Mitsui & Co., Japan’s second-biggest trading house, agreed to purchase a 15 percent stake in New Ocean Capital, the asset manager that was founded by XL Group Ltd. and Stone Point Capital to make insurance-related bets.
Mitsui also committed $100 million of investment capital to the private fund platform, Bermuda-based New Ocean said Friday in a statement.
XL, the seller of commercial insurance and reinsurance, has been expanding in so-called alternative risk-transfer deals after hiring Craig Wenzel from Deutsche Bank AG in 2012 for a push into capital markets transactions. The next year, XL joined with Stone Point, the private equity firm led by former Goldman Sachs Group Inc. executives Stephen Friedman and Charles Davis, to form New Ocean. Wenzel is counting on increased appetite from Wall Street investors for insurance-linked securities, or ILS, which can include bonds where returns are tied to the weather.
“It’s gratifying to see such a high-caliber corporate investor join,” Wenzel said in the statement. “New Ocean is a cornerstone to XL’s long-term commitment to alternative capital, which will increasingly become more relevant in our business.”
‘More Appealing’
Mitsui has invested with New Ocean since 2014 and will seek to source additional capital, beyond the latest $100 million commitment, by 2020, according to the statement. A representative of the trading house will join the board of New Ocean, and XL will remain the majority shareholder.
“We believe ILS reinsurance will become more appealing to institutional investors in Japan, and across the globe,” Takashi Nakai, general manager of Mitsui’s insurance business department, said in the statement. The bets offer firms an investing opportunity for returns that aren’t correlated with fluctuations in stock and credit markets.
Stone Point is known for its role in insurance ventures in the Bermuda market and beyond. The firm was an investor in 2006 in the first capital raise by Privilege Underwriters Reciprocal Exchange, which takes on risks for wealthy clients and won backing last year from XL.