GoshawK signs Rosemont Re run-off deal.
The announcement that GoshawK has agreed to put Rosemont Re into run-off has ended weeks of speculation. After failed takeover bids, large catastrophe losses, downgrades (by AM Best from “A-”/excellent to “B”/fair) and unsuccessful capital raising efforts, GoshawK and Rosemont Re have accepted a deal proposed by Don Kramer, former vice chairman of ACE Ltd, acting on behalf of a group of private equity investors. At the time of writing, there are no details on the new investors.
Under the terms of the “enterprise value transaction” the investors will set up a new Bermudan reinsurer with $750m in start-up capital using Rosemont Re's existing infrastructure and GoshawK's staff in return for a one-off payment of $2.5m. The new company is also offering 8% commission based on any renewed Rosemont Re business in 2006, which the directors anticipate could yield between $4m-$7m. GoshawK anticipates receiving $90m in claims throughout the run-off period.
CEO Russell Brooke and financial director Jonathan Beck will resign as directors of GoshawK to run the new company. While the as yet unnamed reinsurer has still to obtain licenses from the Bermudan Monetary Authority the intention is for it to specialise in similar lines to Rosemont Re – primarily property and marine reinsurance – with the main difference being better capitalisation from the start. It is hoped the new company will be able to take full advantage of hardening rates following this year's extreme catastrophes without suffering any of the legacy issues plaguing other established Bermudan reinsurers.
“This deal provides value for GoshawK shareholders above what will be achieved from run-off,” insists Brooke. “It will provide continuity for Rosemont Re clients and ensures our team can stay together. We are delighted that a well-known industry figure like Don Kramer is endorsing the Rosemont Re team and believe we have an exciting opportunity as part of the new venture.”