European MGA-reinsurance fronter Accredited finally sold to Onex Partners

Private equity interest in the MGA-reinsurer fronting sector continued with news late on Friday that European-US hybrid carrier Accredited is to be sold to Onex Partners.

Malta-headquartered Accredited Insurance (Europe) will be spun out of the London-listed R&Q together with its US counterpart, provided the $465mn transaction is approved by the group’s hard-pressed shareholders.

Accredited is one of a number of rated fronting carriers to emerge in the past five years to capitalise on the rise of the $100bn+ MGA market on both sides of the Atlantic. Its European arm wrote £595.67mn ($723.8mn) of GWP in 2022 (2021: £387.01mn) on behalf of MGAs on the continent, providing its rated capacity to sit in between the MGAs and their ultimate reinsurance capital.

However, R&Q’s business-critical A- AM Best rating was again put on negative outlook earlier this year after the debt-laden group posted yet more losses and adverse development from its separate-but-interconnected legacy business. This forced the group to put Accredited up for sale in a long-winded process that finally came to resolution late last week.

But the deal leaves shareholders – who were offered a buy-out of 175 pence a share 18 months ago – nursing heavy paper losses (the shares closed at 53 pence on Friday). However, it should now mean Accredited will eventually be in a position to trade forward with an A- rating affirmed and on a stable outlook. As part of the proposed deal, R&Q debt of $28mn will be repaid to Accredited with a further $80mn retained as collateral to support R&Q legacy liabilities written by Accredited companies. A further $50mn will also be retained as working capital.

Led by Colin Johnson, Accredited Europe had 30 programs under management at year-end 2022 and more have signed this year despite the group difficulties.

Accredited is relatively unique in providing rated fronting capacity in both the US and Europe, with most other fronting companies focusing specifically on the US. However, new competition has emerged recently in the form of carriers such as Bridgehaven Europe Ltd.

Onex Partners’ decision to invest in the Accredited spin-off also shows private equity’s interest in the sector remains undimmed despite the Vesttoo-inflicted travails endured by Clear Blue.

Last week, this publication also revealed that US fronting company Sutton National is in sale talks with Charlesbank Capital Partners, while Hippo is mulling the sale of Spinnaker to another US private equity firm, Summit Partners.