Capital Z seen backing Endurance Specialty

Capital Z seen backing Endurance Specialty

Byline: Kelly Holman

Capital Z Partners, an investment firm affiliated with Zurich Financial Services, is reportedly investing $200 million alongside Aon Corp. to sponsor Endurance Specialty Insurance Ltd., a new Bermuda reinsurance business.

A spokeswoman for New York-based Capital Z said she could not confirm a Reuters news report Nov. 8 of the firm’s $200 million commitment to Endurance Speciality. Aon Corp., however, announced Wednesday that it was investing $200 million with a “major financial services organization” in Endurance Specialty.

Aon officials did not return calls for comment, but the deal is hardly a surprise to industry observers like John D’Alimonte, a partner at Willkie, Farr & Gallagher in New York. “With demand going up you are seeing a whole host of new entrants enter the market,” he said.

Insurance companies and private equity sponsors have been quick to capitalize on what is expected to be a burgeoning demand for insurance and reinsurance following Sept. 11. The insurance bill from the attacks is expected to exceed $40 billion.

Insurers and reinsurers are seeking to build books of business as claims rise. Observers say that some investment banks with operations that were disrupted Sept. 11 are expected to file “business interruption” claims. In addition, several strong storms are expected to cause additional demand for insurance products.

Analysts also estimate rates to escalate 30% to 50% higher.

D’Alimonte and others said today’s rush to reinsurance by private equity and insurance companies resembles the early 1990s, when a shortage of capacity in catastrophe insurance created demand for new reinsurance providers. RenaissanceRe Holdings Ltd., for example, was formed during this time by New York private equity firm Warburg Pincus llc and other investors.

New York buyout firm Kohlberg Kravis Roberts & Co. announced Nov. 2 it would invest an additional $100 million in its Baar, Switzerland, reinsurance portfolio company Alea Group Holdings AG.

KKR partner Perry Golkin said at the time the equity infusion would provide the “capital support to take advantage of an improving insurance/reinsurance market.”

That same day, Hanover, N.H.-based White Mountains Insurance Group Ltd. said it planned to invest $200 million and seek additional investors to build a new, Bermuda-based reinsurer with $1 billion in capital. Just nine days before, Warburg Pincus and San Francisco’s Hellman & Friedman llc announced their intention to invest $750 million for a majority stake in Arch Capital Group Ltd., a publicly-traded Bermuda-based reinsurer.

Insurance providers often choose Bermuda as a place of business because of its favorable tax rate and regulatory environment.

In late September, Marsh & McClennan Co. said its private equity subsidiary MMC Capital had launched Bermuda-based Axis Specialty at $1 billion.

Endurance Specialty, which Aon says will be capitalized with $1.2 billion from several other investors, will provide commercial property and casualty insurance and reinsurance underwriting services.

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