Applied to acquire E&S carrier from Axa XL through IBT process

Applied Underwriters is to acquire Catlin Specialty Insurance Company from Axa XL, in a move intended to bolster Applied’s operating capabilities in support of its strategic partners as the E&S market hardens.

Catlin Specialty Insurance Company is currently A+ rated, and will be consolidated into the North American Casualty group of companies, which are A rated.

The transaction is scheduled to close during the second quarter after anticipated regulatory approvals are received.

Jamie Sahara, president of Applied, described the deal as “an important development for us and for our partners in the E&S market”.

“Applied has consistently executed our commitment to sustaining and growing our national platform for E&S business and to intensifying our relationships with our strategic partners with whom we have impacted the sector,” Sahara said.

The structure for the transaction drew upon the business transfer process used in Oklahoma that is based upon the Part VII transfer procedure used in the UK and the EU.

“We found great potential in the Oklahoma Insurance Business Transfer (IBT) Act’s regulatory process and its regulators’ application of it,” said Steve Menzies, chairman of Applied.

The IBT process permits insurers the ability to effect the absolute transfer of blocks of insurance business from one insurer to another, providing both the transferring and assuming companies an efficient, transparent and straightforward process, while also realizing a legal finality.

“Our deal was complex and the Oklahoma regulatory format really helped facilitate this,” said Menzies.

The transaction required the redomestication of the company.

The Catlin Specialty Insurance Company is licensed as an E&S carrier in all states except Oklahoma, where it will be domiciled and where it holds a number of surplus lines authorizations.

“To effect the acquisition, Applied and Axa XL worked with Delaware and Oklahoma regulators to redomesticate Catlin from Delaware to Oklahoma, so that Oklahoma’s IBT process could be used,” Menzies explained.

The company that is today known as Catlin Specialty Insurance Company was formed in the 1950s. It has been the subject of a series of transactions that culminated in its acquisition in 2006 by Catlin Group, which in 2015 became a part of what is now Axa XL.

Applied at the start of the year announced it had a pipeline of larger scale transactions and was also looking to drive strong organic growth this year.

At the time Sahara - who has been a driving force in Applied’s build-out since he led a management buyout of the company from Berkshire Hathaway in 2019 - highlighted continued E&S opportunities as a focus for the company. He contrasted it with a domestic, traditional admitted market that is “way oversupplied”.

Applied in 2021 completed a series of acquisitions as well as adding several underwriting teams to launch new MGAs and programs on its burgeoning platform.