Protective Life has completed its acquisition of Obsidian Insurance Holdings, a hybrid fronting carrier for specialty property and casualty programs, from funds advised by private equity firm Genstar Capital.
Terms of the deal were not disclosed.
The deal, first announced in April, gives the Birmingham, Alabama-based life and annuity insurer its fifth business line and takes it into the excess and surplus lines market for the first time. Protective is the US subsidiary of Japan’s Daiichi Life Group.
Founded in 2020, Obsidian supports specialty programs underwritten by MGAs, MGUs and program managers. It provides carrier infrastructure, oversight and access to reinsurance capacity, and cedes most of the risk it writes to reinsurers. Since its founding, it has grown annual gross written premium to more than $1 billion.
“Obsidian brings Protective into an important segment of the insurance market through a business that complements our existing portfolio,” said Paul Wells, Protective’s president.
Obsidian chief executive William Jewett and president and chief operating officer Craig Rappaport, who co-founded the business with Genstar, will continue to lead it. Lance Black, Protective’s executive vice president of acquisitions and corporate development, will oversee Obsidian within Protective.
“Our customers and partners will continue working with the Obsidian leaders and teams they know,” Rappaport said.
Jewett said Protective’s financial strength and wider capabilities would help Obsidian invest in the business.
The acquisition is Protective’s 62nd and its ninth since joining Daiichi Life in 2015.
The deal is unusual. Life insurers rarely buy P&C businesses, which have different risks and cycles. Protective said that was part of the appeal, describing Obsidian as a business with different earnings drivers and market cycles from its existing operations.
For MGAs and program managers, Obsidian’s new owner brings a much larger balance sheet. That could strengthen its ratings and its ability to support more programs. When the deal was announced, AM Best placed Obsidian’s A- (Excellent) financial strength rating under review with positive implications.
The deal is the latest sign of how much capital is flowing into fronting. Hybrid fronting carriers, which keep a share of the risk and pass the rest to reinsurers, have become an important source of capacity for the fast-growing MGA market. Other carriers, including Hippo and Everspan, have been growing or reshaping their fronting businesses this year.
There are risks, too. Fronting carriers depend on reinsurers’ continued appetite. Casualty programs in particular face pressure from rising loss costs. Brokers and MGAs will want to see whether Protective’s ownership brings stable, long-term support through the cycle, rather than growth that could reverse if reinsurers pull back.
