex Re in Bermuda will provide some third-party reinsurance, but also provide reinsurance protection to Convex UK as well.
A.M. Best warned that Convex will face strong competition from well-established peers and also be highly reliant on brokers to access underwriting business.
But, with a senior management and underwriting team with extensive experience in targeted classes of business, the rating agency said this will increase the likelihood of Convex achieving market acceptance and successfully executing its business plan.
A.M. Best said that Convex’s consolidated balance sheet strength is categorised as very strong, while it is expected to maintain the strongest level of consolidated risk-adjusted capitalisation, as measured by BCAR, through a forecast period of five years.
Offsetting all of this is the planned exposure to catastrophe risks, which A.M. Best said will be material based on the business plan, as well as the reliance on reinsurance to manage this.
Convex enters the market at an interesting time, when some London based capacity has shrunk, following the Lloyd’s performance measures and the ILS market remains dented by recent losses.
The capacity the firm brings to market could fill some gaps for ceding companies as a result, which may assist in the creation and underwriting of its first portfolio.