A new captive launched in Malta this month by The Erinaceous Group to write general property business has sent a shockwave through the market.
The captive, called PropGen Insurance, gained authorisation from the Malta Financial Services Authority to write general property and a number of liability classes (see box) in the past few weeks.
Managed by Marsh Captive Consulting, PropGen will ostensibly write flats and landlord business through its relationship with insurer Groupama. This includes the £8m premium income business generated by Homelet, which Erinaceous Group inherited when it acquired Hanover Group in October 2004.
Competitor insurers fear Erinaceous Group will move general property and liability lines to the captive.
PropGen director John Pelham said: "The captive will write the Erinaceous business with Groupama which includes Homelet and Rentabuy."
It will be a 50/50 venture. Groupama used to write 100% of the Homelet business but will now only write 50%, while Erinaceous will write the remaining 50%.
Pelham said: "The business will focus on flats, landlords and rent-to-buy. We will go live on 1 February."
He scotched rumours that the captive had capacity to write £20m premium income, saying: "Definitely not in the first year. Our projection is close to £10m this year."
A Groupama spokeswoman said: "We are in discussions with an existing partner and cannot comment until they have been concluded."
One rival underwriter said: "There is a concern among some of the major players that they may start to lose business to the captive."
Pelham denied the claim. "It is far too early to talk about future plans."
PropGen's classes of business
Miscellaneous financial loss
Fire and natural forces
Other damage to property