Marsh & McLennan (MMC.N) will take a minority stake in Bermuda-based insurance asset manager Juniperus Capital, which specializes in catastrophe bonds and other capital markets insurance products, Juniperus and its private equity backer, Aquiline Capital Partners, said Tuesday.
The deal makes for a reunion of sorts - Aquiline Chief Executive Jeff Greenberg was for many years the CEO of the consultancy and insurance broker Marsh & McLennan before being forced out in 2005.
He went on to found Aquiline, which backs a number of insurance-related businesses including flood and educational insurer WRM America and asset manager Conning.
Aquiline acquired a stake in Juniperus in January. The company said Tuesday it plans to expand its management team following the Marsh investment.
Juniperus is also planning new funds for investors, it said.
"We're going to expand our fund offerings so that we can create some different alternative structures for investors," said Phil Lotz, chairman and CEO of the company (named for a species of cedar tree found only in Bermuda that is well-known for its resilience in hurricanes).
There has been a sharp upswing in demand of late for catastrophe bonds and other so-called insurance-linked securities, particularly because of a low correlation with other asset classes that leaves them less vulnerable to market swings.
First-quarter catastrophe bond sales set a record $1.5 billion, Marsh peer Aon Plc (AON.N) said this month.
"One of the challenges of the asset class is scale now that we have a lot more pension funds interested. They have a lot more capital to invest," said Lotz, estimating the size of the catastrophe bond and collateralized reinsurance market at roughly $30 billion to $35 billion, a fraction of the size of the traditional reinsurance market.
He added that Juniperus would ultimately offer two or three commingled funds for investors, as well as managed accounts for those looking for more direct control of their investments.
He said the pension funds coming into the sector would probably largely invest in commingled funds, moving into managed accounts later as they gained more experience with the reinsurance business.
Marsh & McLennan shares were up 1 percent at $32.25 on Tuesday morning.
(Reporting By Ben Berkowitz in Boston; Editing by John Picinich and Matthew Lewis)