What next for Brit Insurance?

By selling the renewal rights of Brit’s regional UK business to QBE, Mark Cloutier has taken another step in configuring the Lloyd’s insurer the way he wants it. Here, he explains to Insurance Times what the QBE deal means for his company, its staff and what the next steps will be.

IT: What is the significance of the QBE renewal rights deal mean for Brit?

MC: It’s a very important day for us for a couple of reasons. First of all, in recognising that the UK SME regional business was not going to be a core part of our business in the future, we were trying very hard to find a solution to not only extract value from what has been built here, but also to find a home for the roughly 130 people involved.

We have been putting Brit through a fair amount of restructuring and the people issues were really important to us. We chose to go with QBE because of their focus on really wanting the team that came with the business.

The second reason is that this sets the stage for us to really focus on the business that we want to take going forward – the combination of reinsurance and specialty insurance that we have renamed Brit Global Specialty. It enables us to speak very clearly now to people both inside the business and in the community about where we want to go.

IT: QBE are not taking back-office and claims staff. Will the deal result in redundancies at Brit?

MC: We are announcing no job losses as a result of this transaction. The people that are staying with Brit are important to us. We have moved a fair amount of business from Brit Insurance Limited (BIL) onto Brit’s Lloyd’s syndicate. But the relationships and history associated with those live in BIL. We have been working hard to reassure our trading partners that we’re sensitive to the fact that we have ongoing trading relationships. We can’t forsake that company and those people who have been the keepers of those relationships. They are important because we want to show that continuity to our client base.

Also, because of the nature of the transaction, BIL will continue to write premium for some time. The transaction will involve QBE needing to move over all of the coverholder relationships, as well as renewing policies on their natural expiration date. We will have premium and claims associated with that premium earning through that insurance company, probably through 2014.

Once the premium and the exposure earns off, you are going to have a block of claims. We are still going to have to be doing all of the reserving and financial reporting on that. There is going to be a fair amount of activity in BIL for some time.

In addition, as we grow Brit Global Specialty and have needs there, it is my intention to deploy resources as they are freed up in Brit Insurance Limited over to our ongoing and hopefully growing business.

IT: Why have you conducted the transaction as a renewal rights sale and was it the right outcome for Brit?

MC: I think it is the right outcome for us for this reason. We have a lot of what we still consider to be still important trading relationships whose business is in BIL. If we had sold the whole thing, we were going to have to figure out how we were going to protect those relationships or face conceivably losing the support of some of the clients we wanted to keep on at Global Specialty. While it is not necessarily the most eloquent solution from a capital standpoint, I think from the business health standpoint, this is the better solution.

IT: Was a rights issue sale always the plan?

MC: I’ll just say that these things start out in one shape and they morph through several shapes along the way.

IT: What is next for Brit?

MC: From a major restructuring standpoint, once this transaction is completed, we have the platform and the defined business that we think is the future for us. But this isn’t the end of the story by any stretch. We will be putting a lot of energy into continuously improving our underwriting performance and seeking new opportunities in the market in the area of specialty insurance and reinsurance. Now we have clarity about who we are and what we’re about, we get to really start putting much clearer definition around that and actioning some of the improvement initiatives. As we look at new opportunities and hopefully announce them, there will now be enough context around them that people will understand.