Stone Point backs $1.5bn reinsurance platform

After successive hurricanes have battered the Southern parts of the US, Stone Point, the team of former Marsh private equity pros, is getting back into the reinsurance business with the acquisition of a Chubb subsidiary.

Financial services specialists Stone Point Capital has launched a new Bermuda-based global reinsurance company Harbor Point Limited, which will be used to acquire the ongoing business of Chubb Re, the reinsurance subsidiary of The Chubb Corp.

It’s clear there are dislocations in the reinsurance marketplace as a result of recent catastrophe experience among other issues.

John Finnegan, CEO, Chubb Corp.

Harbor Point will have an initial capitalisation of approximately $1.5 billion (€1.24 billion), and will be headed by John Berger, who has served as president and CEO of Chubb Re for the past seven years. Greenwich, Connecticut-based Stone Point is using its Trident III private equity fund to make the investment.

The timing of this deal and the recent hurricane activity in certain Southern areas of the United States is not likely a coincidence. Stone Point, which was spun out of Marsh & McLennan earlier this year, has made similar moves in the past. As part of MMC Capital (Marsh’s private equity arm), the group launched Mid Ocean Ltd. in 1992 as a response to Hurricane Andrew, and AXIS Specialty, another reinsurance provider, was formed subsequent to the September 11 terrorist attacks.

The recent destruction left in the wake of Hurricane Katrina, and more recently Hurricane Wilma, underscores the stress being put on the insurance space.

Stone Point CEO Charles Davis, in a statement, cited the group’s previous reinsurance ventures, saying that they were launched to address “supply and demand imbalances in the insurance and reinsurance markets”. He added, “Harbor Point is in the tradition of these previous investments.”

The insurance industry has been battered as areas such as Florida continually get belted by hurricanes and tropical storms. This allows the reinsurance companies to raise pricing as the demand for insurance increases and the supply is unable to be met.

Meanwhile, Chubb CEO John Finnegan, said in a separate press release, “It’s clear there are dislocations in the reinsurance marketplace as a result of recent catastrophe experience among other issues.”

Stone Point is not the only group to jump into the reinsurance industry. Last year, MMC Capital was joined by Vestar Capital and Friedman Fleischer & Lowe in launching Wilton RE US Holdings, and in a separate deal, The Cypress Group invested $180 million in connection with Scottish Re Group’s acquisition of an ING Re subsidiary.

According to Chubb’s announcement, Trident has agreed to invest $200 million into Harbor Point, and the management team is also expected to have a “meaningful” investment in the company. Other co-investors will also be brought on board. The closing of the transaction is subject to the condition that $1.1 billion will be raised by investors outside of Stone Point and Chubb.

Harbor Point, which will have a separate subsidiary based in Bernardsville, New Jersey, is expected to write a portfolio of both property and casualty reinsurance products.

The deal is expected to close by the end of November.