Japanese insurer Mitsui Sumitomo Insurance Co. has struck a deal to buy Singapore-based property and casualty insurer First Capital from Canada's Fairfax Financial Holdings Ltd. for $1.6 billion, according to people familiar with the transaction.
Fairfax, a Toronto-based holding company founded in 1985 by one of Canada's most prominent investors, Prem Watsa, will get a 25% stake in First Capital's insurance portfolio.
First Capital's CEO, Ramaswamy Athappan, will remain in his role, while continuing to serve as chairman of Fairfax's Asia operations.
The deal is part of a global partnership between the two firms that will give Fairfax access to Japan's insurance market, while allowing Mitsui greater access to the United States, said the people.
Japanese insurance firms have been branching out into higher-return investments elsewhere because of Japan's low interest rates, which have hurt returns.
Fairfax has also been trying for a foothold in Japanese markets for several years, and the partnership gives it a chance to take part in underwritings from one of Japan's largest nonlife insurers, according to the people close to the deal.
Fairfax paid more than $4 billion in July to acquire Allied World Assurance Co., marking the largest expansion into the U.S. in Fairfax's 30-year history.
In October, it agreed to buy some of American International Group Inc.'s Latin American and European property and casualty insurance operations.
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(END) Dow Jones Newswires
August 23, 2017 16:56 ET (20:56 GMT)