First Reserve seeds energy insurer with $720m

The private equity energy giant has made its largest-ever investment into specialised insurance with its support of London-based Torus Insurance.

First Reserve Corporation has seeded specialised energy insurer Torus Insurance with a $720 million (€464 million) equity investment, its largest-ever foray into the specialty insurance space.

Slated to begin official operations on 1 July, London-based Torus will initially focus on providing physical damage and business interruption coverage to large commercial and specialty businesses in the energy sector, starting with onshore and offshore energy facilities such as oil rigs and refineries.

“We’re trying to differentiate ourselves by writing large, site-specific and complex type risks,” Tim Fillingham, Torus chief marketing officer, told PEO. “The more we can bring in an engineering and analytical approach to the business, the more data-driven approach we can bring from First Reserve, the greater our ability will be to perform at a better level.”

Torus will initially extend coverage plans primarily to North American clients, but hopes to expand its business globally and beyond the energy sector to include chemical plants, pharmaceutical industries and other engineering-intensive property risks.

The company will be headed by long-time maritime insurance executive David Hope, whose previous posts have included chief executive of the The Navigators Group’s London office and senior underwriter at Octavian Managing Agency.

Hope will head Torus for the remainder of the year until he is replaced by “an industry executive who will assume the position at that stage”, according to a statement.

First Reserve, currently in the process of raising what market participants believe will be the largest-ever energy fund with a target of $12 billion, is hoping that Torus can capitalise on the long-term macro trends that have created unprecedented demand for specialised energy insurance.

As fuel prices continue to skyrocket, energy-related facilities like offshore oil platforms are increasing in market value, causing firms to either revise or seek brand new coverage plans that reflect their properties’ rising equity.

“There has been a lot of revaluation of [energy] properties so insurance valuations have gone up and therefore the demand for increased top value insurance has also gone up,” Fillingham said.

First Reserve first entered the energy-insurance market back in 2005 in the wake of Hurricanes Rita and Katrina, which destroyed several Gulf Coast oil rigs. That year it purchased Petrel Energy Risk Management, which focusses on offshore energy wind risks in the Gulf of Mexico. The investment has been one of the firm’s most successful portfolio companies, according to Fillingham.

First Reserve also holds ownership stakes in onshore and offshore insurer Sideris Re, a joint venture with energy insurance underwriter CV Starr.