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NEW YORKClients of Marsh Inc. will be offered additional working-layer capacity for their global property catastrophe exposures at the end of this month, under a new Bermuda-based facility created by the brokerage.
MaRI Ltd., an abbreviation for Marsh Risk Innovations, was developed in collaboration with Bermuda-based ACE Ltd. and investment bank Morgan Stanley, according to Marsh. MaRI acts as a sidecar in providing extra capacity through capital market investors, but, unlike typical sidecars, the facility will offer capacity directly to primary policyholders.
With ACE acting as a highly rated fronting company, MaRI will be able to directly assume cat risks such as windstorm and earthquake for Marsh clients, said Philip V. Moyles Jr., executive vp of Marsh in New York.
Most sidecars set up following hurricanes Katrina, Rita and Wilma in 2005 provide capacity "either in back of an insurer or alongside a reinsurer," not directly to primary policyholders, Mr. Moyles noted. In monitoring the sharply contracting property insurance market during 2005 and 2006, Marsh considered "a myriad of options to help clients" get more catastrophe capacity, he said.
"MaRI is an augmentation of capacity for our clients," said Bob Howe, Marsh's global property practice leader. "Clients have major issues obtaining wind capacity," he said.
ACE's plan is "to supplement MaRI's cover with our own," said Ed Zaccaria, president of ACE Global Underwriters in Philadelphia. MaRI offers up to $25 million in limits per property account, on ACE's admitted paper. This is available at the lower end of insurance programs, within the first $35 million of coverage, Mr. Zaccaria said. ACE could write "a meaningful piece" of that, offering coverage in addition to what is available through MaRI, he said. "MaRI is in addition to ACE's standard products."
MaRI will begin writing cat risks Jan. 31 and expects to offer about $400 million in capacity through the May renewal period, Mr. Moyles said. "Based on demand or market conditions, we could build another $1 billion" of capacity for MaRI, he said.
Although MaRI can write risks globally, Marsh expects most of the capacity will be used by North American clients. The only risk classes that MaRI does not plan to write are energy and stand-alone builders risk, Mr. Moyles said. "It's a broad-based application to serve clients."Investors in MaRI include affiliates of Lehman Brothers, Marsh & McLennan Risk Capital Holdings and funds that invest in insurance and risk-linked securities. MaRI will be managed by Marsh unit Victor O. Schinnerer & Co.