Accelerant aims to launch Bermuda Class 3 insurer

Start-up Accelerant is looking to create a Bermuda insurance company to add to the Malta-based carrier it already has in place as it continues its strategy of retaining up to 20 percent of business written by the MGA members on its platform, The Insurer can reveal.

According to sources, the Jeff Radke-led company is in the regulatory approval process with the Bermuda Monetary Authority (BMA) to establish a Class 3 carrier on the island.

This publication reported earlier this year that the firm was considering the formation of a Bermuda-based internal reinsurer to assist with centralising capital within the group.

It is not known whether the move to launch a Class 3 insurer is also aimed at participating on the MGA business alongside external reinsurers, and whether it will seek an AM Best rating.

Sources have suggested the company is also likely to have an eye on expanding into the buoyant US program sector.

Accelerant is backed by US private equity firm Altamont Capital Partners and was launched at the start of last year to provide capacity to a portfolio of member MGAs in the UK and Europe that largely target the SME market.

According to marketing material on Accelerant’s website, Altamont has invested over $100mn in the MGA platform and is able to provide additional funding as required.

Its strategy sees it invest in its MGA partners and provide management services as well as capacity to retain up to 20 percent of business they write.

In March this year it secured an A- AM Best rating for its own Malta-based insurance company.

Swiss Re has been acting as Accelerant’s primary reinsurance partner for P&C business written by its member MGAs in the UK and Europe, alongside a panel of A rated reinsurers.

5-year capacity arrangements

In the marketing material, the firm says it is able to address the issue of unstable capacity for MGAs, including “knee-jerk reactions” by insurers to line of business performance, capacity retrenching in certain business lines and geographies, insurers competing with their MGAs, and “poorly capitalized” and unrated insurers “filling market gaps and quickly failing”.

Accelerant says it is able to enter into five-year capacity arrangements with MGAs, takes a portfolio approach to support all business underwritten by a member, and does not compete with members or their brokers through other distribution channels.

In turn it seeks to work with MGA partners that have an established track record of underwriting profitability, a trusted management team, an “excellent base” of supporting brokers and agents, a focus on smaller commercial clients, and a like-minded approach to doing business.

Altamont has previously shown ambition in the US fronting space, with a deal agreed to buy US carrier Topa Insurance Group earlier this year, only for the deal to be called off in the early stages of the Covid-19 pandemic.

The private equity firm is also an investor in US MGA platform Embark General.

Accelerant is led by former PXRE CEO and Argo executive Radke as CEO, with his erstwhile Argo colleague Christopher Lee-Smith as head of distribution and former Swiss Re UK and Ireland CEO Frank O’Neill as CUO.

The Malta platform – Accelerant Insurance Limited – services MGAs in the UK, the EU and Norway, with UK business written by a third-country branch of the Maltese insurance subsidiary.

In rating the Malta insurance company, AM Best commented: “The group has a senior management team in place that has extensive experience in MGA management and in the reinsurance industry. In AM Best’s view, this increases the likelihood of market acceptance and successful execution of the group’s business plan.”

The Insurer comment

A significant theme in the MGA and programs space has been a strong appetite from reinsurers to write the business and a desire to work with MGAs that are willing to align interests by sharing in the risk they assume.

At the same time there is a demand from MGAs and program administrators to find ways of securing stable capacity - an issue that has become ever more critical in recent years as capacity has tightened and carriers have retrenched from lines of business.

Those dynamics have driven the surge in fronting carriers that are willing to retain a percentage of the business they put their paper up for. They have also been behind moves by some MGAs to create their own balance sheets for risk sharing, either by establishing captives, acquiring rated carriers or backing reciprocal exchanges.

Not all MGAs have the scale or financial clout to take that step, however. Accelerant has identified a need to provide access to risk sharing paper to its MGA members. For its part it also has to ensure it partners with the right MGAs to perform for its panel of reinsurers.

Sources have previously suggested that Accelerant and its backer Altamont has ambitions to build out a US programs-focused platform. Its move for Topa appeared to confirm that, before the deal was scrapped. Watch this space…