Mitsui Sumitomo Announces $400M Cross-Cutting Acquisition

Japanese insurance group Mitsui Sumitomo is reportedly set to acquire hybrid P&C program and front-end carrier specialist Transverse Insurance Group for $400 million.

Japanese newspaper Nikkei reported the news and said a deal for the rumored acquisition of around $400 million could be announced before the end of the month.

While the publisher also said that up to an additional $150 million could be paid by the Japanese insurance giant, depending on Transverse Insurance Group’s revenue after the deal is struck.

Transverse Insurance Group was launched in late 2018 and is headquartered in New Jersey, USA.

The firm has a hybrid approach to programming P&C activity, fronting and also risk transformation, working with sources of reinsurance capital, including alternative markets, such as insurance-linked securities specialists ( THEY).

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Generally, Transverse only holds a relatively small share of the risk, with the majority being ceded to capital providers, or ceding all of it, in partnership with reinsurers and alternative markets. The Nikkei reported that Transverse typically takes about 5% of premiums as fees in its hybrid program, fronting and risk transformation operations.

Transverse was launched by co-founders Erik Matson, as CEO, an experienced executive in MGA and underwriting-focused businesses, and David Paulsson, an investor experienced in start-up allocation. ups from the reinsurance industry, ILS vehicles and access to the Lloyd’s market. strategies.

Their company works with admitted and non-admitted solutions and has emphasized surplus and surplus (E&S) in many of its news announcements which we have already covered.

Transverse raised $48 million in capital earlier in 2022 to help grow its hybrid frontage insurance operation. It also launched an insurtech investment arm this year.

The Nikkei reported that Transverse is a “reinsurance broker” and that Mitsui Sumitomo aims to buy the company to improve its own understanding of reinsurance markets.

Although Transverse is not a reinsurance broker, in the typical sense, the company positions itself as a conduit to reinsurance capital for program business and other carriers, while also helping to match capital from reinsurance and providing it with direct access to the main sources of insurance. risk.

It therefore clearly occupies a key position in the risk-to-capital value chain that could enhance Mitsui Sumitomo’s understanding of and access to reinsurance and capital markets, while also providing access to specialized ranges of subscription.

The Nikkei said Mitsui Sumitomo has ambitions to expand into areas such as cyber risk and understands the importance of reinsurance capital to achieve this, also viewing Transverse as a potential candidate for this type of expansion.

MS&AD Holdings, the Japanese conglomerate and parent company of Mitsui Sumitomo Insurance, acknowledged the Nikkei report in an announcement today.

Today there was a report on a business investment from Mitsui Sumitomo Insurance Co., Ltd., a subsidiary of the company. However, this is not an announcement made by the Company or its affiliates.

It is true that we are currently reviewing various business investment opportunities, including those reported in the media,” MS&AD Holdings said.

However, he added that there was currently no basis for the report, suggesting that a deal was not yet guaranteed.

In the future, when matters requiring disclosure are decided, MS&AD Holdings said it will announce them.

The news highlights how attractive insurance and reinsurance market strategies that combine origination with capital, without the weight or drag of a risk-bearing balance sheet, are currently.

This hybrid approach is increasingly appealing to investors, including private equity specialists. This assumed $400 million valuation (with a reported potential of $150 million more) will likely increase investor appeal for the program/fronting and the hybrid re/insurance approach matching risk and capital.

If a deal was announced (it’s important to remember there has been no confirmation of this deal, we’ve contacted but haven’t heard from either party as of press time), fall under the stable MS&AD could be an important driver of global expansion for Transverse and enable the company to both help the Japanese insurance giant access new risks and markets, as well as benefit from Mitsui Sumitomo’s access to global insurance risks.

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