September 2001: Filling In The Insurance Dislocation

Five years ago this month, the private equity community along with the rest of world was coping with the aftermath of the Sept. 11th terrorist attacks. While it wasn’t without a heavy heart, buyout pros did indeed keep busy in the weeks and months that followed, and some firms even found opportunity in addressing the post 9-11 world.

Stone Point Capital Partners, which was then the private equity arm of insurance giant Marsh & McLennan, helped fund the launch of Axis Specialty Ltd. that September. A Bermuda-based insurer, Axis provides specialty lines of coverage in commercial property, marine and energy, aviation and political risk, among other areas.

It wasn’t a coincidence that Axis’s focus specifically adopted segments in the insurance space that were directly affected by the attacks. The design of Axis was to address the dislocation in the market that was created once attacks took place.

Stone Point helped round up other private equity backers to help launch Axis, corralling investments from the likes of Thomas H. Lee Partners, JPMorgan Partners, The Blackstone Group and DLJ Merchant Banking Partners. In all the company received around $1.7 billion of private equity funding.

The company eventually went public in the summer of 2003, raising $473 million in a floatation on the New York Stock Exchange. The investors intermittently sold off their holdings through block sales and stock buybacks. While some of the investors have exited the investment completely, Stone Point continues to hold a stake in the business, as of a May 12, SEC filing.

Other private equity firms followed Stone Point’s lead in the months following Sept. 11, and buyout backed offerings such as Endurance Specialty Holdings and Montpelier Re Holdings also cropped up to help fill in the capacity gaps in the insurance space. Buyout shops such as Hellman & Friedman, Warburg Pincus, Kohlberg, Kravis, Roberts & Co. and Capital Z were among those to invest in the sector.