Insurance Manager Kane Sees HSBC Acquisition as Global Step

In creating what it describes as the "world's largest independent insurance manager," Kane Group Ltd. said it has successfully linked its global acquisitions strategy to a decision by financial services giant HSBC to pull out of that sector.

Kane Group "decided some time ago that we wanted to create the best insurance management platform in the world," said Chief Executive Stephen May. To this end, he added, Kane opened offices in London and the Middle East and looked for its first acquisition in the West.

The new entity is being formed as a result of Kane's $27.5 million (19.4 million euro) acquisition of HSBC Insurance Management. Regulatory approval will be required.

Kane, which provides specialized insurance and risk management services, said HSBC Insurance Management is the fourth-largest insurance manager in the world, with a strong position in insurance-linked securities. It is also active in captives, reinsurance, and pensions and life insurance. HSBC Insurance Management operates from such locations as Bermuda, the Cayman Islands, Guernsey, Malta and New York. The deal is being supported by private equity firm CBPE Capital.

Kane, which has offered jobs to all HIM employees, sees the creation of the larger group as the chance to provide advice that is not tied to specific domiciles. Among the HIM employees who will stay on are Roy Fellowes, who will go from being CEO at HIM to the same role in the enlarged entity.

"This is a very attractive business in the insurance management space," Fellowes said of HIM. "HSBC Insurance Management has been managing captives for over 25 years. So it's a mature, very experienced, very professional firm that attracted a lot of attention in the market."

Insurance management, Fellowes said, is Kane's only business. "For our clients and our staff it sort of ticked all the boxes in terms of a good fit for the business itself," he said.

HIM performed well in its specialist areas last year, Fellowes said. "We fully expect that growth to continue this year."

May said the ups and downs of the insurance cycle have become "less relevant" to the captives sector. Previously, "hard markets drove people to retain more risks and to set up captives to do so," he said. "Nowadays, it's far more part of an overall financial structuring of a company, and the captive becomes part of the core of the strategy."

May said he believes the captives sector, along with the insurance industry itself, is well placed to adapt to the requirements of Solvency II, which has been designed to introduce a uniform capital adequacy structure for insurers and reinsurers throughout the 27-nation European Union at the end of 2012. Despite some uncertainty about how the legislation will play out, May said, he believes the increased regulatory interest in the management of capital and risk will favor operations in which both are clearly identified.

"It should in the long term actually promote the use of these structures," May said. "In the short term, it will be interesting to see how each jurisdiction deals with this initiative."

Kane's global reach offers an advantage, Fellowes said. "We have businesses that are within Europe or that will be seeking equivalence [with Solvency II]," he said.

Listen to the entire interview with Stephen May at http://www.ambest.com/media/media.asp?RC=184414

(By Robert O'Connor, London editor: [email protected])