Axis Capital, a Bermuda insurance company, said yesterday that a unit of Marsh & McLennan, one of its founding shareholders, has sold 1.85 million shares in a block trade.

Merrill Lynch is handling the sale for Marsh Risk Capital, a unit of leading brokerage Marsh & McLennan Companies, Inc.

Marsh, through investments by several units was the lead investor in Axis when the company was founded in 2001.

Merrill Lynch will sell the Axis shares to public investors, and the net proceeds of the sale will go to Marsh Risk Capital.

The sale reduces Marsh Risk Capital?s stake in Axis to about one percent, with 1.85 million Axis shares still owned.

Earlier this year, Marsh Risk Capital sold 3.7 million Axis shares in another block trade handled by Merrill Lynch.

That sale, which is twice the size of the one just announced, was valued at $105.6 million.

Under scrutiny from regulators, Marsh has scaled back its investments in insurers because of concerns there could be a conflict of interest in a broker, who places business with insurers for clients, also having stakes in some of the insurers it recommends to its clients.

Marsh units have led investments in numerous insurance companies through the years, including ACE Limited and XL Capital.

Marsh was not the only broker to put money into Bermuda ventures. Rival broker Aon Corporation also moved, this year, to avoid concerns by selling off its stake in the company it helped to set up, Endurance Specialty Holdings.

Marsh & McLennan was Axis? lead investor in 2001, putting money into the start-up venture through a unit under its then private equity arm MMC Capital, Trident II, L.P., and through Marsh Risk Capital.

Other founding partners that have sold their stakes in Axis are JP Morgan Partners, Thomas H. Lee Partners, The Blackstone Group and Credit Suisse First Boston.

Trident continues to be an investor, although the company is now managed by Stone Point Capital in which Marsh has a small stake after MMC Capital was largely taken over earlier in the year by its senior management.

Axis was one of a dozen highly capitalised insurance and reinsurance ventures to be set up in Bermuda following a severe void in insurance capacity, after some $32.5 billion in claims from the September 11, 2001 terrorist attacks.

Some of Axis? peers have also seen founding investors sell off their shares, while others have returned capital to their shareholders as the insurance cycle begins to soften. In a soft market, the opportunity to sell policies for a profit tightens, as increasingly cut-throat competition reduces the market rates for a wide range of insurance policies.

Axis? initial capitalisation was $1.6 billion. Less than four years later, shareholders? equity in Axis now tops $3.1 billion, according to the company?s second quarter figures through the end of June.