Marsh Inc. has launched of MaRI (Marsh Risk Innovations), an insurance facility designed to provide additional capacity to the depleted property catastrophe insurance market this year. According to Marsh, this new facility is unique in that it delivers capital market capacity through an A+ rated* insurer with admitted paper directly to major corporations in need of additional property catastrophe coverage.
The additional capacity will be made available through reinsurance provided by MaRI, Ltd., a newly-formed Bermuda-based reinsurer, to ACE, a leading Bermuda-based insurance company. Marsh collaborated with ACE and Morgan Stanley, which served as structuring advisor and placement agent, to create MaRI.
This new facility provides large corporate clients of Marsh with exclusive access to insurance capacity intended to fill gaps that are creating instability and shortfalls in property catastrophe risk coverage.
Traditionally, this form of extra risk capital – commonly referred to in the industry as a “sidecar” – allows reinsurers to offer more capacity to their clients, the retail insurers. What makes the MaRI structure innovative is that it provides Marsh clients with direct access to the capital markets through a highly-rated ACE delivery vehicle.
“In the wake of the 2005 U.S. hurricane season and growing concerns about natural disasters in the years ahead, obtaining sufficient insurance coverage for catastrophic loss has been extraordinarily difficult for many of our clients,” said Brian Storms, chairman and chief executive officer of Marsh.
In some regions of the U.S., property catastrophe insurance rates have quadrupled since the 2005 U.S. hurricane season. Marsh expects the ACE / MaRI program to deliver $400 million in extra capacity to its clients during the next three months. Depending upon client demand, market conditions, and other factors, Marsh believes this approach could provide more than $1 billion in total extra capacity over the next year.
Investors in MaRI include affiliates of Lehman Brothers, Marsh & McLennan Risk Capital Holdings and several funds with expertise in insurance and risk-linked securities.