St. George Re – Backed by Berkshire – Aims to Slay Asbestos Dragons

January 10, 2008

Asbestos related claims have been an albatross around the neck of the insurance industry for over 20 years. They almost caused Lloyd’s to collapse in the 1990’s. However, there now appears to be some new hope on the horizon that the claims, which will endure for another 25-30 years at least, may get some new coverage.

A new company, Bermuda-based St. George Re Limited, is ready to commence operations to write insurance designed specifically to remove uncertainty and provide resolution to historical corporate asbestos risk.

St. George Re’s founding investors are funds managed by Context Capital Management LLC, Plainfield Asset Management LLC, and Silver Creek Capital Management LLC. It was “founded in response to the demand from companies faced with potential liability arising from asbestos-related personal injury claims,” said the bulletin. St George Re aims to offer insurance coverage to protect against risk of loss from future asbestos claims and to provide coverage for the costs of defending against those claims. According to the Company’s announcement, based on US Chamber of Commerce figures, those claims have so far “cost companies an estimated $70 billion and forced more than 70 companies into bankruptcy.

“Prior to St. George Re, the only options available to manage asbestos risks projected to extend to 2050 or beyond were self insurance, engaging in ‘finite’ or non-insurance contracts, or filing for bankruptcy.”

The new reinsurer, who will concentrate only on asbestos risks, boasts considerable underwriting expertise. “Company executives have more than 75 years combined experience in dealing with asbestos risk, having structured over $3 billion in asbestos related risk transfer solutions for both insurance carriers and policyholders,” said the bulletin. It also boasts “a capital base unencumbered by legacy business risks.”

In addition it has a heavyweight backer in the form of a “strategic capacity arrangement with the Berkshire Hathaway Group of Companies, which allows the Company to underwrite and deliver policy limits anticipated to meet the largest of coverage levels desired by corporate asbestos defendants.” St. George Re, however, said it would also “cater to small to mid-sized corporations in need of a responsive insurance provider who can offer resolution to their asbestos legacy issues.”

CEO Colin R. Barnes explained: “Managing and absorbing the risk of legacy asbestos problems in-house can consume significant corporate and managerial resources. This ‘asbestos overhang’ also clouds perceptions of shareholder value as outside parties and stakeholders struggle to understand how a company’ s asbestos problems will impact its balance sheet and future earnings. Our goal is to provide resolution to a company’ s asbestos problems so that companies can focus on their core competencies and shareholders can realize the benefits that removing the ‘asbestos discount’ from the Company’ s stock valuation can provide not just over the long run but immediately at the point of risk transfer.”

St. George Re said it will provide two distinct offerings:
1. Excess Liability coverage to corporations providing for indemnification of loss, defense, and loss expenses related to asbestos-related liability, and
2. Ground-Up Coverage and claims management providing first dollar loss indemnification, defense costs, and loss expenses to corporations facing asbestos-related liability

“We are excited about the potential value of St. George Re’ s new asbestos liability insurance product to Aon’ s many clients with existing or potential U.S. asbestos liabilities,” stated Joe Rego, President and COO of Aon (Bermuda) Ltd. He described the new company as representing “another positive example of innovative product development from the Bermuda insurance market,” and indicated that “Aon looks forward to working together with St. George Re and our clients to identify situations where this asbestos risk transfer vehicle makes good sense as a complement or supplement to existing risk management strategies and insurance programs.”

St. George Re described Barnes as a “pioneer in the risk management field, who has more than 30 years of achievement in insurance company operations, corporate risk management, captive insurer operations, and board member service with various commercial and mutual insurance companies in Bermuda, London, and the U.S. ”

Company President, Jason Paterniti, has worked in the insurance and capital markets since 1993, and brings a broad base of financial and risk management expertise to St. George Re and its clients. The Company’s Chief Actuary, Kate O’ Reilly, has extensive experience in asbestos reserving, underwriting, and pricing, having been a member of Tillinghast’s London Asbestos Pollution Hazard team.

Source: St. George Re

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