News broken by The Insurer that rehabilitated Ambac is lining up a live insurance platform that looks set to include a program fronting capability raises the prospect of a fresh addition to the already swollen ranks of vehicles that have rolled off the production line over the last few years.
Details of the business plan for Everspan Insurance Company are not known. But the hiring of former State National executive Wyatt Blackburn and Steve Dresner from Crum & Forster clearly points in the direction of some kind of hybrid fronting entity.
Sources have indicated that Ambac – which is understood to have been working with former XL and Torus executive Clive Tobin in a consultative capacity – had earlier done the rounds of existing fronting carriers looking for a potential acquisition before now opting to build its own.
Blackburn has fronting pedigree having been a stalwart of State National for three decades, rising to executive vice president and COO before his departure in 2013, while Dresner brings program relationships from his most recent role at the Fairfax Financial subsidiary.
Going from business plan to fully live and rated vehicle is an arduous and lengthy process, as the flurry of recent start-ups in the last few years will attest to.
And the addition of yet another fronting carrier (assuming that is the path taken) may raise questions over the number of mouths to feed in the sector – although there is an expectation that program opportunities will continue to grow amid retrenchment in the broader P&C marketplace.
Everspan – assuming it successfully goes down the AM Best rated path – may bring something different to the mix, however.
Most of the recent wave of start-ups to the sector have entered at sub-$100mn surplus. But according to its latest statutory filings, Everspan Insurance Company had policyholders surplus of $247mn as at 31 March this year.
If the plan is to retain that level of capital in the business, that would represent significant heft among its peers, with only a small number of carriers led by State National offering greater scale.
The additional scale could prove meaningful for those counterparties that demand a bigger balance sheet from their fronting partners.
If sources are correct annewd Ambac is also looking to add MGAs to its Everspan platform it could represent the latest example of another emerging trend in the program sector.
There have been a number of moves by MGAs or program administrators and fronting carriers to more closely align, either through direct or joint ownership.
The rationale is that reinsurers supporting programs increasingly want to see an alignment of interest with their counterparties – whether that’s a fronting carrier retaining a larger share of the business or an MGA engaging in some form of risk sharing structure.
Putting MGAs and program fronting carriers under the same ownership also helps guarantee access to paper. And that could prove a valuable asset in a hard market where capacity is more challenging to find and keep.