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London News Digest - October 2004

SOC Group bids to buy Anton Private Capital
SOC Group, the Lloyd's insurance agency close to collapse a year ago, is in merger talks to acquire Anton Private Capital.

If SOC Group succeeds it will mean there are only three members' agents advising private capital investors in the Lloyd's market who represent approximately a fifth of the Society’s capital base. SOC Group plc was brought to its knees by the disastrous underwriting results of 1998-2001 yet in February this year it was rescued by three of its Names who agreed to invest £6mn into the company, while also taking on the liability of £8.2mn of bank debt, in exchange for the majority of the group's equity.

R&SA offshores jobs
General insurer R&SA became the latest UK financial company to farm services out to India with news this month that it would deliver annual cost savings of more than £10mn by moving around 1,200 jobs abroad.

In September, life insurer Aviva revealed that it would offshore a further 950 jobs and plans to have 7,000 in place by 2007.

Jago leaves Aon Re
Paddy Jago, Aon Re's veteran US casualty broker, surprised observers by resigning this month after 15 years with the company.

An Aon spokesperson told The Insurance Insider: "We respect his decision to leave and he goes with our best wishes."

It is unclear whether this is related to initiatives by Aon Re Inc's chief executive Michael Bungert to try to introduce placing fees, rather than shared commission, when US reinsurance business is handed over to London.

Reinsurance brokers continue to play musical chairs
Jago's departure was not unique as the trend among London's reinsurance brokers to swap houses continued last month with news of the arrival of former Guy Carpenter broker Adam Fox at Glencairn Ltd and the departure of Aon ReSpecialty Marine and Energy head Tony Pointing to Guy Carpenter.

And if the brokers were not recruiting from each other, they looked to reinsurers. Benfield appointed former Swiss Re executive Patrick Murphy O'Conner to a client management role.

WTC trial mark II begins; Lloyd's sues airlines
The second phase of the WTC insurance trial began onx 18 October with nine remaining insurers arguing that they are only liable for one payout despite not relying on the "one event" WilProp form.

If the WTC leaseholder Silverstein wins, he will gain an additional $1.1bn in addition to the $3.55bn he has been awarded.

In a separate action, last month Lloyd's syndicates, together with London based QBE International Insurance, filed suits against American and United Airlines, over losses they have paid out from the WTC attacks. The action was filed a day before the three-year anniversary of the attacks and demands $300mn each from the two airlines. It was one of a number of suits filed to meet the three-year statute of limitations deadline.

RK Carvill makes London redundancies
RK Carvill, the reinsurance broker suing XL and a host of London market reinsurers over the withdrawal of XL's US D&O reinsurance contract last year, made more than a dozen redundancies among its London based staff this month.

GoshawK facing US bail bond claims
GoshwawK, the parent of Bermudian reinsurer Rosemont Re, revealed that it is the latest insurer to face exposure to controversial US bail bond losses.

Rosemont Re faces the claims from its reinsurance of the SCPIE account. Earlier this year, Lloyd's insurer Heritage revealed that it was facing a morass of claims on the 2002 underwriting year from Capital Bonding Corporation, a Pennsylvania based programme manager for bail bonds. Other reinsurers thought to have written the scheme include Beazley and Hiscox. Litigation is almost inevitable.

Coffers buoyed as Admiral floats
UK motor insurer Admiral enjoyed a successful stock market debut last month, floating on the London Stock Exchange at an offer price of 275p, just above the midpoint of the indicative price range and valuing the company at £711mn.

Gross proceeds from the IPO amounted to £231.3mn, prior to the exercise of the over-allotment option, and the offering of 84.1 million ordinary shares was equivalent to 32.5 percent of the total issued shares. The float was more than five times oversubscribed, generating around £1.5bn gross aggregate demand.

Lloyd's debuts with $500mn debt issue
Lloyd's capped a year of success with the news that it would make its first ever foray into the international debt markets by raising £500mn of longer term subordinated debt.

In the 13 October announcement the corporation said the funds would be used to bolster the Central Fund for solvency purposes and that the proceeds of the notes were expected to be categorised as Lower Tier II capital in the Financial Services Authority's new capital adequacy regime.

The move to boost the Central Fund was first predicted by The Insurance Insider in April 2004 and are part of the Society’s plans to build a Central Fund in excess of £2bn.

Oxygen start-up unveils management
London market start-up Oxygen unveiled an impressive array of executives this month, together with plans to operate a dual underwriting agency and broking platform.

Founders Nigel Barton and John Benjamin announced the arrival of Sian Fisher, the former managing director of Hiscox' European retail division, as the head of its agency while Ron Sandler, the former chief executive of Lloyd's, joined as non-executive chairman.

Investors include Sir Laurie Magnus, vice-chairman of corporate finance boutique Lexicon Partners, and Taracay Investors, a US private investment fund managed by industry stalwart Bob Clements and in which he has a small stake. Fisher and Sandler also hold stakes in the company.

"We want to talk to the rainmakers. The people who are at the peak or just getting to the peak of their career, who have the confidence of clients and markets, that are good producers, very ambitious and are just looking for the right platform to operate from," said Barton.

The business will also target a new level of transparency, said Barton, tying in with the requirements of Lloyd's Franchise Performance Directorate and the FSA.

The acid test, however, will be attracting talented producers and insurers’ backing. Barton said news on this front is imminent...

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