US investment giant could provide capacity for insurer’s expansion
?Royal & Sun Alliance has held talks with US insurance giant Berkshire Hathaway over a potential deal to expand its presence in the property investors market by tens of million of pounds.
The insurer is thought to be exploring a range of options for growing its property book. A tie-up with major international insurer, Berkshire Hathaway, was one of the options under consideration.
A senior R&SA source confirmed discussions had taken place with a number of parties including the US insurer, owned by Warren Buffet, but said no deal was currently on the table.
The source added that a presentation to investors and analysts in relation to capital would take place next week.
R&SA is thought to be keen to target high value commercial property investors, such as funds and institutions. R&SA’s A- financial strength rating could present a stumbling block to securing these high-end clients, many of whom require a AAA rating.
A deal with Berkshire Hathaway would provide R&SA with capacity to underwrite business for big ticket business. By striking a deal, it would be able to use Berkshire Hathaway’s elite AAA rating, limited to only a handful of companies.
R&SA’s property investors’ insurance book, is currently valued in excess of £200m, having doubled its new business in the past year.
In the past year numerous big name insurers, including Allianz and Zurich, have made moves to develop up their offerings in an attempt to carve out a more substantial share of the £1bn market.
Berkshire Hathaway has a long tradition of providing Lloyd’s insurers with capacity through quota-share arrangements.
Independent expert LECG director Mark Winlow said a deal with a company like Berkshire Hathaway would be attractive to R&SA.
He said: “With capital backing on such a large scale, such a deal would allow R&SA to spread the risk much wider, and prove to clients it is capable of writing the business.”
A senior source at a major insurer said: “High-end property business, including property investors, demand a high level rating. When R&SA struggled with its rating in the past there were some managers who expressed concern. This would guard against that.”
R&SA refused to comment.
Berkshire Hathaway was unavailable for comment.