Ariel Re Sells Credit & Surety Reinsurance Business to Arch Capital

Ariel Reinsurance Co. Ltd. said it's selling its Zurich-based credit and surety reinsurance operations to Arch Capital Group Ltd.

This follows Ariel announcing earlier that it would sell its Bermuda-based insurance and reinsurance operations to Goldman Sachs, (Best's News Service, March 1, 2012). Terms for both transactions were not disclosed.

Upon the closing of the credit and surety reinsurance transaction, Ariel Re’s Zurich-based team will transfer to the Zurich office of Arch Reinsurance Europe Underwriting Ltd. and will be immediately fully operational. Ariel Re’s existing trade credit and surety portfolio will be reinsured by Bermuda-based Arch Reinsurance Ltd.

The closing of the transaction is subject to regulatory approvals and other customary closing conditions.

With $644 million in 2010 gross life and nonlife reinsurance premiums, Ariel Holdings was the 45th-largest global reinsurer, according to BestLink. The company was formed in the wake of hurricanes Katrina, Rita and Wilma in 2005. In 2007, it acquired Atrium Underwriting Group plc, a managing agent for Lloyd's Syndicates 570 and 609 and Valiant Insurance Co., a primary U.S. insurer. In 2008, it formed Valiant Specialty, a surplus lines writer (Best's Review, June 2010).

On March 1, Ariel Holdings said it would sell its Bermuda-based business to Goldman Sachs Group Inc. Ariel Re’s Bermuda-based insurance and reinsurance operations would be combined with Goldman Sachs' existing Lloyd’s business. The sale includes reinsurance of all in-force business and outstanding reserves associated with the property reinsurance, property insurance and specialty reinsurance business, as well as the "Ariel Re" brand name and intellectual property.

The combined business will operate as part of the Goldman Sachs Reinsurance Group</org>, and there will be a single organizational structure overseeing three operating entities: Ariel Re Bermuda Ltd., Ariel Syndicate 1910 and Arrow Capital Reinsurance Co. Ltd., Ariel said.

Senior management in the combined organization will include Ariel Re Chairman George Rivaz, Ariel Re Chief Executive Officer Tom Hulst and Goldman Sachs Managing Director Tom Milligan.

At closing, the current Ariel Re underwriting staff will join Ariel Re Bermuda Ltd., a subsidiary of the Goldman Sachs Group. Ariel Re Bermuda Ltd will be a licensed Bermuda intermediary and Lloyd's coverholder, acting exclusively on behalf of Goldman Sachs’ Syndicate 1910. Syndicate 1910 will be re-named Ariel Syndicate 1910 and along with its existing business will offer renewal and novation of the in-force covered business. The transaction remains subject to regulatory approvals, and is expected to close on April 1.

Attempts to reach the company for additional comment were not immediately successful.

A.M. Best Co. affirmed the Best's Financial Strength Rating of A- (Excellent) of Ariel Reinsurance Co. Ltd.

"The ratings of Ariel Re reflect its strong level of risk-adjusted capitalization, favorable operating performance and solid enterprise risk management capabilities," A.M. Best said (Best's News Service, March 1, 2012). "These strengths are partially offset by Ariel Re’s limited business profile following the company’s recent announcement that it has entered into a definitive agreement with the Goldman Sachs Group Inc. for the eventual sale of its Bermuda-based property, marine and aviation businesses. As a result of this transaction, Ariel Re will be a much smaller entity with a significantly reduced risk profile."

Ariel Re will continue to assume the business underwritten by its Lloyd's affiliate, Atrium Underwriting Group Ltd., under an existing quota share arrangement that will remain in force. This business has historically proven to be very profitable for Ariel Re and it will in effect be managed by the successful management team at Atrium Underwriting Group Ltd., subsequent to the closing of the transaction, which is expected during the second quarter of 2012, A.M. Best said. Also, Ariel Re will be renamed Arden Re as the Ariel brand name will be sold to Goldman as part of the announced transaction.

Arch Reinsurance Co. currently has a Best's Financial Strength Rating of A+ (Superior).

(By Meg Green, senior associate editor, BestWeek: [email protected])