IAG wants to underwrite jilted Steadfast Direct
IAG is negotiating with Steadfast to underwrite the diversified broker group’s personal lines business after Berkshire Hathaway withdrew from the arrangement.
Steadfast MD and CEO Robert Kelly told insuranceNEWS.com.au the negotiations centre on a $900 million arrangement involving a different ratings allocation and ratings mechanism to its other direct personal lines operations.
He says Steadfast’s original underwriting arrangement with Berkshire Hathaway “became collateral damage” when the US-based investment and insurance giant announced on June 16 that it would acquire a 3.7% stake in IAG for $500 million.
Part of the new arrangement involves IAG acquiring Berkshire Hathaway’s local personal and SME lines, while Berkshire Hathaway will acquire the renewal rights to IAG’s large-corporate property and liability insurance business in Australia.
The deal essentially killed off the original underwriting agreement between Steadfast and Berkshire Hathaway, which was announced last November.
Under that arrangement the US company agreed to underwrite Steadfast Direct, a new line of retail insurance products to be sold through brokers.
Mr Kelly says IAG has proposed that the Steadfast Direct operation could be placed alongside businesses that it already underwrites, including its wholly owned direct brands and challenger brands like Coles.
“We had a number of approaches from potential capital-providers after the [IAG-Berkshire Hathaway] deal was announced,” Mr Kelly said.
“Then [IAG CEO Personal Insurance] Andy Cornish approached us with the proposition that IAG would be better off dealing with Steadfast because we would competing with their brands anyway.
“If they were to have some erosion of business as a result, it would be better for them to be dealing with a challenger they know.”
It’s understood that any final arrangement could involve IAG securing the services of the Berkshire Hathaway managers who put the original Steadfast Direct underwriting deal together.
“If we can achieve that we will commit to go forward with IAG,” Mr Kelly told insuranceNEWS.com.au.
“We won’t negotiate with anyone else at this point.”