Carlyle-backed JenCap Aims to Roll-up Small Binder/MGA Business
April 6, 2016
Wholesale consolidator JenCap will look to roll-up small binding authority, program and MGA business in the E&S space with significant backing from new majority owner The Carlyle Group.
The New York-based private equity giant closed a deal last month to take a majority stake in JenCap and buy the assets of Wholesale Trading Co-Op Insurance Services (WTC).
WTC will be renamed as Wholesale Trading Insurance Services (WTIS) and sit as a subsidiary of JenCap, which will be positioned as a consolidator of specialty insurance distribution and program management business.
And in an interview with Inside E&S, JenCap president and CEO John Jennings highlighted the opportunity for aggregation in the small business segment of the US insurance market.
The executive – who headed WTC before the Carlyle deal – said MGA business alone in the US represents around $30bn in premium.
“There’s so much small business in the US and we think we’ll be able to take advantage of that by aggregating this type of business,” he commented.
John Redett, managing director of The Carlyle Group, described a “tremendous opportunity” in the sector.
“These are small businesses where a lot of them face a generational challenge with a founder who is aging and no internal successor. The desire to monetize that individual’s largest asset is a compelling outcome for them,” he said.
He added that Carlyle is confident JenCap will be able to do a “fairly sizeable roll-up over the next 36-48 months”.
Jennings explained that operating as a wholesaler, WTC had dealt with clients that had a large amount of small business that was spread out geographically with very little aggregation.
“We started looking at whether we could roll up that kind business for our clients. It became clear that to do so would require a very broad range of product in the small binding authority and MGA space. That led us down the road where we decided not to build but to acquire instead,” he explained.
With Carlyle backing, the firm will look to aggregate small binding authority, small transactional wholesale, MGA and program administration business through M&A.
Jennings said that JenCap was in the process of building out its corporate infrastructure, with a CFO identified and a senior M&A team already being put together.
WTC founder and investor Jeff Cappel has been appointed as a director, bringing significant insurance M&A experience.The firm will look to utilize technology in aggregating the business and is in the process of assessing potential platforms.
JenCap will be headquartered in New York, while WTIS will operate from its existing offices in New York, San Francisco, Atlanta and Princeton, New Jersey.
Jennings was part of the founding management of WTC when it was launched in 2010 by fellow director Jeff Cappel along with retailer Edgewood Partners Insurance Center (Epic) and its co-founder and CEO John Hahn.
Carlyle is also an investor in Edgewood and late last year backed UK start-up PIB Insurance Brokers, the intermediary launched by former Willis UK & Island CEO Brendan McManus and UK broker consolidator Chris Giles earlier in 2015.