Bermuda insurance management company Castlewood Ltd has announced it has formed a joint venture with two US companies in a deal which will bring in more business to the Island and will increase the number of people employed by the company on the Island.

Castlewood Ltd, which is based in offices in Windsor Place in Hamilton, has joined forces with Enstar Group and Trident II to form a new company Castlewood Holdings Ltd which will look to buy and/or manage reinsurance companies and will have committed capital of about $120 million.

The deal values Castlewood Ltd, which started operations in 1993, has offices in Bermuda, London, Guilford and Brussels and buys insurance companies and manages insurance in run-off, at $43.8 million.

Paul O'Shea, chief operating officer of Castlewood's Bermuda operations said; "We are delighted at the deal. As the third largest reinsurance centre in the world, Bermuda's innovation, its efficient business environment and tax legislation and its labour pool have made the Island a very attractive place to do business."

Mr. O'Shea, who is one of the founders and main stake-holders in Castlewood, said that these elements had attracted the two businesses to invest in Bermuda and its insurance market.

He added that it had attracted the interest of men like Chris Flowers, who is the largest single shareholder of Enstar, a financial holding company based in Alabama.

The businessman has interests in Japan and led an investment group in 1999 which were involved in a multi-billion dollar deal to buy Shinsei Bank, which could allow the joint venture a new "in" into the notoriously difficult to enter and highly profitable Asian markets.

And now he is believed to be looking into further opportunities in Bermuda for his growing business empire.

The other partner in the deal is, Trident, a $2 billion private equity fund which is managed by MMC Capital Ltd., which is a subsidiary of Marsh and McLennan.

Only last week Trident announced it was the lead investor in a new Bermuda reinsurance company AXIS Specialty Ltd, an insurance company which was formed with John Charman at its helm.

Castlewood has carved out a niche for itself in managing and buying run-off insurance. Mr. O'Shea said most insurance companies focused much of their energy in bringing in insurance. After it is bought it is considered to be in run-off. What Castlewood does is manage insurance and claims associated with it afterwards.

Castlewood either buys the insurance company or manages the run-off. "We collect all premiums and do all the management," he said. "We have ten years of underwriting experience here. Most insurance companies concentrate on production - getting the business."

But he said that it can be difficult and costly for some companies to manage the cover. They pay off the liabilities and manage the on-going business of the company, but the risk is all still with the insurance company.

"There are complex policy issues sometimes to resolve a claim. We have the experience and the knowledge base then to resolve this and other issues that may be similar in different companies. Sometimes the resolution can be very costly, and we can resolve it for a fraction of the cost. If we have a solution for one, we have the solution for all three. There are potentially huge cost savings in that."

This programme has led the company to its success today with clients such as Texaco and Sun Life Canada using their services, and now to be valued at $43.8 million for this deal.

The current owners of Castlewood, which has about 25 employees in Bermuda, will contribute all the shares of Castlewood to the newly incorporated Castlewood Holdings in exchange for a one-third economic interest in the new group plus notes and cash totalling $4.3 million. Enstar and Trident will make equal capital commitments totalling $79 million in exchange for their one third interests in Castlewood Holdings.

Mr. O'Shea said: "This investment is a further endorsement of Bermuda as one of the most important reinsurance domiciles in the world. This expansion of Castlewood will establish Bermuda as one of the main centres for professionally managed reinsurance run-off operations."