PEMBROKE, Bermuda—One of the largest shareholders of Endurance Specialty Holdings Ltd. has urged the Pembroke, Bermuda-based insurer to find a merger partner.

New York-based hedge fund manager Perry Corp.—which owns 12.6% of Endurance and whose president, Richard C. Perry, is a member of its board of directors—said in a regulatory filing Monday that it expects consolidation in the Bermuda reinsurance market to accelerate in the near term.

Endurance “should undertake an evaluation of its strategic alternatives and pursue a possible merger or other strategic transaction in order to create a stronger company with a defined growth strategy,” Perry, which does business as Perry Capital L.L.C., wrote in the filing with the Securities and Exchange Commission.

In addition, Perry said recent executive appointments at Endurance will “not position the insurer to capitalize on consolidation opportunities.”

Last week, Endurance President and CEO Kenneth J. LeStrange said he would retire, and the company appointed David Cash as CEO and William M. Jewett as president, effective March 1. Mr. LeStrange will continue as chairman of the board until March 2011.

In a statement Tuesday reacting to the Perry filing, the specialty insurer and reinsurer said the appointments are “consistent with best practices in corporate governance.”

“Endurance has an exceptionally strong balance sheet and excellent strategic position and will remain focused on delivering superior value for its shareholders,” the company said in the statement.

Observers have been watching potential merger and acquisition activity in Bermuda after another Bermuda-based firm, Validus Holdings Ltd., won a bidding war last year with rival Max Capital Group Ltd. to buy IPC Holdings Ltd. for $1.77 billion.