WTW close to reinsurance return with PE backing

WTW has been linked with a partnership with private equity firm Bain Capital to launch a new reinsurance venture which would fulfil the global intermediary’s stated ambition to get back into a space it left with its $3.25bn+ sale of Willis Re to Gallagher, The Insurer can reveal.

According to sources, an announcement of the partnership could be imminent. They added that the likelihood in such a 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 going for a joint venture-style approach with a private equity partner is likely 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 merger with Aon.

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

The venture is likely to be largely built out organically with few businesses of meaningful scale likely to be 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 said that in a partnership such as this, WTW would be expected to 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.

It is thought that Bain and WTW were previously in dialogue over the launch of an underwriting platform last year, but the private equity firm was not involved as a backer when specialised MGU Veritas was unveiled in October 2023.

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 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.

Speaking in Monte Carlo last year, Hess said it was something he and his leadership colleagues were seriously considering.

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

“Ultimately, the question we have to answer is whether a return would be a value-add to our clients, prospective clients and markets. If we decide yes – and there are certainly reasons why we might – then we have to elect how to do so, and when.”

On the how, Hess acknowledged three options: “Organic, acquisition or a combination of the two.”

“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.

In addition to providing clients with more options, WTW is likely to be attracted by the 40+ percent margins that can be generated from reinsurance broking.

While M&A opportunities do exist in the reinsurance intermediary space, they are limited.

The biggest of the challenger firms TigerRisk was taken out by Howden last year, with a big gap in scale to the next group of reinsurance intermediaries.

Among those, several – such as Lockton Re and Acrisure Re – are embedded within large retail brokers, while others are either at a nascent stage or fiercely independent, such as Holborn.

WTW and Bain did not immediately respond to a request for comment on this article.