Montpelier Forms Lloyd's MGA - Analyst Blog

Montpelier Re Holdings Ltd. (MRH) has fortified its Lloyd’s operations. Last week, the company announced the formation of its new U.K. Managing General Agent (MGA). Montpelier Group’s wholly owned subsidiary, Paladin Underwriting Agency Limited, has received the authorization of the Financial Services Authority and has been granted Lloyd’s coverholder status.
 
Paladin will generate business for Montpelier Syndicate 5151 at Lloyd’s. Montpelier stands to benefit from this formation with Paladin’s ability to attract niche underwriting teams and accessibility to profitable classes of business. In the beginning, Paladin would focus on producing Specialist Contractors, Recycling and Crime classes of business.
 
Senior management level appointments have been made. William Adamson has been appointed Managing Director of Paladin. Richard Chattock and Giuseppe Perdoni have joined the board as Executive Directors, while Tom Busher and Todd White have joined as Non-Executive Directors.
 
The formation of Lloyd’s MGA augurs well and is in line with the company’s strategic initiatives to develop its international platform and increase its accessibility to write specialty lines of business.
 
Montpelier has expanded its underwriting reach beyond Bermuda. It has transformed from a Bermuda “monoline" property catastrophe reinsurer to a global diversified catastrophe specialist and has expanded its operations in the US and the UK. Though investments in newer operating platforms will undoubtedly impact financial results over the near term by incurring upfront costs, these new operating platforms have already begun to be accretive to overall returns.
 
Lloyd’s Syndicate 5151 commenced underwriting on Jul 1, 2007, and has operations in the U.K., Switzerland and the U.S. The Lloyd’s platform provides it with global licenses and a strong brand with “A+" rating. Going forward, we expect a steady stream of new opportunities at Lloyd’s.
 
Montpelier’s strong financial position and claims-paying ability are reflected in its ratings. The resumption of share repurchase activity also bodes well. However, the current pricing environment in the primary insurance market and the stressed economic conditions will restrict significant top line growth. Additionally, there exists execution risk with the newer platforms and we expect investment yields to remain under pressure, going forward.
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