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Howden Tiger: a broker born of ‘love’ with the power to disrupt
Howden Group’s acquisition of TigerRisk Partners represents a natural step for both companies—but the sentiment behind it contains a remarkable sense of energy and purpose thanks to the zeal and passion of its architects.
Rod Fox and David Howden are two of the biggest characters in the reinsurance world—never mind just reinsurance brokerage. Colourful and driven, each has achieved that increasingly rare feat in the ever more regulated world of risk transfer: creating privately-owned businesses of scale built on the principles of entrepreneurialism.
In June 2022, the leaders of TigerRisk Partners and Howden Group, signed a deal to merge their companies, with the tie-up creating a global broker of significant size. The newly formed firm now boasts reinsurance operations on a par with some of the biggest players in the market, including Aon’s reinsurance unit and Guy Carpenter/JLT Re, which combined in 2019.
Post the deal, having unveiled Howden Tiger, speaking with Intelligent Insurer, they both seem delighted. In a market increasingly dominated by few big players, the numbers and potential for growth partly explain this. They truly believe that the combined business can disrupt the monopoly in the market and offer clients greater choice.
“Clients have been asking for this; I have never seen such an outpouring of positivity and love, since they first got wind of this [they claim talks were leaked in mid-May],” said Fox.
The word “love” cropped up often. Still high on the energy of signing the deal, which creates a $30 billion company in gross written premiums handled, Fox and Howden were keen to stress how positive the dynamic between them is.
“Rod and I were made for each other,” Howden said at one point.
In a surreal twist of fate, the seed of the idea for the deal was first conceived at Cliveden House, a stately home in Berkshire, UK, where the Profumo affair, one of the greatest scandals in British politics, was played out in the early 1960s. Fox and Howden met there in 2018.
“We had lunch, we discussed the idea in very broad terms,” Fox said. “It was a very high level, conceptual discussion. But we realised we got on very well. The cultures of the businesses were very similar. We stayed in touch. This was before the JLT-Marsh deal and some of the other consolidations we have seen.”
Fast-forward and those sparks of a potential connection were reignited in the autumn of 2021. By now, the reinsurance brokerage landscape had changed again. Both parties felt the time was right to move things forward—and, they claim, clients were asking for such a partnership. Their key objective was to retain the entrepreneurial spirit underpinning both businesses.
“This creates a true business of scale with great credibility capable of disrupting the landscape and presenting a genuine challenge to the biggest players,” said Howden. “Yet it is built on true entrepreneurial businesses. Both businesses were once startups and we will retain those principles.”
In terms of the practicalities of the deal, Howden has acquired 100 percent of TigerRisk for cash; Flexpoint, the latter’s private equity backer, has exited; Fox and other shareholders have taken a mixture of cash and shares in Howden. Asked what his stake in Howden is now, Fox replied: “A lot less than David’s!”
He added that Flexpoint was genuinely “sad” to exit. “They loved the people, the industry, the power of the combination,” he said.
“Both businesses were once startups and we will retain those principles.”
David Howden, Howden Tiger
All in the name
The business will hold an enterprise value of more than $13 billion, handle some $12.5 billion in reinsurance premiums and have revenues of $400 million, which represents around 20 percent of Howden’s total revenues of some $2.2 billion. It could be tough to retain such principles in such a big enterprise but, according to the deal’s architects, doing the deal was smooth, or “painless” as they repeated, setting the business up for a path of rapid growth.
One illustration of this was their claim that the name, Howden Tiger, or the order of those words, to be precise, was never debated. “There was almost no discussion. It was suggested, it seemed natural given the Howden brand, and we said ‘yes’,” said Fox. Howden added: “The whole deal was very painless.”
In a statement, Fox and Rob Bredahl, executive chairman and chief executive officer, respectively, of TigerRisk, said: “After the merger the same client teams that serve you now will continue to provide the amazing client experience you expect from us, and our senior management team will remain in place including Rod Fox as executive chairman, Rob Bredahl as chief executive officer, and Tim Ronda as president.”
The statement stressed that, by combining reinsurance operations, TigerRisk will benefit from and add to Howden’s expertise in facultative, UK specialty, programmes, and binders. The new entity will have increased scale, retail distribution, broader strategic relationships and an even greater ability to reinvest in the business, they claimed.
TigerRisk will continue to be privately-owned, the statement said. “This means that senior management will have no public market investors, equity analysts, and public company boards to serve, which will allow the senior management of Howden Tiger to focus on serving clients.”
Size does matter
While shy of revealing any post-merger growth targets, Fox pointed out that TigerRisk was already growing by 25 percent a year. Howden said his company was doing the same—just in terms of organic growth. “Yes, we are competing against the biggest brands, the equivalent of Coke vs Pepsi, but we foresee explosive growth ahead,” said Fox.
“We have had so many calls, since the deal was leaked, from both clients and executives interested in opportunities here. Normally in such circumstances, people go quiet. But I really feel that in this current landscape, clients are crying out for an alternative, for a change.
“There is a lot of dislocation in the market, and we can offer a credible alternative now.”
“The more business you put through, the better the returns you get in terms of fees and commissions.”
Barrie Cornes, Panmure Gordon
Insurance analysts say that the newly created firm will take a palpable premium for joining the mega broker club, while their addition to the industry leader board could mean some downward pressure on re/insurance rates.
“Size really does matter,” Panmure Gordon insurance analyst Barrie Cornes told Intelligent Insurer, commenting on this latest union in the relentless consolidation craze.
Mergers and acquisitions activity speaks for itself: top players such as Marsh and Aon keep adding on for a reason, pressing to the point where anti-trust regulators step in, as with Aon-Willis Towers Watson. Smaller names are nearly forced to follow suit.
“There is a race for size, so it is not surprising the likes of Howden and TigerRisk tie up,” Cornes said.
Above and beyond the major cost synergies on the consolidation, the new Howden Tiger will be padding its top line with the improved terms of business it can strike with the major insurers.
“The bigger target is your ability to flex the terms of business agreement,” he said. “The more business you put through, the better the returns you get in terms of fees and commissions.”
While the new Howden Tiger broker improves its take from trade, insurers should be looking around for downward pressure on their own insurance rates as the mega-broker club takes on a new member fighting with leverage for its commercial clients, Cornes suggested.
The addition of a new major player “will add a bit of downward pressure on the rate environment,” Cornes said. Howden’s profile in cross-commercial insurance and reinsurance should tell the story of where to look. Brokers are slightly more pressed in the struggle to “do the best they can for clients, and get the best prices out of insurers”.
Whether that will be measurable in a market that had been easing timidly, before running into Ukraine conflict fears and inflation in select lines, remains anybody’s guess.
“But it will add to the overall pressure on insurance companies to cut rates when risk starts easing,” Cornes said.
Howden Tiger appeared to signal a pending competitive drive. “People want choice,” Fox said. “Clients will benefit from our distinctively different approach. We will be very bold.”
Click here to read more about the Howden Tiger deal
Image: Shutterstock / Lightspring
