In the private equity world chaos and uncertainty is not necessarily a bad thing. MMC Capital Inc., the private equity arm of Marsh & McLennan Companies Inc., recently formed a new reinsurance company, AXIS Specialty Limited, to take advantage of soaring reinsurance rates resulting from the events of Sept. 11th. MMC Capital?s Trident II LP fund will commit $200 million to the venture, which is expected to be capitalized at $1 billion. The Bermuda-based company will begin its operations in the fourth quarter.
AXIS Specialty will be headed by John Charman, as CEO, and Robert Newhouse, as chairman. ?The World Trade Center disaster appears to be a watershed event for the property casualty insurance and reinsurance industry,? said Teryce James, chief communications officer at MMC Capital. ?The losses have created a shortage in capacity in the industry, and resulted in increased premiums. This provides Axis with an opportunity to provide capacity at attractive rates.?
MMC Capital is no stranger to the insurance and reinsurance industry. The firm created Bermuda-based ACE Ltd. in 1985 and XL Capital Ltd. in 1986 in response to the scarce supply of directors? and officers? liability coverages to corporations. The group also established Mid Ocean Ltd. in 1992 in response to the shortage of property catastrophe reinsurance concerns.
Furthering its play in the reinsurance industry, Trident II LP and the Enstar Group, Inc. have agreed to form Castlewood Holdings Limited to acquire reinsurance companies. The current owners of Castlewood will contribute all the shares of Castlewood to Castlewood Holdings in exchange for a one-third interest in the newly formed Castlewood Holdings, plus notes and cash totaling $4.275 million. As part of the transaction, Enstar and Trident will make equal capital commitments totaling $79 million in exchange for their one-third interest in Castlewood Holdings. Enstar will receive 50% of the voting stock of Castlewood Holdings and the Castlewood principals and Trident will each receive 25% of the new company’s voting stock. Upon closing, Castlewood Holdings will have total capital available in excess of $100 million.
Nimrod Frazer, Enstar’s chairman and CEO, said in a statement, ?We are extremely pleased with the deepening of our relationships with Castlewood and Trident through this transaction. We believe that Dominic Silvester, the founding shareholder of Castlewood, and his management team, will lead the way for Enstar, through Castlewood Holdings, to be an effective player in the global insurance run-off management business.?