AIG plans to acquire Validus in a $5.56 billion transaction. AIG foresees benefits from an expanded reinsurance platform, a significant presence in the Lloyd’s market, as well as market share in the U.S. crop and excess and surplus (E&S) markets.
Validus Holdings, Ltd. offers reinsurance, insurance, and asset management services. Validus maintains a worldwide presence with across all major regions The company has more than 1,000 employees in 19 offices worldwide, and includes four operating units:
- Validus Reinsurance, Ltd., a global reinsurance group focused primarily on treaty reinsurance;
- Talbot Underwriting Ltd., a specialty (re)insurance group operating within the Lloyd’s market through Syndicate 1183.
- Western World Insurance Group, Inc., a U.S. specialty lines organization.
- AlphaCat Managers, Ltd., a Bermuda-based investment advisor managing capital for third parties and Validus through insurance-linked securities and other property catastrophe and specialty reinsurance investments.
Western World Insurance Group, established in 1964 and a unit of Validus Group since 2014, is among the top excess and surplus lines insurance groups in the U.S. The firm specializes in underwriting classes of business that are not easily placed in the standard insurance market due to their complexity, high hazard, or unusual nature.
Insurance coverage offered by Western World includes general liability, property, professional liability, trucking, liquor, and commercial auto.
Professional liability coverage includes: architects & engineers (A&E) liability; directors & officers (D&O) liability; public official liability; educational errors & omissions; information technology errors & omissions; miscellaneous errors & omissions; miscellaneous professional liability; and employment practices liability (EPLI).
Crop Risk Services is another Validus subsidiary, this one focused on agricultural insurance coverage in the federal and private markets. It was first established in 1982 as ASI AgriService Inc. and later became ADM Crop Risk Services (as in Archer Daniels Midland). It was acquired by Validus in 2017 and assumed its current name. CRS is headquartered in Decatur, Illinois.
Validus is known for its ability to model and assess risk using advanced research and data analytics techniques. AIG likely looks forward to also adding this capability as it sharpens its risk management toolkit.
The AIG / Validus transaction is expected to close in mid-2018.
AIG has been under pressure in recent years to improve its financial performance, with activist investor Carl Icahn being a vocal past critic. The Validus transaction represents a strategic change in direction from recent streamlining efforts, into a new growth period for AIG.
AIG Panel Counsel Implications with Validus
Western World is the Validus unit that is probably of greatest interest to insurance defense law firms that are following this transaction (some nervously).
Will AIG keep the existing Western World panel counsel program, or consolidate it with the existing AIG panel counsel program? Of course, it is too early to tell.
Western World panel counsel members will want to both understand the plans for the post-acquisition integration efforts, while also accelerating the search for potential replacement panel positions.
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