Runoff specialist Castlewood buys Inter-Ocean

HAMILTON, Bermuda—Bermuda-based runoff holding company Castlewood Holdings Ltd. has agreed to buy Inter-Ocean Holdings Ltd. for $57 million.

Under the deal, Hamilton-based Castlewood, which is partially owned by The Enstar Group Inc., plans to acquire Inter-Ocean using about $24.5 million of new bank debt and cash, it said in a statement.

The transaction is subject to Bermuda regulatory approval and is expected to close in the first quarter of 2007.

Meanwhile, Castlewood has "been providing management services to Inter-Ocean for approximately 11 months," it noted in the statement.

Inter-Ocean is owned by a group of insurers and reinsurers that have helped produce much of its business and that act as 100% retrocessionaires of its two units, Inter-Ocean Reinsurance Co. Ltd. of Bermuda and Inter-Ocean Reinsurance (Ireland) Ltd.

The company, which was shuttered in April 2005, has been a subject of regulatory probes into companies' use of finite reinsurance.

Three former top executives of RenaissanceRe Holdings Ltd. —including its former chief executive—are facing civil fraud charges in connection with a reinsurance deal entered into in 2001 with Inter-Ocean, while RenaissanceRe itself is awaiting a proposed $15 million settlement with the Securities and Exchange Commission relating to that deal, which the reinsurer previously acknowledged was improperly booked and for which it adjusted its earnings statements.