After winning a long, drawn out battle to combine with IPC Re last year in a merger deal valued at $1.6 billion, Validus Holdings’ Chief Executive Officer Ed Noonan hinted recently that the deal, which he often describes as “transformational,” may not have been transformational enough.

While the 2009 deal that propelled Validus to more than $4.0 billion of capital from just about $1.9 billion at year-end 2008 had all the intended benefits, including giving Validus a leadership position in the property-catastrophe reinsurance market, the combined company remains a specialist in short-tailed lines, Mr. Noonan noted during a recent conference.

During a Bank of America Merrill Lynch Insurance Conference late last month, Mr. Noonan, when asked about his appetite for acquisitions going forward, mused about the possibilities–at some future date–of moving into the U.S. market and diversifying the book to include casualty business.

“We don’t think of ourselves as an acquisition company, although we have done two sizable ones in two years,” Mr. Noonan said–referring to the IPC amalgamation and to a 2007 deal to acquire Talbot, a Lloyd’s operation writing short-tailed insurance businesses like marine hull, terrorism and energy.

“We have a higher cost of capital because we’re in a volatile class,” he said, referring to the heavy weighting of the company’s business in catastrophe lines.

“Long term, that probably isn’t where we ought to be. We probably ought to find ways to diversify the company further to bring down the cost of capital,” he said.

He continued by noting that the Bermuda company is “just dramatically underweight to the U.S. market.”

“From the time we’ve been a company, we’ve just felt that the United States has been an overly competitive market…but the day will come when [it] will be attractive,” he said. “I don’t know when that day is, but it’s a huge opportunity at some point in time down the road.”

Mr. Noonan added that “someday, [Validus] will need the ability to issue U.S. paper,” suggesting that the onshore energy and aviation segments are areas where this might occur.

Should Validus Holdings’ operating units ever include a surplus lines or specialty admitted company in the United States, it would follow in the footsteps of RenaissanceRe, set up in the wake of Hurricane Andrew, Montpelier Re (one of the “Class of 2001″ group) and Ariel Re (a “Class of 2005″ company), which like Validus itself, got up and running in the wake of Hurricane Katrina.

Referring specifically to his monitoring of casualty pricing indices and broader casualty business trends, he said that “it’s a great spectator sport for us at this point.”

“Accident-year loss ratios are unprofitable for most companies. It’s a question of when do reserve redundancies run out? We know we’re getting close, but I don’t know how close we are,” he said.

“It’s a class we watch. It’s obviously a huge class, but I don’t think we’re going to see post-9/11 turn where you can just show up and have the world throw casualty business at you. So there’s probably some advanced positioning you have to do,” he said.

Like Mr. Noonan, David Cash, CEO of Endurance Specialty, has his sights on casualty business, but he said his company is bent on organic growth in the casualty arena, rather than growth via acquisition.

“I’m surely not going to signal aggressive growth. That’s not the message that should come from this meeting,” he said, also making his remarks at the Merrill Lynch conference.

While Mr. Cash did not indicate whether the incremental growth he envisions in casualty lines would be in insurance or reinsurance business (or both), or what parts of the world Endurance might focus on, he did highlight the company’s current positioning in the excess casualty market rather than the primary market, ultimately painting a brighter picture of the casualty segment than some of his Bermuda brethren.

“When I look at the casualty space, I don’t believe we’re in a toxic casualty market by any means. To me a casualty market that has gone wrong is 1998 and 1999,” he said, noting that those years were riddled with “weak business practices” and contrasting them to better practices generally in place today.

In the late 1990s, “you had genuinely unprofessional underwriting, and you had ethical lapses that weren’t just isolated, they were systemic. And you had balance sheets that were weak,” Mr. Cash said.

Today, strong financials may create potential for competition, but he said that balance sheets are stronger, “in part, because managements have been more realistic about how they view that business.”

“I view the casualty space as being generally profitable,” he concluded. In particular, he noted that Endurance has generated “very significant returns” over time in the large-risk casualty arena–writing excess casualty insurance for Fortune 1000 clients. “Claims just don’t come through that frequently,” he said.

John Charman, CEO of AXIS, has a very different view. “Casualty business breaks me out in spots,” Mr. Charman said at the same conference.

“I don’t like it. I’ve never liked it,” he said, referring to the insurance side of the casualty market in particular. “For the last two or three years, casualty insurers have “seriously underpriced their products and seriously been too optimistic on reserving.”

“We do not…and will not have that issue,” he said, noting that casualty insurance represents just 14 percent of AXIS’ inception-to-date portfolio.

At Aspen Insurance Holdings, CEO Chris O’Kane admits that his company was recently burned by losses in the U.S. casualty insurance arena, but he still has hopes for slowly building a specialty insurance brand in the United States.

U.S. insurance has “been the least successful thing that we’ve done, and in some places, it’s been unsuccessful,” he said, referring, in particular, to a contractors book in New York. “It’s one very local, specific issue,” he said.

“I believe we’re going to make a quite a bit of money in a few years.” But for now, activity is limited to “hiring teams and asking them to do, paradoxically speaking, not very much,” he said, explaining that Aspen, which sells property, primary casualty and umbrella insurance in the United States, changed U.S. division leadership and hired a team to start up professional lines last month.