Omega Urges Shareholders to Vote Against Coup

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February 23, 2010 Tuesday 03:58 PM EST

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Omega Urges Shareholders to Vote Against Coup

Meg Green

HAMILTON, Bermuda

Omega Insurance Holdings Ltd., a property insurer and reinsurer, will hold a special shareholder meeting March 12 to consider an investor's unusual request to oust the entire current board of directors and install completely new leadership.

Invesco Ltd., which owns 29.5% of Omega, is requesting that shareholders vote to install John Coldman, the retired chairman of the reinsurance broker Benfield Group (which merged with Aon in 2008) as chairman of the Omega board, replacing the current chairman, Walter Fiederowicz.

Invesco, which is a global investment management company with $423.1 billion in assets under management as of Dec. 31, also seeks to oust Christopher Clarke from the board. In addition, if elected chairman, Coldman is asking the remaining Omega directors -- Clifford Palmer, Coleman Ross, and Nicholas Warren -- to stand down when he asks them to do so, Omega said.

In addition to Coldman, Invesco has nominated five additional new directors, including James Bryce, former president and chief executive officer of IPC Re, who retired after IPC Re merged with Validus Re last year, and Robin Spencer-Arscott, who was named president of Cyrus Reinsurance Ltd., an XL Ltd. sidecar, in 2006.

Also nominated are three attorneys from the Bermuda law firm of Cox Hallett Wilkinson: Jonathan Betts, Ernest Morrison and David Cooper.

Omega, which writes short-tail property insurance and reinsurance -- including operating a Lloyd's syndicate -- from offices in Bermuda, United States, London and Cologne, is asking shareholders to vote down the attempted coup, but has scheduled a special shareholder meeting on March 12 to consider the proposal.

Also, the Delaware Department of Insurance, which oversees Omega U.S., has called a public hearing March 10 to consider the proposed changes to the board and what, if any, regulatory approvals the changes would require, Omega said. Attempts to reach the department for additional comment were not immediately successful.

In a letter to shareholders, the Omega board said it attempted to resolve the conflict with Invesco by agreeing in January to appoint Coldman as chairman, plus appoint Bryce and Spencer-Arscott as nonexecutive directors. Fiederowicz had agreed to step down. But, "there was no response to this proposal from Invesco," Omega said in its letter to shareholders. Attempts to reach Omega and Invesco for additional comment were not immediately successful.

Omega notes that three of Invesco's proposed directors, Betts, Morrison and Cooper, are all lawyers with the same law firm Cox Hallett Wilkinson, which is also the law firm Invesco retained to requisition the special meeting. Omega said the board should be a balance of executive and nonexecutive directors and that no individual or small group of individuals should dominate the board's decision making.

Omega said it has conflicting information from shareholders as to whether the Invesco-led coup is being staged in part to reinstate John Robinson, who was chief underwriting officer until he left the company Oct. 29. Robinson co-founded Omega's Lloyd's Syndicate 958 in 1979, but Omega replaced him as active underwriter of the syndicate in September. A month later, he stepped down as director and chief underwriting officer.

Robinson was "impeding the evolution of the group's underwriting activities to meet new and evolving regulatory and risk management requirements, in particular, those linked to the Solvency II directive," Omega said in its letter to shareholders.

Solvency II, which is due to take effect in October 2012, will introduce a uniform regulatory structure for insurance and reinsurance in the 27-member European Union (BestWire, Feb. 18, 2010).

Omega said Lloyd's "made it clear" that Lloyd's was concerned about how fast Omega was coming up to speed to meet required underwriting standards, and that Lloyd's was concerned that Robinson was "a major obstacle to the Syndicate's progress in meeting those standards."

If Omega failed to meet those standards, it might have impacted the company's capital requirements with Lloyd's, and the company might "suffer reputational damage and might not be able to operate in an economically viable way, thus directly reducing the group's prospects for profitability," the company said.

On Feb. 22, A.M. Best Co. placed the Best's Financial Strength Ratings of A- (Excellent) of Omega Specialty Insurance Co. Ltd., (Bermuda) and Omega US Insurance Inc., under review with negative implications due to the "uncertainty regarding Omega's board composition, operational management and future strategy" (BestWire, Feb. 22, 2010).

The Best's Syndicate Rating of A (Excellent) of Lloyd's Syndicate 958, which is managed by Omega Underwriting Agents Ltd., remains unchanged at the Lloyd's market level.

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

February 24, 2010

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