HIH has moved to shore up its threatened corporate insurance portfolio by forming a joint venture with QBE.

The move, announced jointly by the two companies late this morning, will see QBE take 80% ownership as well as management control of the new entity, which will be called QBE Corporate Insurances Limited.  

The present arrangement HIH has with Gerling will now be dropped.

The new company will offer to renew all corporate insurance written through major brokers by HIH and QBE in both Australia and New Zealand. The insurance liabilities on past and current policies, including unexpired policies, will be run off. QBE Corporate Insurances won’t assume any past or existing liabilities of either company – except the remaining insurance liabilities of HIH in New Zealand. In that case, assets will be transferred for an amount equal to the insurance liabilities assumed.

The JV will renew about $800 million of gross premium income and net premium income of around $700 million. Initial shareholders’ funds are expected to be $300 million, with QBE funding $216 million of that total. HIH said the higher contribution by QBE “reflects the larger proportion of premium being contributed by HIH to the joint venture”.

QBE MD Frank O’Halloran said company will operate in a different market to QBE’s existing joint venture with ING – QBE Mercantile Mutual – which services retail and SME businesses through intermediaries. “The proposed joint venture excludes CTP, trade credit and direct retail insurance written by QBE in Australia.”

HIH CEO Randolph Wein said the joint venture will preserve and enhance value for HIH shareholders, and provide the company with an ongoing earnings stream and a valuable investment.

“It will provide corporate clients and many insurance brokers with a more permanent alternative to the transitional agency structure that HIH already has in place via the Gerling Group.”

The two companies will seek to have the joint venture approved by the regulators before the renewal date of June 30. Commencing immediately, QBE will offer renewals to HIH’s major corporate clients through QBE Insurance (Australia) which is rated A+. Approaches will also be made to Standard & Poor’s to obtain an A-category rating for the new company.