iAs 2014 came to a close, several significant insurance industry transactions were announced that, if completed, will likely reshape several segments of the insurance industry in 2015. Each of them, of course, will require antitrust approval before they can be consummated.
The first, and largest, of these transactions was the late November announcement by RenaissanceRe Holdings that it had reached an agreement to acquire fellow Bermuda-based reinsurer Platinum Underwriters. The deal is valued at $1.9 billion. Analysts commenting on the transaction have stated that RenaissanceRe is interested in enlarging its casualty insurance reinsurance business, and that casualty reinsurance represents over half of Platinum Underwriters’s book of business.
Subsequently, in mid-December, Progressive Insurance announced its intention to acquire a controlling position in ARX Holding Corp, the parent company of American Strategic Insurance. American Strategic currently offers homeowners and property/casualty insurance to consumers in approximately 25 states. In announcing the transaction, Progressive stated that the transaction would support its strategy to service more customers who seek bundled homeowners/auto policies. The deal is valued at $875 million.
Finally, on December 18, ACE Limited announced that it was acquiring Fireman’s Fund’s high net worth personal lines insurance business from Allianz Group. The deal is valued at $365 million, and would supplement ACE’s current high net worth personal lines business conducted through ACE Private Risk Services. The acquisition by ACE, coupled with Allianz’s planned integration of the remainder of Fireman’s Fund’s commercial insurance business into Allianz Global Corporate & Specialty Insurance, will mean the end for the Fireman’s Fund brand name, which has been in existence for over 150 years.
Notably, despite the insurance industry’s antitrust exemption – the McCarran-Ferguson Act – the parties to these proposed transactions must obtain regulatory antitrust approval from the FTC/DOJ Antitrust Division before the transactions can be completed. This was made clear by the Supreme Court in SEC v. National Securities, Inc., 393 U.S. 453 (1969), in which the Court expressly held that insurance industry mergers are not "the business of insurance" for McCarran purposes (and thus are not exempt). See also In re American General Insurance Co., 81 F.T.C. 1052 (1972) (insurance company mergers are not the "business of insurance"). In addition, most states also regulate insurance industry mergers under their versions of the NAIC Insurance Company Holding Act, which typically require notice and approval of any "change in control." Accordingly, while none of the announced transactions appear to present any significant antitrust issues, and thus approval is not unlikely, the transactions are not expected to close until the first quarter of 2015, or later.
