US specialty insurer Fortegra Financial Corporation has closed on a $200mn line of credit that it says will give it greater freedom to build shareholder value through domestic and international expansion including in programs.

Rick Kahlbaugh – Fortegra

The move comes after The Insurer revealed earlier this year that Fortegra is targeting growth in the casualty program segment as it looks to grow its overall top line to $2bn over the next five years.

The Tiptree-owned carrier obtained the senior secured credit facility from a syndicate of banks led by Fifth Third Bank, NA, with the full $200mn immediately available for letters of credit and any remaining portion of the facility to be used for working capital.

In a statement, the Jacksonville, Florida-based company said the deal was oversubscribed, which was “indicative of the banks’ trust in the company’s financial footing”.

“This sizable line of credit, with a maturity date of August 2023, provides a significant level of financial stability, allowing Fortegra greater freedom in building shareholder value through domestic and international expansion,” it continued.

In an interview with this publication back in January this year, Fortegra CEO Rick Kahlbaugh said the move to build out its specialty program business was part of a strategy to expand into “adjacent verticals”.

The A- rated insurer’s core business has been offering a range of warranty, credit protection, auto and health coverages to businesses and consumers.

But it also has a specialty division that focuses on casualty-exposed lines with low-limit profiles, working with MGAs to create and deliver programs.

Lloyd’s access

Fortegra hired former Chaucer head of specialist lines David Barber last autumn as part of its programs push in a bid to tap his experience in the Lloyd’s market to add business from MGAs seeking access to capacity through London.

The carrier had previously hired Mark Rattner as executive vice president, chief underwriter and head of product management in 2016 from Houston International Insurance Group.

“The strategy is for David to work with Mark and bring that whole London component. A lot of people still go to London to place business. Sometimes they’re looking for admitted paper in the US for their programs.

“Somebody with his experience and his brand panache really made a lot of sense for us given our focus on light commercial casualty programs,” said Kahlbaugh.

The Fortegra CEO said Barber and Rattner are charged with finding programs where the carrier can take at least a 10 percent quota share, then either reinsure the balance into Lloyd’s or the traditional reinsurance market. Fortegra could also just sit behind the London market if they’re only seeking capacity, he added.

“The benefit of us is that because we have such a large book of credit and warranty we don’t really have much distribution conflict with the Lloyd’s market. We do a lot of business with syndicates where we refer business to them and they refer business to us,” the executive continued.

As at the start of 2020, Fortegra’s specialty division had added around 20 programs with $80mn of premium since Rattner arrived and was expecting to grow the book to $200mn over the next five years, as the overall group expands from a current top line of just under $800mn to a target of $2bn.