Changing market adds value to Tysers acquisition: AUB

Global insurance patterns driven by climate change and rising demand for alternative risk solutions underscore the value of specialist capabilities provided by Lloyd’s broker Tysers, AUB CEO Mike Emmett says.

AUB this week announced the $880 million acquisition of Tysers, the sixth-largest wholesale broker in the Lloyd’s market, in a move the company describes as a bold and significant step.

Tysers will provide AUB with the ability to access a diverse range of risks and insurance types for clients and broker networks in Australia and New Zealand and will support establishment of new agencies, Mr Emmett said.

Mr Emmett was asked during a briefing if the tapering of the hard market could moderate demand over the next few years for placement of wholesale business through Lloyd’s.

But he says changing patterns will see a shift away from the traditional insurance cycle and a move towards more of an annual or consistent adjustment in premium rates as climate-related events occur more frequently and severely.

At the same time, there’s likely to be increasing demand for alternative risk solutions, such as parametric products, as some clients face affordability issues in purchasing traditional insurance policies and look for other options.

“You are going to have to complement them with alternate risk structures,” Mr Emmett said. “What Tysers does is gives us the ability to get more involved and access those types of products for our clients.”

In the short term, the acquisition will allow AUB to direct $200 million of gross written premium (GWP) to Tysers from existing and future placements within broking and agency networks, creating an uplift in margin and revenue, the company says.

Direct access to Lloyd’s and international markets is expected to also provide AUB’s broking networks and underwriting agencies with capacity to write additional new business and deliver differentiated exclusive products to AUB’s network, the group says.

Following the acquisition, 50% of Tysers UK retail business will be sold by AUB to PSC Insurance Group, creating a joint venture between the companies.

Mr Emmett says AUB sees most opportunity from the wholesale side, but the joint venture will allow AUB to participate in upside offered by the retail assets, and PSC, which has existing UK operations and a similar culture, is an obvious partner.

PSC says the companies approach the operation of businesses in a similar manner, which involves autonomy and a focus on revenue growth.

The Tysers retail business comprises four branches in central and south-east England.