Omega Specialty Insurance Company, the new Bermuda arm of Lloyd’s insurer Omega Underwriting Holdings has opened for business. It has about $170 million in capital, making it much smaller than the 2005 start-ups. The new firm is in the process of getting a rating from AM Best.
Unlike other recent Bermuda start-ups, Omega Specialty was not up and running in time for the Jan. 1 renewals. But Richard Tolliday, Omega Underwriting’s chief executive, says this was never the intention, and opening this late will not harm the company’s prospects.
Part of the reason for this is the business Omega Specialty will write. The new unit will effectively be an extension of the business written by Omega Syndicate 958 – mostly small-ticket, short-tail speciality property insurance and reinsurance. It will not be writing high-value property-catastrophe reinsurance.
“A lot of the Bermudian companies and start-ups are writing big-ticket risks,” says Tolliday. “The Jan. 1 renewals are important for these risks – between 50% and 60% of this business comes up for renewal at Jan.1.” He adds that the renewals periods for the smaller-value property business Omega writes are more spread out through the year. “We did not target Jan. 1 as a key date,” he says.
Tolliday also does not believe Omega Specialty has missed out on the price increases caused by the 2005 hurricanes. He thinks the full effect of the losses has not been felt yet. “The impact from losses has got some way to go in terms of strengthening the market,” he says. “The retro market has clearly responded and that will drive the impact through to the front end. But our view is that there will be a progressive strengthening through 2006 and 2007. Jan. 1 was never going to be a litmus test for the effect of the losses.”
He says a lot of companies’ experience at the Jan. 1 renewals has borne this out. Many reinsurers have reported lower price increases than they were expecting.
Even though Omega Specialty did not write any new business at the Jan. 1 renewals, it will still participate in some business renewed at that date. It will reinsure the 15.2% share of Syndicate 958’s business owned by Omega Dedicated, Omega’s corporate member at Lloyd’s. Omega Specialty will also underwrite a quote share of the syndicate’s total account for 2006.
“Although we have only just established Omega Specialty, it has written January 1 business by virtue of the reinsurance of our corporate member and the quota share of the syndicate,” says Tolliday.
Tolliday declined to comment on how much premium Omega Specialty will write. But investment bank Numis Securities estimates its premium income will be $185 million when fully operational. Of this, the bank estimates that $80 million will be accounted for by the reinsurance of Omega Dedicated’s share of Syndicate 958 and the quote share deal.
Omega decided to set up an operation on Bermuda because of its growing importance, and because certain types of business are now written in Bermuda rather than London. “Strategically, it’s important to have a presence in both markets,” says Tolliday.
Omega has appointed Stephen Edwards as chief underwriting officer of the new Bermuda unit. He was previously Syndicate 958’s reinsurance coordinator. He will be joined on Bermuda by one other member from Omega’s London team.
