NEW YORK (Bloomberg) — Bermuda-based re/insurer Endurance Specialty Holdings Ltd. has been advised by its biggest shareholder to seek merger opportunities.

Perry Corp., the hedge-fund manager run by Richard Perry - who has a seat on the Endurance board - made the comment in a regulatory filing on Monday.

Perry, one of Endurance's founding investors in 2001, owns more than 12 percent of the company. Perry is also the ninth largest holder in another Bermuda re/insurer, Platinum Underwriters Holdings Ltd., with a 2.2 percent stake.

Endurance, which sells crop and workers' compensation insurance as well as reinsurance, has a market capitalisation of about $2.2 billion based on yesterday's closing price.

Bermuda insurers "are trading below book value per share and are heavily concentrated on similar lines of business", Perry said, without naming the firms. "These factors together with recovery in financial markets are likely to support a trend of industry consolidation."

Last week Endurance named Bermudian David Cash as chief executive officer and William Jewett as president, both replacing Kenneth LeStrange, who will serve as chairman through March 2, 2011.

Mr. Cash has worked for Endurance since it was founded in 2001 and Mr. LeStrange has served as CEO throughout that period.

Although Mr. Perry described the promoted pair as "capable industry executives", the leadership changes won't position Endurance "to capitalise on industry consolidation opportunities," he said.

Validus Holdings Ltd. last year bought IPC Holdings Ltd. for about $1.7 billion, beating offers from Flagstone Reinsurance Holdings Ltd. and Max Capital Group Ltd. All the companies are based in Bermuda, where reinsurers are looking to merge to raise capital and gain market share.

"The election of the former CEO to the position of non-executive chairman is not in the best interest" of Endurance, Perry Corp. said in yesterday's filing. Mr. Perry, who has a seat on the board, said he plans to contact other investors to review "strategies to improve shareholder value," including urging the company to pursue a merger and whether to elect directors.

Endurance, in a statement today, said the appointments are "consistent with best practices in corporate governance" and that "Endurance has an exceptionally strong balance sheet and excellent strategic position and will remain focused on delivering superior value for its shareholders."

Endurance gained four cents to $38.10 at 4.02 p.m. in New York Stock Exchange composite trading. The company has advanced about 62 percent in the past 12 months.

Franklin Montross, the CEO of Berkshire Hathaway Inc.'s General Re Corp., said in October that more Bermuda-based reinsurers may combine after Validus's acquisition.

"Bermuda is logical," Montross said in an interview at a conference in Ottawa. "There are a lot of companies down there, many of them are quite small."