As 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 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 Alianz’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.