NU Online News Service

Warren, N.J.-based Chubb announced yesterday that it entered into a strategic agreement with a private equity firm to launch a Bermuda-based reinsurer with $1.5 billion of initial capital.

Company management said they saw an opportunity in the wake of hurricane losses that have shaken the reinsurance market.

Chubb will invest in the new global reinsurance company--Harbor Point Limited--to be formed by Stone Point Capital LLC, a private equity firm based in Greenwich, Conn.

Chubb will also transfer the ongoing business of its reinsurance arm, Chubb Re, to the new venture, along with certain related assets, including renewal rights effective Jan. 1, 2006.

Chubb, along with Trident III, L.P., a private equity fund managed by Stone Point Capital, will be the lead investors in Harbor Point. The closing of the transaction is subject to the condition that $1.1 billion be raised from investors, other than Chubb and Trident III, and certain customary closing conditions.

It is expected that the closing will occur by the end of November and that Harbor Point will then commence underwriting upon receipt of necessary regulatory approvals, the company said.

Chubb Re will no longer engage directly in the assumed reinsurance business. Harbor Point, however, will have the right--for a transition period--to have Chubb front certain reinsurance business in cases where Harbor Point is unable to underwrite that business because of the absence of necessary regulatory licenses or approvals.

It was explained that any reinsurance policies issued by Chubb under this fronting arrangement during this transition period will be ceded to Harbor Point under quota share reinsurance agreements to be entered into by the parties, with Chubb retaining a limited portion.

Harbor Point will not assume the reinsurance liabilities of Chubb relating to reinsurance contracts incepting prior to Dec. 31, 2005. Chubb said it will retain those liabilities and the related assets and reserves.

In a statement announcing the launch, John Finnegan, Chubb's chairman and chief executive officer, said, "It's clear there are dislocations in the reinsurance marketplace as a result of recent catastrophe experiences, among other issues. This transaction offers Chubb an outstanding opportunity to leverage its position in that marketplace in a way that should achieve the greatest opportunity for significant upside capital appreciation."

Harbor Point will be led by John Berger as president and CEO. Mr. Berger has 28 years of experience in the reinsurance industry and has served as president and CEO of Chubb Re since 1998.

Stephen Friedman, a senior advisor to Stone Point Capital, will serve as non-executive chairman of Harbor Point. Mr. Friedman was formerly chairman of Goldman, Sachs & Co.

Through Trident III, Stone Point invests exclusively in the financial services sector and has historically focused primarily on the insurance sector.

Charles A. Davis, CEO of Stone Point, said: "A number of our previous ventures, including ACE, XL, Mid Ocean and AXIS, have addressed supply and demand imbalances in the insurance and reinsurance markets. Harbor Point is in the tradition of these previous investments."

Stone Point Capital serves as the manager of the Trident Funds, which have raised more than $3 billion in committed capital to make investments in the insurance, employee benefits and financial services industries. Prior to the formation of Stone Point Capital in 2005, the principals of the firm led the private equity firm MMC Capital Inc.

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Chubb Part Of New Reinsurance Launch

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