A new Bermuda reinsurer being formed to provide coverage to New York-based insurer Tower Group is in the midst of raising $220 million to get off the ground, according to an online news report.

reported earlier this month that Tower was boosting its access to reinurance through a quota-share agreement with a new reinsurer forming on the Island.

Online insurance newsletter The Insurance Insider on Monday named the new reinsurer as Castlepoint Holdings Ltd., and said that a preliminary offering memorandum revealed the company expected to win an A- rating financial strength rating from leading ratings firm A.M. Best, if it reached its target capital.

A.M. Best spokesman Jim Peavy said the ratings firm, when it is looking at assigning a new rating, doesn?t publicly reveal what its rating may be. And Tower Group management and a spokesman for the company did not respond to e-mail and telephone enquiries from yesterday.

The company has previously declined to name the new reinsurer, which is to be headed by Tower chief executive Michael Lee, and is being formed by several departing executives, Joel Weiner, Robert Hedges and Joseph Beitz.

Tower has a $15 million investment in the new company.

Mr. Lee declined, on a March 1 investor call, to say if he, Mr. Weiner, Mr. Hedges or Mr. Beitz were making personal investments in the Bermuda reinsurer, which will also have a specialty insurance unit.

Under a quota-share agreement with the new reinsurer, Tower will cede, or pass on, between 25 percent and 45 percent of its insurance premium and losses.

Tower, which is benefiting from market opportunities created by giant US insurer Allstate?s decision to curtail the number of policies it sells in the New York region, is the latest in a string of insurance companies to try to tap into expanding market opportunities by setting up a ?sidecar? reinsurer.

Sidecars, minimal infrastructure reinsurers set up on the fly with private investor money, can boost capacity for established players.

And the sidecars can allow larger reinsurers to continue writing high-risk policies while reducing the volatility inherent in these kinds of contracts because the coverage is effectively provided through a separate entity.

A search of Registrar of Companies records showed that a holding company and a reinsurance company were formed under the Castlepoint name in November. Castlepoint hadn?t been licensed by the Bermuda Monetary Authority as a reinsurer, according to information in a bulletin released early this month.

Castlepoint?s formation brings the number of sidecar reinsurers being formed on Bermuda in recent months up to at least six.

Investors pushed down Tower?s shares 41 cents, or 1.75 percent, yesterday to $22.98 in 4 p.m. composite trading on the Nasdaq.

The Insurance Insider said Arlington, Virginia-based investment bank Friedman Billings Ramsey was raising Castlepoint?s funds through a private placement.

Friedman also handled the private placement, and later the public issuance, for Quanta Capital Holdings.

The bank is now advising Quanta on ?strategic alternatives? after the insurer saw its business prospects called into question by a downgrade of its A.M. Best rating into the ?B? range earlier this month.