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30 years later, Bermuda startups again take center stage

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30 years later, Bermuda startups again take center stage

Ace Ltd., which announced its purchase of Chubb Corp. earlier this month, and XL Group P.L.C., which acquired Catlin Group Ltd. in May, emerged from the mid-1980's capacity crisis and since have risen, with the occasional stumble, to become industry powerhouses thanks to nimble management and an absence of their own legacy issues.

Ace Ltd., which was established in 1985, and XL Capital Ltd., formerly known as EXEL Ltd., was created in 1986, were established as policyholder-owned facilities to offer excess liability and directors and officers liability coverage during that era's liability crisis, and also helped jumpstart the alternative Bermuda market.

Now public companies, both largely have thrived since then, at least in part because of their acquisitions, though their most recently announced deals are set to propel them to a new level in the global market.

In addition to the announcement of its $28.3 billion Chubb acquisition, other major Ace acquisitions have included its 1993 acquisition of Corporate Officers & Directors Assurance Ltd., its 1996 acquisition of Tempest Reinsurance Co. Ltd.; and its 1999 deal for Cigna Corp.'s global property/casualty business, which gave the insurer an international platform.

In addition to its $4.28 billion Catlin acquisition, other major XL deals have included its 1997 deal for property catastrophe reinsurer GCR Holdings Ltd., the holding company for Global Capital Reinsurance Ltd.; its 1998 acquisition of Mid-Ocean Reinsurance Ltd.; its 1999 merger with NAC Re Corp.,; and its 2001 acquisition of Winterthur International, among others.

Both companies have also acquired a significant presence at Lloyd's of London and with its Catlin purchase XL owns the market's largest syndicate.

The insurers' growth has not been free of problems. XL in particular acquired legacy liability exposures with its acquisitions of NAC Re and Winterthur that led to the company taking more than $1 billion in various charges and reserve increases during 2004-2005.

Ace managed its exposure to past-year liability losses in its acquisition of Cigna's property/casualty business through a then-innovative reinsurance deal with Berkshire Hathaway Inc. But it ran into troubles of its own when it was one of several insurers caught up in the bid-rigging allegations made my former New York Attorney General and later Governor Eliot Spitzer. Ace paid more than $80 million to resolve bid-rigging investigations by various states.

But both Ace and XL have largely been successful since their formation.

The companies formed during the liability crisis, and when the market turned “they had very good results, and made money and retained that capital, and that allowed them to take advantage of other opportunities down the road,” said Jim Auden, managing director of insurance at Fitch Ratings Inc. in Chicago.

“They came in without a lot of legacy issues in terms of culture and with fresh management, and I think as a result they were able to be more nimble” than other insurers, said John Wicher, principal at John Wicher & Associates Inc. in San Francisco.

“And with the appropriate safeguards in place, they have not been afraid to be aggressive and to reach out for growth,” Mr. Wicher said.