Arch Capital in Deal With Equity Investors to Launch Bermuda Reinsurer

Arch Capital (AC) joined other Bermuda-based insurers in announcing plans to establish a new reinsurance company. Backed by the private equity firms Warburg Pincus and San Francisco’s Hillman & Friedman, Arch Reinsurance (AR) would begin life with over $1 billion in capital.

AC, which is backed by Marsh Inc.; and Merrill Lynch, will contribute around $250 million. Warburg plans to inject $500 million into AC through purchases of Series A Convertible Preference Shares and Class A warrants. Hillman will similarly invest $250 million.

AR will be have by an experienced management team headed by CEO Paul Ingrey, former Chairman of F&G Re; President Dwight Evans, former Exec. VP, No. Am. for St. Paul Re, and Sr. VP and Chief Actuary Marc Grandisson, VP and Actuary of the reinsurance division of Berkshire Hathaway.

Commenting on the new venture, Ingrey said in a written statement, “We are extremely excited by the opportunities in front of us. Arch is a terrific platform on which to build because it places us in the market immediately with the capacity to write January renewal business. The security of clean capital will be highly attractive to the market. Furthermore, we will continue to build our reinsurance team in order to become a significant player in this segment of the insurance industry.”

AC’s venture joins RenRe and State Farm’s Da Vinci Re, Marsh’s Axis Specialty, and a number of others who have recently increased their capital to take advantage of the anticipated sharp rise in premiums and demand following the Sept. 11 attacks on the U.S. (See previous article – ACE Ltd.). As reinsurance expert Paul Walther recently observed in a recent interview with the IJ, “The bigger ones [reinsurance companies] will just get bigger, and will be able to realize higher premiums, while the smaller players disappear.”|”arch, capital, in, deal, with, equity, investors, launch, bermuda, reinsurer

Topics Reinsurance