BY STEPHEN V.NYGARD
Journal Staff

Aon and Century Insurance Co. of Saipan are on the brink of signing a contract that will turn Century into a major player in the region over the next year.

March 1 is the effective date that the largest property/casualty insurer on Saipan launches a partnership with the world's second largest insurance broker.

"Century knows the islands, they've been around since 1988, and they are not going anywhere," said Rodney Rankin, regional director for Aon, which does business in the Marianas as Aon Insurance Micronesia (Guam) Inc. and Aon Insurance Micronesia (Saipan) inc.

In a joint conference call to the Journal from the Century Insurance Building on Beach Road in South Garapan, Saipan, on Feb. 18, Rankin and David M. Sablan, president and chief executive officer of Century, said they expected to sign a contract any day and were only awaiting corporate approval of the language in the contract.

The opportunity for Century to partner with Aon occurred with Aviva's surprise announcement late last year that it would no longer renew policies in the Mariana Islands after Feb.29.The withdrawal of Aviva, the oldest insurance company in the world, came as a shock to the industry, a well as Aon, which had been seemingly inseparable partners on Guam for 50 years and on Saipan for 36 years. The 90-day surprise notice sent Aon scrambling with its global resources to find a new underwriter.

Finding it problematic to entice a new international carrier to the region, Aon found a suitable underwriter 120 miles away in Garapan, which was remarkable, Rankin said. He called the fit between Century and Aon perfect, with potential for global growth. ";This is just a new beginning for both of us." Rankin said. ";Both organizations will benefit from this partnership. We're quite excited about them locally and internationally. We were the first international broker to be granted a license in China, and Luen Thai [International Group Ltd., parent company of Tan Holdings, headquartered in Hong Kong] is big in China."

Sablan said, "This will be long, long-term relationship with Aon. I think eventually we will have to review our posture in the area. Indications are that we will work directly with Aon throughout the region."

Rankin said, "There are potential mutual benefits of doing a lot of international business together." He said. ";Aon, through its worldwide presence, would be able to provide insurance advice and assistance wherever they grow." Luen Thai is the world's largest apparel manufacturer.

What the partnership means for Century Insurance is that it will step into the role as underwriter for Aon policies on Guam and Saipan as they expire over the next year, beginning March 1, and any new business generated by Aon in the Marianas. Rankin said Century Insurance will be able to handle 99% of the policies that are covered now by Aviva.

Under the agreement, Aon will be the exclusive managing underwriting agency for Century. The only way for business to be done with Century on Guam is through Aon. On Saipan and elsewhere in Micronesia, Aon will write Century policies on a non-exclusive basis. Century will continue to honor arrangements with subagents on Saipan.

Aon announced on Feb. 9 that its US Security Committee granted approval to go forward with contractual arrangements with Century Insurance after waiving the minimum capitalization level of $50 million, which is generally required of underwriters around the world that do business with Aon. Rankin said Aon Micronesia was able to convince the committee that Century Insurance was well established, well managed and capable of handling claims in the region. The committee, however, restricted Aon policies with Century to Micronesia.

The security committee also requested that Century Insurance immediately be rated. Sablan said Century has begun internal work to prepare for rating, and will work with A.M. Best, an international rating company, to be rated by the end of the first quarter of 2004.

Rankin and Sablan said their immediate goal is to make the transition from Aviva to Century as smooth as possible. "The only change our clients will see," Rankin said, "is the change of names of the insurance underwriter. Clients will continue to deal directly with us. It's going to be that simple."

Century Insurance, the first and only locally owned insurance company in the Northern Mariana Islands, was incorporated on Saipan on Feb. 11, 1988, and granted a business certificate on June 21, 1988. Century's primary purpose was to issue surety bonds to satisfy bonding requirements for foreign workers in the apparel factories belonging to parent Tan Holdings Corp. On Oct. 18, 1990, Century was issued a new certificate of authority by the insurance commissioner to issue policies on disability, casualty, marine, property, surety and vehicle insurance. The company's paid-up capital was increased at the time from $200,000 to $1 million. Sablan said Tan Holdings has agreed to support Century with additional capitalization: "It's just a matter of deciding how much. We can and will meet the requirements asked of us."

Today Century has the largest book of insurance business in the Northern Mariana Islands. In 2000, Century announced plans to expand and has established brokerage arrangements in the Federated States of Micronesia and Guam. The license to do business on Guam was issued on July 1, 2002, and Guam's ABY Insurance has done groundwork for Century.

The combination of Century and Aon portfolios will elevate Century to the third largest property/casualty insurance company in the Marianas in terms of premiums. By 2005, Century, with the combined portfolios, will report gross written premiums well in excess of $20 million, Rankin said.

Aon is the No. 1 reinsurance broker in the world and the No. 2 insurance broker in the world. Based in Chicago, the 142-year old company has offices in 120 countries with about 60,000 employees. It was established on Guam in 1954 and on Saipan in 1968. Aon Micronesia has staff of 27 on Guam and nine on Saipan.

Century Insurance is part of the Century Group of Companies, one of the operating groups of Tan Holdings Corp. Sister companies are Century Travel Agency Inc. and Century Finance Co. Ltd. Tan Holdings, which had gross income of about $200 million in 2001, the last year it was reported in the Deloitte & Touche/Guam Business Top 50 list of the largest companies in Micronesia, is a diversified conglomerate based in Saipan. Century Insurance has its own building on Beach Road in South Garapan.

Aviva, the world's oldest insurance company and the 48th largest company in the world, began operating on Guam in 1950 as New Zealand Insurance. Aviva, which formerly was known as CGU Insurance, said all policies in force as of Feb. 29 will continue in force until they expire, and claims will be handled in the normal manner until they have been settled. Michael Gourlay, Aviva's general manager for the Philippines and the Marianas, said, " Due to the volatility in results caused by exposures to typhoons, primarily, but also earthquakes, Aviva recently decided to cancel its agency representation in the Mariana Islands."

Rankin said he hoped the partnership with Century "goes as long, if not longer, than the last one. I believe this is exciting for the region for a number of reasons. Through my experience it has been difficult to entice new carriers to the region. One of the problems being their lack of understanding and local knowledge of the region. The benefits of Century for Aon are that Century has a really clear understanding of the region, and a planned growth strategy in the region."