Markerstudy faces future as powerhouse MGA – Humphreys

Markerstudy will emerge from the sale of its Gibraltar insurance businesses as a powerhouse MGA, according to group underwriting director Gary Humphreys.

The company announced this morning that it has agreed to sell its Gibraltar insurance businesses to Qatar Re.

The rest of the Markerstudy group will remain with its current shareholders: founders Humphreys and chief executive Kevin Spencer.

Financial terms of the deal were not disclosed.

“Markerstudy will become a broking business and a very large MGA,” Humphreys told Insurance Times in an exclusive interview.

And he added that the deal also covers a long-term strategic partnership with Qatar Re providing Markerstudy with capacity and support for future expansion through acquisition

“The agreement is that they take on the insurance companies and in return they provide us with a long term to provide capital for the MGA.”

A further step in the relationship

According to Humphreys, the sale of the Gibraltar insurance businesses to Qatar Re was a logical extension of the relationship between the companies.

“In reality it was just a further step in the existing relationship, because we already reinsured about 85% of our insurance risk to Qatar Re anyway,” he said.

“This is taking that up to 100%,” he added.

“They take on the ownership, and the insurance companies have the benefit of rated capital behind them in the same group, and we carry on underwriting with a capacity deal to continue doing what we’re doing without the solvency strains.”

As strategic capacity provider, Qatar Re will also participate in Markerstudy’s future acquisition plans, Humphreys said.

“They will support the growth and expansion of the group with future deals that we wish to do,” he said.

“They have a growing presence in the UK market that they wish to continue so we see the relationship as the first step in the longer term to grow the Markerstudy group with the support of Qatar Re.

“The terms of the funding on future acquisitions will be dealt with on an individual basis.

“There will be support for the group going forwards, as targets are identified,” he added.

“We see it as a partnership goring forwards if we see an acquisition that would be mutually beneficial then there is the offer of support available.”

Hits from Solvency II and Ogden

According to Humphreys, the deal illustrates the problems affecting smaller insurers in the current market.

Speculation has surrounded Markerstudy since early last year.

In May, it was reported that Markerstudy had appointed an investment bank to explore a possible sale of the business.

Early last year the group’s insurance companies exited transitional provisions under Solvency II by meeting the regulatory regime’s new stricter capital requirements after its shareholders injected more than £45m new capital. That development was swiftly followed by the cut in the Ogden discount rate, which sent shockwaves through the entire UK insurance sector.

“The risk-bearing side of the business is obviously the most capital intensive, and the regulatory regime is such these days that it makes it harder, when you have an entity of our size, for it to remain in private ownership with private funding,” Humphreys said.

“We’d already sourced a large amount of our capacity in the reinsurance market, and it just made sense to take that financial strain away from the business.”

And he added that there is no prospect of regulation easing in the future.

“Solvency laws and regulatory requirements aren’t going to lessen, so it made sense that we’d seek support from a financially strong group to take over that side of the business; and it gives us security of capacity going forward,” he said.

And he said the company was concerned about how it might weather another major shock to the market.