Ironshore may be in the process of being taken over by a Chinese firm — but its roots will remain firmly entrenched in Bermuda.

Maintaining what Ironshore chief executive officer Kevin Kelley calls “the Bermuda advantage” was a key element of the $1.84 billion acquisition of the insurer by Shanghai-based Fosun International Ltd.

With management given a mandate to continue what they’ve been doing — building out a global specialty insurance platform — with an owner in it for the long term, Mr Kelley believes Ironshore is more strongly positioned than ever for growth.

Fosun itself has made around $25 billion of acquisitions over the past five years and its deep pockets will enhance Ironshore’s ability to fuel its expansion through acquisitions, should such opportunities arise, Mr Kelley said.

Unlike most of the takeovers and mergers seen in the market, jobs do not appear to be at risk in this case. The “synergies” Fosun has identified as benefits from the deal include “prevention of currency risks, expansion of assets allocation and co-operation in reinsurance business”.

In an interview with The Royal Gazette, Mr Kelley said: “The way we have it structured, we will preserve the Bermuda advantage — and that was very important to us. We have conveyed to Fosun and they have agreed that the Ironshore brand will continue to be built out as it has under our previous ownership.

“On the closing of the deal, Fosun will create a Bermuda subsidiary and Ironshore will merge into that subsidiary.

“We’re committed to Bermuda and we consider the regulatory environment here to be very strong. That’s why it was important to us to have a Bermuda regulatory structure remaining in place post the merger.”

Fosun is backed by Chinese billionaire Guo Guangchang, who professes to be a student of Warren Buffett, who has for decades used insurance businesses to generate a cash “float” for further investments. In 2014 Fosun earned about 13 per cent of its revenue from its insurance businesses and last December it announced a $443 million deal to buy US insurer Meadowbrook Insurance Group.

“We have Fosun’s commitment to continue to add resources and capital so we can grow that business appropriately as opportunities are seen,” Mr Kelley said.

“We’ve transitioned from private equity, which is temporary capital, to a permanent capital base. Fosun has 300 portfolio companies, but only a handful of those are subsidiaries of the parent.

“We believe this ownership will make for a very exciting future for our company and will allow us to acquire if that’s what we see as opportunistic.”

Mr Buffett’s tendency to let the existing management get on with running acquired companies appears to be echoed in the case of Ironshore.

“We believe that what we bring to the table is a pretty sincere and sophisticated management,” Mr Kelley said. “Fosun respects that and will be a great partner with the current management team. Fosun is extraordinarily entrepreneurial and we have a lot of respect for them.”

Ironshore was formed in Bermuda in 2006 and Mr Kelley, who joined in 2008, is one of a number of former American International Group executives in prominent roles in the firm.

In Bermuda, where the firm writes property insurance and also operates the Iron-Starr Excess Agency Ltd joint venture with partners Starr Insurance & Reinsurance Ltd and Hamilton Re Ltd, Ironshore’s team is based at 141 Front Street, Hamilton. It has offices in numerous US cities, as well as a presence in Australia, Canada, Hong Kong, Ireland, Japan, Singapore and the UK. Ironshore employs 750 people worldwide. Ironshore writes no reinsurance.

“We built the company around an insurance model,” Mr Kelley said. “That was something our founder Bob Clements was very clear about. He felt an insurance model was sustainable, but it’s actually more difficult to build. It’s built around bricks and mortar and being in more places.

“That has been the guiding philosophy of the company and that’s why we’re in as many countries and cities as we are. To be in the specialty insurance world, you have to be close to customers and their brokers.”

Ironshore has grown to about $2 billion in shareholders’ equity and last year it wrote more than $2.2 billion in gross premiums. Mr Kelley said he expected Ironshore’s acquisitive practices to continue in a similar vein to its first nine years.

“We’ve historically looked at tuck-in investments that allow us to expand and deepen our product array, either in a particular geography or element of the broader focus. I would see us continuing to do that. I don’t necessarily think that we’re going to acquire a company that’s as big as we are. I don’t see any great need to do that.

“The way I see us continuing to build the company is through expanding our geography, deepening our people and having more people in more places. If there’s an acquisition that gets us there quicker then we’ll do that, provided we can agree on price.”

Mr Kelley said the consolidation trend in the insurance industry was the function of two macro-trends — the desire to improve return on equity and the desire to attain scale, particularly in reinsurance.

“I think you’re seeing a greater recognition on the part of boards and management that things need to be done differently going forward than they may have been done in the past,” Mr Kelley said. “It will also have an impact on capital and I think it’s a very rational way for capital to be exiting the business.”

Asked whether he thought companies were overpaying in the merger spree, Mr Kelley responded: “I think the value is ultimately determined several years after the acquisition. If an acquisition fits a strategic move, then the price is always good. If that strategic benefit is never realised then the price is always too high.”

Finding solutions to clients’ cyber risk is one of the great emerging challenges for insurers. Mr Kelley views it as a great opportunity, but the solution would need to be more complex than many traditional insurance products.

“I maintain that the ideal solution is probably one that combines risk identification with risk financing and risk mitigation — basic risk management 101.

“I think the industry will come up with solutions that have that kind of structure. I think that offering a risk financing product will limit the potential of that market and that the ultimate solution will be a multi-pronged solution for clients.”