Private equity tycoon plots £2bn raid on motor insurers

Investment vehicle Tungsten is planning to create a technology-driven motor insurance group by melding insurance acquisitions with telematics.

Tungsten’s co-founder and non-executive director, private equity veteran Edmund Truell, said his company is seeking to buy motor insurers in the UK and continental Europe to add to its controlling stake in telematics provider Lysanda, acquired at the beginning of this year.

Tungsten is understood to be interested in IAG-owned Lloyd’s motor insurer Equity Red Star, and looked over Direct Line Group before it settled on its flotation plan.

Truell said that the company is hoping to do an acquisition by the end of the first quarter of 2013.

Speaking to Insurance Times, Truell said: “The effort up until now has been securing the technology platforms, which we have done and we are already in negotiations with a couple of insurers, both here in the UK and on the continent, to see whether we can acquire a significant book of business which we can migrate to our new platform.”

‘Considerable firepower’

Tungsten has a variety of interested investors whose capital it can deploy for insurer acquisitions, ranging from traditional asset managers to a hedge fund and private equity. A sovereign wealth fund has also expressed interest, Truell said.

While noting that the amount of capital available for acquisitions depends on market conditions, Truell said up to £2bn could be available. “We have got considerable firepower for the right transaction,” he said.

‘53 targets’

Truell contends it is a buyers market for motor insurers, with companies looking to sell up for a variety of reasons. As such, he believes there are opportunities for good deals. “Given that we have 53 possible acquisition targets on our deal list I don’t think we are going to have to pay more than we expect.”

Tungsten, which Truell co-founded with brother Danny, is particularly interested in motor insurance despite its lack of underwriting profitability because he believes that telematics will be a “game-changer” for the industry, he said.

He said: “The technology is now there to assess people’s actual driving styles and risks rather than just saying ‘you’re 21 years old and therefore we’re going to put a high premium on you.’ It is that technology-driven insurance that we are particularly attracted to.”

Read more in next week’s issue of Insurance Times.