Warburg Pincus leads creation of reinsurance platform

Warburg Pincus, a global private equity firm, has led the $500m formation of Aeolus Re, a Bermuda-based reinsurance company.

Warburg Pincus, a global private equity firm, has led a $500 million (€393 million) investment to fund the creation of Aeolus Re, a Bermuda-based global reinsurance business.
 
Peter Appel and David Eklund, Aeolus Re’s founders, also invested alongside Warburg Pincus in the transaction. Appel is a former president and CEO of Arch Capital Group, a global insurance and reinsurance company, which will invest an undisclosed sum in the new business.
 
Appel will be chairman and CEO of Aeolus Re, while Eklund will be chairman.
 
Eklund said that demand for property catastrophe reinsurance had outstripped supply following the 2004 and 2005 hurricane seasons in the US, and has also been driven by changes in rating agency guidelines.
 
Aeolus Re is an unrated reinsurance platform initially targeting the property catastrophe segment of the worldwide reinsurance market.
 
Warburg Pincus has provided financing to establish reinsurance platforms in the past. The firm invested $140 million alongside General Electric Pension Fund and USF&G Corporation in 1993 to form Renaissance Re, where Eklund was chief underwriting officer until 2004. In October 2001, Warburg Pincus and Hellman & Friedman created Arch Capital with $763 million of equity capital.
 
September 11 and recent hurricane damage in the US has created increased interest in the reinsurance market from private equity firms.
 
Last month, AXA Group, a French asset management business, sold its AXA Re reinsurance subsidiary to a consortium including Stone Point Capital, Hellman & Friedman, Vestar Capital Partners, Crestview Capital Partners, Och Ziff Management, ABN Amro and New Mountain Capital. The new business, Paris Re Holdings, will have an initial capitalisation of $1.5 billion.
 
In February, Lightyear Capital, Lehman Brothers Merchant Banking and hedge fund West End Capital launched Flagstone Reinsurance Holdings, also based in Bermuda and capitalised with over $715 million. In January, The Blackstone Group, Texas Pacific Group and Thomas H Lee Partners ploughed $1 billion into the launch of Ariel Reinsurance.