Marsh & McLennan Cos. Inc. is forming a new firm to deal with industry cutbacks in coverage that have occurred since the Sept. 11 attacks.
The new firm, to be called Axis Specialty Ltd., is being created to capitalize on the shortage of services as insurance companies are hit hard by losses resulting from the terrorist attacks, Marsh & McLennan said. The attacks, which destroyed the World Trade Center and damaged the Pentagon, are expected to be the most expensive disaster ever for the insurance industry, with costs exceeding the record $20-billion payout from Hurricane Andrew in 1992.
Bermuda-based Axis is expected to have about $1 billion in capital and will start underwriting in the fourth quarter, Marsh & McLennan said. Trident II LP, a fund managed by MMC Capital, will be the lead investor, the firm said.
Capacity shortages in the industry have prompted Marsh & McLennan to form new firms several times in the past. The firm formed ACE Ltd. in 1985 and XL Capital Ltd. in the year after to provide excess directors’ and officers’ liability coverages when there was a shortage of that type of insurance. A few years later, in 1992, it formed Mid Ocean Ltd. in response to a sharp fall in the availability of property catastrophe reinsurance.
John Charman, the former president of ACE International, will be chief executive of the new insurance and reinsurance company, which will be created by Marsh’s MMC Capital Inc. unit. Robert Newhouse Jr., who was the chairman at Mid Ocean Ltd. and a vice chairman at MMC prior to that, will assume the position of chairman.
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