Still flying

Still flying

Sportscover’s owner Wild Goose Holdings had a turbulent 2019, but its founder says the future remains bright

By John Deex

Wild Goose Holdings (WGH) sent tremors through the market in July when it announced it was heading into voluntary administration. Although not many people knew much about the company, they were quickly made aware that it owns Australia’s largest sports insurer, Sportscover Australia. WGH and its administrators immediately emphasised the issue was nothing to do with Sportscover, and would not affect the operations of the specialist underwriting agency.

WGH Founder and Chairman Peter Nash could only say at the time that the administration related to “the dim and distant past” of its Lloyd’s managing general agency, Syndicate 3334, which Sportscover sold to Hamilton Insurance in 2014.

Now, following agreement with creditors on a deed of company arrangement, Mr Nash is able to explain the issue in greater detail.

The administration came about as a result of one debt, he tells Insurance News, owed to a large reinsurer – not for the purpose of reinsurance but for capital provision in Syndicate 3334. How it came about was “a little unusual”.

“Back in 2012 I signed a document that had a guarantee in it, that in the event that the capital of this particular provider was drawn down in a certain way, then WGH would make good the amount of that drawdown,” Mr Nash says.

“Subsequently we sold the syndicate, and a little unusually the business that bought the syndicate [Hamilton] determined to close three years at the one time, rather than one year.

“As a consequence Lloyd’s drew down on this capital slightly more than the capital the syndicate was due to pay, which triggered the guarantee.”

It is quite rare for these guarantees to be triggered, Mr Nash says. “It is generally an unusual set of circumstances.”

As the guarantee was attached to WGH, not Sportscover or the syndicate, WGH was left facing a £4 million bill.

“We needed time and the only way we could get it was to go through the administration,” Mr Nash tells Insurance News. “

There wasn’t another alternative, really.”

He says the deed of company arrangement is a way for the company to trade forward and work its way through the debt involved. While WGH is now out of administration, there are still a number of issues to resolve.

“There’s a range of things the company will be doing to procure the payment of the debt,” Mr Nash says. “We have two years to come up with a way in which that can be done.

“It may well be that when the final amount as to what is owed is agreed that the money is borrowed. We are certainly looking at selling some of the other businesses that WGH owns.

“It’s all very straightforward and contractual.”

The episode has left Mr Nash wondering if and how things could have been better handled. “I have asked myself 100 times whether I could have done it differently and the answer is probably no. The likelihood of this actually being activated was very low.

“It’s like Lotto, but in reverse. We had a ticket, and it came up.”

The fact that WGH owns Sportscover caused some concerns in the local market, and Mr Nash is quick to stress that the issue never had, and will not have, any impact on Sportscover Australia’s operations.

“The only relationship between WGH and Sportscover is the ownership of the shares,” he says. “In the worst case scenario WGH would have to divest itself of the shares in Sportscover, but that’s not what is going to happen.”

Mr Nash says Sportscover Australia has always been profitable since it was formed 33 years ago.

“It is nowhere near a catastrophe. It is a simple consequence of being in the insurance industry. We will deal with it. It will pass.”

“We suffered a little bit from what was reported about the WGH matter, as you’d expect, and we suffered in the beginnings of the market upheaval back in January [2019]. But we’ve come through that so well it’s unbelievable.”

Sportscover is now looking to expand, but Mr Nash says recruitment is proving a major stumbling block.

“We are currently desperate to hire some new underwriters. One of the issues we have in this country is you just can’t get good people easily. Hardly anybody is training people any more.

“They are going through university and they are doing the diploma, but they come out knowing little about insurance or underwriting, and they really don’t understand the nuances and the intricacies of the market the way they would have done 20 years ago.

“It is a massive problem and I can see it becoming a huge issue for all insurers, particularly in Australia.

“We offer good conditions, better than market in all sorts of different ways, but it doesn’t get you anywhere. It is becoming very difficult to run an insurance business here with people who understand insurance.

“We’re desperate to expand at the moment. The people working for us are at capacity.”

While there is solid growth in Australia, Mr Nash sees huge opportunity in the sports sector in Asia.

He says the growing middle classes in Asia are increasingly turning their minds to sports, and sport insurance.

“We have representatives in Singapore and China. I think Asia will account for about 10% of our business fairly quickly and will continue to grow from there.”

Lloyd’s tightening of capacity has had an impact, but it hasn’t created major problems for Sportscover.

Mr Nash says Lloyd’s new rules are “good and sound” and such readjustments are not a significant concern for experienced operators like Sportscover.

“You know and understand these things because you’ve seen it before,” he says. “We went through the market tightening around 9/11. We’ve been through the challenges of 1987. We’ve seen all those different ups and downs in the market so this is nothing new.

“The opportunities now in the current hard market are fantastic for businesses that have a sound basis like we do. That’s the reason we are talking about hiring people.”

Mr Nash is confident any market uncertainty about WGH’s debt and the administration process will not have any lasting effect on Sportscover.

“It is nowhere near a catastrophe,” he says. “It is a simple consequence of being in the insurance industry. We will deal with it. It will pass.

“Sportscover will still be around in another 30 years.”