US: AIG to buy reinsurer Validus for US$5.6b

American International Group said it would buy reinsurer Validus Holdings for US$5.56 billion in cash, snapping a long period of retrenchment for AIG as new Chief Executive Brian Duperreault plots an expansionist path.

Duperreault initiated the deal for Bermuda-based Validus, which comes four months after US regulators said that AIG, which has radically shrunk after its near-death experience during the financial crisis, was no longer “too big to fail.”

Bermuda’s insurance industry is familiar turf for Duperreault, who was born there and founded and ran the Bermuda-based Hamilton Insurance Group before heading to AIG.

The deal marks AIG’s reentry into the Lloyds of London insurance market, strengthens its reinsurance operations and adds new areas, including crop insurance, at a time when AIG, like rivals, is facing stiff pricing pressure.

“I particularly like the reinsurance business as additive to what we do. There are a lot pieces to this company that fit us like a glove,” Duperreault said on a conference call with analysts.

Reinsurers play an important role in the financial industry by assuming risks that are either too large or too unpredictable for their insurance clients to take on their own.

Full Content: Bloomberg

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