A tenure as AIG’s in-house reinsurer may have put Transatlantic Holdings on the map, but it’s determined now to make the most of its new-found freedom
Transatlantic president and chief executive Robert Orlich is excited; there are, he says, all sorts of new possibilities now that AIG and its subsidiaries own less than 1% of his firm.
“We are able to access the capital markets on our own as opposed to being lumped in with AIG and being subject to a group credit exposure,” he says. “And while we could have bought back shares in the past, every share we repurchased would have meant that AIG would own more of us.”
On 21 December last year, Transatlantic authorised a $200m (£132m) share repurchase programme. The company can now also consider relocating from its New York base without incurring the wrath of its former parent. It can think too about buying or setting up an insurer.
“When we were affiliated with AIG, we had access to primary insurance paper. Now that we are independent, we still enjoy a strong relationship with AIG, but we are keeping our options open,” Orlich says.
The backing of such a big name as AIG allowed Transatlantic to access markets long before its peers. For example, many reinsurers are only now starting to do business in Brazil after the market opened in April 2008, but Transatlantic has been there since 1988.
But it is clear that its association with AIG was also becoming a burden. Aside from the reassuring letters about Transatlantic’s future that Orlich was forced to write when AIG was bailed out by the US government in 2008, it seems some clients were reluctant to place business with the company because they were concerned their trade secrets would be passed on to their biggest rival.
“The biggest difference is that we are now seeing significant increases in submission counts,” Orlich says.
Now that it is an independent, he is keen to emphasise that there is a lot more to Transatlantic than its former parentage. For one, it has been writing business for longer than its main group of competitors, the relatively recently-formed Bermudan reinsurers.
“We have a 30-year track record,” he says. “We have shown continuity, have not left classes of business and continued to pay claims. All these qualities are valuable to our clients … there aren’t many reinsurers who can make those claims.”
The firm’s international network, spanning 23 countries, also helps to set it apart from its younger competitors. “It essentially allows us to underwrite business locally, with people that understand the culture and speak the language, before it gets to an insurance or reinsurance hub like Bermuda or the UK,” Orlich says.
He also cites Transatlantic’s business mix as a differentiator. Some 25% of the firm’s book is specialty business, which he argues has high barriers to entry for newcomers.
“The primary insurers that write this business are fairly reluctant to allow others on to their programmes because they want the expertise and the ability to work with companies that they know are going to pay claims many years later,” he says. “They are very careful about who they allow on their panel and we think that gives us an advantage.”
Writing specialty business also takes expertise, which Orlich contends takes time to develop. “It is difficult for the companies in Bermuda, our largest group of competitors, to match that.”
Unlike many Bermudan firms, whose books have a heavy property-catastrophe weighting, 70 of Transatlantic’s book is casualty business. “Having the backdrop of casualty allows us to write property and catastrophe business more consistently. We have built-in diversification,” Orlich says.
Although keen to extol the virtues of life without AIG, Orlich is under no illusion about how much his company’s strong position owes to its former parent.
“A lot of where the company is today is a result of our long-term relationship with AIG. I firmly believe that we would not have been able to build such a strong global franchise without its assistance,” he says.
“It was very helpful in getting us licences and giving us credibility long before we would have been able to achieve it on our own.” IT