Novae to plug gaps left by Zurich office exodus

Novae will shortly announce a new head of its Zurich office and expects to plug the other gaps caused by a recent exodus before the Monte Carlo Rendez-Vous conference in early September, Insurance Times understands from a Zurich source.

Novae Re chief executive Gunther Saacke and chief underwriting officer Willi Schuerch quit the firm in May, and about 10 more employees have since followed. All have gone to Qatari reinsurer Q-Re.

The executives are understood to have wanted greater autonomy and more capital than Novae was willing to provide.

On Monday, stockbroker Peel Hunt downgraded the Lloyd’s (re)insurer’s stock to ‘hold’ from ‘buy’ as a result of the departures.

Peel Hunt analyst Sarah Lewandowski pointed out that the Zurich-based reinsurance operation was a key part of Novae’s strategy to shift its focus more towards short-tail property insurance and reinsurance. “This seemingly co-ordinated walk­­-out raises questions over the feasibility of Novae renewing the current Zurich book of business,” Lewandowski said in a research note. “In turn, this highlights potential problems for Novae’s strategy of increasing the short-tail side of its book.”

Novae group chief executive Matthew Fosh previously described Novae Re as a growth area.

In its previous incarnation as SVB Syndicates, Novae made heavy losses on its long-tail casualty insurance business and has been reducing this portion of its book.

As well as lowering Novae’s share price target to 362p from 416p, Peel cut its estimated gross written premium for the firm by £50m for both 2013 and 2014 as a result of the departures. Novae Re wrote £233m of gross premium in 2011, 37.4% of the group’s total GWP.

A source said that the walk-outs mainly affected three of Novae’s 10 business lines: agriculture, engineering, and credit and surety, which combined account for around £82m of GWP. The 2011 results show that agriculture accounted for £47m of GWP, and credit and surety £19m. Novae did not provide a breakdown of engineering business but estimates put it at around £16m.

While this adds up to more than the £50m shortfall estimated by Peel Hunt, it is understood the company is hoping to retain or win back some business with its pending new hires.