GTCR Gets Into Specialty Insurance

Though GTCR Golder Rauner missed the opportunity to participate in the creation of property casualty insurance company Ironshore Inc. in 2006, it recently spearheaded a fresh capital raise for the Bermuda-based company that catapulted it to the company’s second largest stakeholder slot.

The deal marks the Chicago-based firm’s first investment in specialty insurance.

GTCR Golder Rauner put up $200 million of equity in the deal. In total, the deal calls for the investment group, which includes a number of existing Ironshore investors, to collectively provide up to $300 million in new equity capital for the company. Ironshore plans to use the monies to push into new areas of insurance. Existing shareholders in the company include Calera Capital, Greenhill Capital Partners, Lazard Alternative Investors, and Irving Place Capital, which remains the largest investor in the business.

That consortium created the company in 2006 in partnership with Bob Clements, a noted insurance executive known for founding companies to capitalize on dislocations in insurance markets. Ironshore itself was started in response to increased hurricane activity highlighted by Hurricane Katrina. At the time, GTCR executives were unaware of the deal, Aaron Cohen, vice president, told Buyouts.

In December 2008, Kevin Kelley, a 30-year veteran of AIG subsidiary Lexington Insurance, was brought in to transform Ironshore from a basic property catastrophe insurance company into a more diversified specialty insurance company. This proved serendipitous as GTCR executives had forged a relationship with Kelley and were looking for ways to partner with him on a deal. That relationship put the firm in a prime spot once Ironshore’s board decided it should raise more cash to fund its expansion, Cohen said.

Fundamental to professionals at GTCR and Kelley’s rationale is the belief that Ironshore can build its business while industry mainstays, such as AIG and XL Capital Ltd., struggle. The investment will help Ironshore expand its environmental, professional liability and medical malpractice insurance lines. “We believe there are some major fundamental shifts going on in the specialty insurance space,” Cohen said. “Capital is scarce right now and several under-capped insurance companies might have to back away from market, giving Ironshore the chance to capture meaningful share.”

Though GTCR has some experience investing in companies in insurance brokerage and insurance technology products, Ironshore is the firm’s entry into specialty insurance. Equity for the deal comes out of GTCR Fund IX, a $2.7 billion fund closed in 2006. To date, the firm has invested less than 50 percent of the fund, Cohen said. GTCR, which traces its roots back to 1980, currently manages $6 billion.

While many buyout shops are biding their time until the economy recovers, Ironshore is the latest investment in what has been a rather energetic year for GTCR. The firm has made four investments and completed one exit. Its most recent deal prior to Ironshore was also an entrance into a new market: On June 2 GTCR launched ReSurge Ltd., a Calgary, Alberta-based company that will buy, sell and lease libraries of three-dimensional seismic data that energy companies use to explore for oil.