Validus Reinsurance Ltd. said today that the Bermuda reinsurer has entered into a collateralized quota share retrocession agreement with a newly formed Bermuda sidecar named Petrel Re Ltd.

Petrel Re will assume a 75 percent quota share of certain lines of marine and offshore energy reinsurance contracts underwritten by Validus Re for the 2006 and 2007 underwriting years, Validus said. Other lines of business are expected to be added over time.

A sidecar is essentially a special purpose vehicle in which third-party investors, such as hedge funds or private equity funds, collaborate with an underwriter to provide additional capacity to existing reinsurers for short-tail lines of business.

The equity investor in Petrel Re is one or more private investment funds managed by First Reserve Corporation, a leading private equity firm with a 23-year history of investing exclusively in the energy industry.

Validus Re, a subsidiary of Validus Holdings, Ltd. in Hamilton, Bermuda, will underwrite and retrocede reinsurance contracts to Petrel Re consistent with agreed underwriting guidelines. According to Validus, the arrangement will enable Validus Re to leverage its established underwriting and technical resources on a distinct capital base.

Petrel Re is required to contribute funds equal to the full amount of their net exposures into a trust for the benefit of Validus Re. Petrel Re has no current plans to obtain a rating from any rating agency.

Validus Holdings, Ltd., through its wholly-owned subsidiary Validus Reinsurance, Ltd., is a global provider of property catastrophe, per risk, marine and energy, retrocession and other specialty short-tail lines of reinsurance.

Validus was formed in December 2005 with more than $1.0 billion of capital from institutional investors, including founding investor and sponsor Aquiline Capital Partners LLC–a private equity firm headed by Jeffrey W. Greenberg.

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