Enstar gets $610m Starstone U.S. PE backing, Noonan & Consolino to lead

Enstar is pushing back into U.S. property and casualty markets, with a focus on excess & surplus (E&S) business, thanks to a successful $610 million recapitalisation of Starstone U.S. from private equity giants including Dragoneer, SkyKnight and Aquiline.

The company has also revealed the hiring of former Validus founding member Jeff Consolino to be the new CEO of Starstone U.S., while former Validus CEO will become Executive Chairman of the venture.

The goal is to relaunch Starstone U.S. as a market leader in the specialty property & casualty insurance markets, with the timing hoped to allow it to prosper in the currently hardening marketplace.

Investors led by SkyKnight Capital, L.P., Dragoneer Investment Group and Aquiline Capital Partners LLC have agreed a $610 million recapitalisation with parent Enstar Group, which alongside Enstar’s existing ownership stake and another $20 million investment from management, means StarStone U.S. has more than $850 million in equity capital.

Enstar said it will receive a combination of cash consideration and shares in the recapitalised StarStone U.S.

An Enstar subsidiary is also going to help with the legacy held by Starstone U.S., in a reinsurance arrangement that sees it enter into a combination loss portfolio and adverse development cover agreement with StarStone U.S.

That will provide greater certainty for the investors buying into the recapitalisation and relaunch of Starstone U.S., providing certainty that the old books are dealt with and the portfolio is clean moving forwards.

The recapitalisation is expected to close later this year, likely putting the company in a position to accelerate into 2021 while the market is still firming.

Enstar said that the new board of Starstone U.S. will be Noonan and Consolino; Paul O’Shea and Robert Campbell from Enstar; Steve DeCarlo (an interesting AmWins link there); Matthew Ebbel, Managing Partner of SkyKnight; Marc Stad, Managing Partner of Dragoneer; and Chris Watson, Partner of Aquiline.

Dominic Silvester, CEO of Enstar, commented on the news, “This is a pivotal moment for StarStone U.S. as we reposition the Company towards specialty E&S growth. In partnership with experienced investors and a talented management team, which have built and led winning organizations, Enstar is committed to realizing StarStone U.S.’ full potential as a specialty commercial property & casualty insurer. StarStone U.S. will work with Enstar, as opportunities warrant, in our ongoing acquisition activities.”

Consolino takes the CEO role and brings 28 years of insurance and reinsurance industry experience, most recently as Executive Vice President, Chief Financial Officer and a Director of American Financial Group, Inc. He was previously a founding member of Validus Holdings, Ltd., serving as President and Chief Financial Officer.

“I am delighted and honored to take on the role of CEO of StarStone U.S.,” explained Consolino. “I am looking forward to working with the Company’s many talented underwriters, employees, and distribution partners as well as the reconstituted Board of Directors to build a market leading specialty insurance company. We observe premium pricing increasing and capacity contracting across multiple classes of business including commercial property, D&O, excess casualty, marine & aviation and professional liability.

“Social inflation and natural catastrophe losses, including floods and wildfires, have also added to market rate momentum. In addition, the COVID-19 pandemic has led to market dislocation and additional capital need. We believe a specialist insurance company with the right leadership, financial backing, protection from legacy exposures and niche orientation can create significant value in this environment.”

Noonan takes the position of Executive Chairman, having joined StarStone Group as Chairman back in 2019. He has over 40 years of insurance and reinsurance sector experience, most recently gained as Chairman and CEO of Validus Group from 2005 to 2018, driving success and growth, at the company up to its acquisition by AIG in 2018.

Before that Noonan was President and CEO of American Re from 1997 to 2002, having worked at the firm since 1983. Before that he worked at Swiss Re from 1979 to 1983.

Noonan said, “Having had the chance to work with the StarStone U.S. team, I am really pleased to have the opportunity to help them build on the excellent work they have done. We have assembled a Board comprised of company founders and business builders which we believe is second to none. I have worked closely with Jeff and many of the directors for years and believe the mix of their skills and experience will greatly benefit the development of the enhanced StarStone U.S. business plan.

“We are very pleased to have the opportunity to partner with patient, long-term investors Dragoneer and SkyKnight who bring a valuable network across both the technology and insurance industries. Following the formation and successful sale of Validus, we are also excited that Aquiline will again invest with us.”

Ebbel of private equity investor SkyNight added, “We are excited to partner with Jeff, Ed, Steve, and Enstar to build StarStone U.S. into an exceptional specialty carrier executing across both admitted and E&S lines of business. This partnership has been nearly a decade in the making, and we believe this is the ideal time for StarStone U.S. to execute on an expansion strategy with both a clean balance sheet and fresh capital.”

Stad stated, “At Dragoneer, we focus on partnering with exceptional teams that are building truly differentiated businesses in large markets. We look forward to working with Jeff and Ed as they build a leading specialty carrier at a time when we see very positive, long-term market trends. We have been impressed by Jeff and Ed’s track record of operational excellence, orientation towards disciplined underwriting, and usage of both data and technology.”

Jeff Greenberg, Chairman and CEO of Aquiline, also commented, “Today’s dynamic market conditions have created a need for dedicated underwriting capacity across multiple E&S and admitted lines of business. We witnessed the strength of the Validus management team first-hand and believe Jeff and Ed will build a market leader at StarStone.”

It’s a stellar management team with backing from some of the most sophisticated private equity investors in the insurance and reinsurance space.

The link to AmWins with Steve DeCarlo taking a board position is also intriguing, but PE investor Dragoneer took 35% of the company back in 2016 and the pair have been working closely together ever since.

There is a significant opportunity to enter the U.S. P&C and E&S space right now, with capacity contracted and rates having steadily risen and now being seen to accelerate.

It won’t be without its challenges, there are reasons capacity is down and many players have begun to shy away from the E&S marketplace in recent years. But the greatly improved pricing means much more leeway and a judicious and efficient use of reinsurance capital can help to make the underwritten portfolio much more resilient to shocks in future as well.

Enstar has also announced that StarStone International contributed its renewal rights to Atrium Underwriters Limited another Enstar subsidiary and the manager of Lloyd’s Syndicate 609, saying that any of the international business not assumed by Atrium will be placed into an orderly run-off.

At this time John Hendrickson has also stepped down from his role as StarStone Group CEO.

Silvester of Enstar said, “I would like to thank John for his significant contribution to StarStone, and we all wish him well with his future endeavors.”