Berkshire Hathaway Speciality Insurance (BHSI) is close to replacing Great Lakes Australia as primary underwriter for travel insurer Cover-More in Australia and New Zealand.

The two companies last week announced a binding heads of agreement, and they are now making “best endeavours” to finalise the deal.

The agreement will give Cover-More greater certainty of underwriting premium and no share in the downside risk for losses above the agreed target loss ratio.

Cover-More has been underwritten by Munich Re’s Great Lakes since 2009 and renewed the agreement in 2013 for five years. However, the proposed deal with BHSI would allow Cover-More to terminate that arrangement.

Cover-More and BHSI already work together in the US to market online travel insurance.

The new deal will not affect Cover-More’s agreement with Transamerica, which will remain the underwriter for its US acquisition Travelex Insurance Services and for Flight Centre USA.

The agreement will run for a five-year term and include a change-of-control clause.

Cover-More CEO Mike Emmett says his group received interest from other global underwriters, but BHSI emerged as the best fit.

“BHSI consistently demonstrated that it sought an entrepreneurial and collaborative partnership in our dealings with it, and it was clear that we were strongly aligned from the outset, both strategically and culturally,” he said.

BHSI President Australasia Chris Colahan says the companies share a strong vision and customer focus. “We add significant scale to Cover-More’s specialist travel insurance, optimisation and medical assistance capability,” he said.

BHSI will use Cover-More’s global medical assistance team to provide emergency support to customers in selected markets. And the collaboration will extend to exploring additional underwriting opportunities in other countries.