Willis Re reboots in Bain Capital JV that shields WTW earnings from attritional build-out costs

WTW looks set to end its three-year hiatus from reinsurance broking as it partners with private equity firm Bain Capital to launch a new venture, returning to a space it exited with the $3.25bn+ sale of Willis Re to Gallagher, The Insurer revealed on the eve of Monte Carlo.

According to sources, the likelihood in such a joint venture partnership would be that WTW would hold a meaningful minority stake and would effectively “rent” its brand, leverage of its retail book of business and analytics capabilities.

The rationale behind teaming up with a private equity partner is understood to be related to the expense of an organic build-out for a public company that is still – successfully to date – going through a process of regeneration in the aftermath of its aborted mega-merger with Aon.

By holding a minority stake, WTW would not be required to disclose costs associated with the build-out in its quarterly results.

The venture will be largely built out organically with few businesses of meaningful scale available as realistic M&A targets in the reinsurance intermediary space.

Although further details have not been confirmed at this stage, WTW is known to have approached a significant number of reinsurance broking executives for potential leadership roles as it looks to reboot in the space.

Sources speculate WTW would have the right of first refusal to acquire the venture outright – although this is not favoured by private equity backers as they typically prefer to have the freedom to market the business once value has been built.

Bain has been increasingly actively involved in the insurance sector over the last few years. It remains a backer of MGA platform Beat Capital following the sale of a majority stake in the business to Ambac, and provides the capital behind program carrier platform Emerald Bay, which launched earlier this year. The private equity firm is also behind The Mutual Group, which was created as part of the transaction that saw Bain invest $200mn into GuideOne, and also this year invested in insurance collateral solutions specialist 1970 Group.

Other insurance industry investments by Bain include Aptia, Enhance Health, Keystone Agency Partners, Ryze Claim Solutions and Summitas Gruppe.

At least a year in the making…

News of the partnership comes a year after WTW CEO Carl Hess arrived at the 2023 Monte Carlo Rendez-Vous saying that while no firm decision had been made on re-entering the reinsurance treaty space, it was more “likely than not” that the industry’s third-largest global broker would do so at some point in 2024.

WTW’s treaty lock-out following its $3.25bn+ sale of Willis Re in December 2021 expired at the end of last year, freeing the company up to once again provide reinsurance treaty advice and placement services in 2024.

“Of course, it is a serious consideration,” Hess said last year, adding that the firm was being “methodical and strategic in whether to proceed and, if so, how”.

“WTW has much to offer – our modelling, data and use of technology are second to none, as evidenced by our insurance consulting and technology business. We have deep relations with clients and markets, a legacy reinsurance brand that goes back more than a hundred years, and capabilities in all areas of corporate and complex risk,” he explained at the time.

WTW is also likely to be attracted by the 40+ percent margins that can be generated from reinsurance broking.

The firm has been ambitious in its hiring on the retail side of its business over the last 18 months, most notably with the addition of Lucy Clarke from Marsh as president of risk and broking in July this year.

WTW and Bain did not respond to requests for comment on this article.