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(Alliance News) - Direct Line Insurance Group PLC on Thursday said its underwriting unit has struck a reinsurance pact with an unnamed party.
UK Insurance Ltd, Direct Line's principle underwriting arm, has entered into a three-year structured 10% quota share arrangement. UK Insurance is a Direct Line subsidiary which underwrites the parent's policies for motor, pet and home insurance.
Direct Line said the deal will boost its 2022 year-end solvency capital ratio by around six percentage points.
The stock was up 3.1% at 177.80 pence each in London on Thursday morning. It is still down 22% so far this year, however. The stock tumbled earlier in January after Direct Line announced it would scrap its final payout for 2022. The insurer's fourth quarter was marred by an increase in claims due to cold December weather.
Ahead of that market update earlier in January, analysts at German bank Berenberg said a reinsurance pact could be a catalyst for Direct Line shares to rise.
A quota share reinsurance deal, like the one struck by UK Insurance Ltd, is a risk-sharing pact by which insurers and reinsurers split gains and losses on written premiums at an agreed-on percentage.
Direct Line was advised by reinsurance broker Gallagher Re, the company said.
By Eric Cunha, Alliance News news editor
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