Japanese insurance group Mitsui Sumitomo Insurance (MSI) has confirmed that it plans to acquire hybrid P&C program and fronting carrier specialist Transverse Insurance Group, after rumours of a potential deal surfaced last week.
MSI has not yet disclosed a price for purchasing Transverse from its current owners, Virgo Investment Group, but reports from Japanese newspaper the Nikkei suggest the deal could be worth roughly $400 million
MSI says the acquisition underlines its long-term growth ambitions and will help to further build out its US presence and generate revenue diversification by accessing the specialist MGA, wholesale and other broker-led distribution channels for property, casualty, marine, and specialty business.
Founded in 2018 by Erik Matson and Dave Paulsson together with Virgo, Transverse is a New Jersey based hybrid fronting company that links producers and re/insurers to underwrite domestic US risks on an admitted or excess and surplus (E&S) lines basis.
Typically, Transverse holds only a relatively small amount of the risk, with the majority ceded through to capital providers, or cedes it all on, partnering with reinsurers and alternative markets. This approach has allowed it to capture a meaningful share of the US fronting market in the time since its launch.
MSI notes that the growth of the US hybrid fronting industry outpaced other segments at 30% during 2016 to 2021, driven by the underlying demand and growth in the E&S markets.
“This creates substantial growth opportunities for companies like Transverse, that combine an attractive, profitable, and scalable business model, with genuine alignment of interest and underwriting appetite, alongside a commitment to retain a proportion of underwriting risk in the program,” the company said.
Tamaki Kawate, Director, Head of International Business for MSI and Johan Slabbert, Chairman & CEO of MS Amlin Distribution Holdings, also stated: “This acquisition marks the start of a new phase for MSI as a market-leading global (re)insurance business. It not only demonstrates our commitment to sustainable growth in the US but highlights our differentiated proposition with the stability and financial strength of our parent company.
“This acquisition will allow Transverse to accelerate its competitive advantage by securing greater access to product lines and new distribution opportunities, serving the evolving and long-term needs of its MGAs and (re)insurer partners more effectively.”
Erik Matson, Chairman, CEO, Co-Founder of Transverse added: “We are all very excited about this development, and what it will mean for our future growth opportunities. This is a significant milestone for everyone involved in our growth journey and we’re delighted to have found a home in MSI. Its balance sheet strength, rating, and international network will exponentially fast-track our development and innovation. This acquisition cements the success of our business and reiterates the value of our hybrid fronting model as a valuable tool that allows our partners to maximise the market cycle.”
“Working alongside Virgo to fund and grow Transverse has allowed the Company to quickly adapt and thrive in the fronting industry,” Matson continued. “I am grateful for the opportunity Virgo provided and am excited for this next chapter. I look forward to leveraging the balance sheet, global footprint and deep institutional knowledge of MSI’s team to further enhance our client offerings.”
“We take a flexible and collaborative approach at Virgo, launching businesses in attractive niches when the opportunity is right,” said Virgo founder and CIO, Jesse Watson.
“We identified the fronting segment in 2018 as a growing and underserved market in which we could build a differentiated competitor, and are proud of how we built Transverse from the ground up to provide both MGA and reinsurance clients with innovative solutions. With Erik and Dave remaining at the helm, Transverse is well positioned to continue expanding its customer base and industry reach under the MSI umbrella. We are honored to have had the opportunity to establish Transverse and are excited to watch its continued growth as part of a global leader in the insurance marketplace.”
