R&Q takes on MSA Safety legacy with new joint venture
R&Q Insurance Holdings Ltd (DI)
R&Q Insurance announced on Friday that, alongside Obra Capital, it has acquired a wholly-owned subsidiary of global safety equipment manufacturer MSA Safety through a newly-formed joint venture.
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The AIM-traded firm said the acquired subsidiary holds legacy product liability claims relating to coal dust, asbestos, silica, and other exposures.
It said MSA Safety contributed around $341m in cash to the company, in addition to related insurance assets, and the joint venture contributed $35m.
As a result of the acquisition, R&Q said it would provide claims and management services and Obra, recently rebranded from Vida Capital, would provide investment management services.
The transaction enabled MSA Safety to remove all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary from its balance sheet.
“We are pleased to form a joint venture with Obra to acquire and professionally manage these legacy liabilities, providing MSA Safety with a complete finality solution,” said R&Q executive chairman William Spiegel.
“This is an exciting transaction for R&Q, showcasing the capabilities, reputation and innovation of our Legacy Insurance business.”
Spiegel said it would see the firm’s reserves and non-insurance liabilities under management increase to more than $1bn, comprising two pools - traditional insurance reserves via Gibson Re, and non-insurance legacy liabilities.
“This furthers our strategy of becoming a leading manager of legacy liabilities and reflects our ability to execute transactions that match different legacy liabilities with the right form of capital.”
R&Q said that as the transaction concerned non-insurance legacy liabilities, it would not be ceded to Gibson Re.
The structure of the joint venture and the related exposures in the transaction would result in reduced counterparty credit risk for R&Q, and thus meant that the fees would be lower than those earned from Gibson Re.
“While we have been providing legacy insurance solutions to insurers, reinsurers and corporate captives for decades, this transaction opens up a new growth avenue in providing similar services for non-insurance, corporate liabilities,” said R&Q’s chief executive officer of legacy insurance, Andrew Pinkes.
“This transaction is a strong demonstration of R&Q's expertise in underwriting and managing long-tailed liabilities, as well as our innovative approach to structuring and delivering comprehensive finality solutions.”
At 1355 GMT, shares in R&Q Insurance Holdings were up 0.51% at 59.3p.
Reporting by Josh White for Sharecast.com.