The acquisition of US insurer Western World Insurance Company represents a significant strategic development for Validus Holdings Ltd, as it provides the Bermuda re/insurer with a platform in the world’s largest insurance market.

That is the view of Validus chief executive officer Ed Noonan, who was speaking after Validus clinched a deal to buy New Jersey-based Western World for $690 million in cash.

“This is as straightforward a strategic acquisition as you can get,” Mr Noonan told The Royal Gazette yesterday.

He said Validus already owned a major reinsurance company in Bermuda, Talbot Underwriters in the London market, as well as operations in Singapore, Latin America and Ireland.

“But we are missing the world’s largest insurance market, the US, which is also the world’s largest market for the short-tail products in which we specialise,” Mr Noonan said.

He added that the company had been searching for the right acquisition opportunity for several years, having kept a close eye on up to ten companies that could conceivably be a good fit, as they awaited an opportunity to buy.

Western World will keep its brand and will be run as a stand-alone company with its current management, after the deal is closes, which is expected to happen at around the end of September.

Western World did not offer the kind of short-tail products that Validus favours, but the strong Validus balance sheet gave the US company a strong base on which to build up its business, Mr Noonan said, while Validus could also help the company expand its product range.

He added that company had a 50-year track record of profitability and provided a “unique fit” for Validus.

The catastrophe reinsurance market in which Validus is a major player, has seen rates tumbling as a lack of catastrophes and an influx of alternative capital have kept rates low.

Commenting on the market, Mr Noonan said: “In both our catastrophe reinsurance and ILS businesses, we are starting to see rates finding a bottom. Both are starting to get some pushback.”

He also pointed out that Western World, as a reinsurance buyer, would benefit from low reinsurance rates.

Validus, which started out in Bermuda in 2005 in the wake of Hurricane Katrina, has grown strongly in its first eight years, helped by acquisitions including fellow Bermuda reinsurer IPC Holdings.

Mr Noonan said the company remained committed to the Island, which now had an “outstanding regulatory regime”.

“Even if we were based in the middle of Manhattan, we would be hard pressed to duplicate the quality of the staff we have here,” Mr Noonan added.