New Bermuda Billion-Dollar Baby Born

Backed by $1 billion in capital and a broker sponsor, a new Bermuda-based insurer has been formed to write U.S. property-catastrophe risk.

Known as Ironshore Insurance Ltd. Inc., the venture said it raised more than $1 billion through a private placement of its equity securities and will begin underwriting specialty lines of insurance immediately through its subsidiary, Ironshore Insurance Ltd.

The global specialty insurer was created in response to the crisis conditions in the U.S. property-catastrophe insurance markets, the firm said.

The founders of Ironshore are Robert Clements and John Clements through their investment vehicle, Tara Partners Fund LLC, and Ironshore management.

Robert Clements is known to the industry for having founded several Bermuda-domiciled insurance and reinsurance companies, including ACE Ltd., XL Capital Ltd. and Arch Capital Group Ltd.

Like ACE and XL, Ironshore is being sponsored by a global insurance broker–in this case, New York-based Integro Ltd. (ACE and XL were originally sponsored by Marsh & McLennan.)

Investors are Bear Stearns Merchant Banking, Corporate Partners (a business unit of Lazard Alternative Investments), Fremont Partners, TowerBrook Capital Partners and Greenhill Capital Partners.

Robert V. Deutsch will take on the role of chief executive officer of Ironshore. Mr. Deutsch, who has worked in the insurance industry for 25 years, formerly served as the chief financial officer of Chicago-based CNA, and before that held the same title at Executive Risk.

Leslie J. Rock will serve as Ironshore's president and chief underwriting officer. Mr. Rock has served as chief property underwriter for three of the leading property syndicates at Lloyd's over the past 25 years.

Ironshore's leadership team also includes Mitchell E. Blaser, most recently the CFO of Swiss Re America and Marsh Inc, who has been appointed chief financial officer.

Ironshore will initially write a worldwide book of property business, the company said in a statement–adding that because of marketplace demands, the company's initial focus will be on commercial risks with wind exposures in catastrophe-prone coastal states such as Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Texas, as well as the Caribbean and Yucatan Peninsula.

Ironshore will also provide commercial earthquake coverage in California.

In a statement, Mr. Deutsch noted that while tens of billions of dollars have flowed into the reinsurance sector since 2005's Hurricane Katrina, “to date, permanent, adequate capacity has not been established on the insurance side.”

Bermuda-based Aeolus Ltd. last week announced that its parent holding company–Aeolus L.P.–has increased its capital base to over $1 billion via a cash infusion from a group of investors led by Warburg Pincus (an initial investor in the company), Merrill Lynch Global Private Equity, as well as the company's founders, Peter Appel and David Eklund.

Warburg Pincus and Merrill Lynch Global Private Equity have each invested $350 million in the company, and Arch Reinsurance Ltd., a subsidiary of Arch Capital Group Ltd. and an initial investor, has increased its investment to $50 million, the company reported. Other investors include Banc of America Capital Investors and Wachovia Capital Partners.

Aeolus Ltd., through its wholly-owned subsidiary, Aeolus Re Ltd., operates as an unrated reinsurance platform initially targeting the property-catastrophe segment of the worldwide reinsurance market.

Since its inception in July 2006, Aeolus Re has been an active provider of fully collateralized property-catastrophe protection to insurers and reinsurers on both an ultimate net loss and industry loss warranty basis.

Commenting on the receipt of the additional capital, Mr. Appel, who serves as chairman and CEO of Aeolus Ltd., said that “the additional capital will allow Aeolus to provide our clients with their most sought after and difficult to find capacity–fully secured protection against their property-catastrophe risks.”

Mr. Eklund, who serves as chairman of Aeolus Re, added that “our acceptance in the marketplace has made it clear to us that there exists significant demand for a property-catastrophe company that can combine the best security in the industry with very large limits of protection and a deep understanding of our clients' businesses. Our additional capital will help us strengthen Aeolus Re's quickly established presence in the market.”