Bermuda-based Arch Capital has teamed up with an investment company owned by a group of Arab states to create a new reinsurer called Gulf Re.

The new company will be domiciled in Dubai with $400 million of capital, with Arch and the Gulf Investment Corporation (GIC) each providing $200 million and each owning an equal share of the new venture.

The announcement was made in a press conference at the Bermuda-organised World Insurance Forum (WIF) at the Dubai International Financial Centre yesterday.

Gulf Re will initially look to reinsure high-value assets, in sectors such as oil and gas, utility and transportation, in the six member states of the Gulf Cooperation Council (GCC) - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

Arch CEO Dinos Iordanou said there was a growing need for reinsurance capacity in the rapidly growing economies of the Gulf States and he was excited about the new venture.

"This is a true partnership with GIC and Arch both playing their part," Mr. Iordanou said. "We will bring all the expertise we have and put it to work here. GIC will help us with local customs and knowledge of the territory and the industries here."

Gulf Re's CEO will be industry veteran Gail Norstrom, formerly the managing director of Aon Risk Services, while the new company's chairman will be Marc Grandisson, who is also chairman and CEO of Arch Worldwide Reinsurance Group.

Gulf Re has applied for regulatory approvals from the Dubai Financial Services Authority and plans to start underwriting during the second quarter.

The six GCC states each have an equal share in the GIC, which exists to promote private enterprise and develop capital markets in the region.

GIC CEO Hisham Al-Razzuqi said he saw the project as a strategic long-term investment. Gulf Re will benefit from the technical expertise and support of Arch Capital, widely recognised for the quality of its management."

Mr. Al-Razzuqi said Gulf Re would be aiming to win a portion of the business that was at the moment being written out of Bermuda.

But Mr. Iordanou said gaining market share was not the primary aim. "We are building a knowledge business - size is not material to us, quality is. The need for capacity will increase over time. And we will fill the need for a specialised reinsurer."

The areas in which the new reinsurer will specialise are similar to some of the areas in which GIC invests - power, water desalination, petrochemicals and steel among them.

And as the Gulf states' governments are GIC's shareholders, the new company will be well placed to gain business from some of the massive state-sponsored engineering projects in the region.

Arch Capital, which was founded six years ago to meet the need for capacity after the September 11, 2001 terrorist attacks on New York and Washington.

It has more than $4 billion in capital, while GIC has shareholders' funds of about $2 billion.

"With the region growing so fast, there is a need for a company like Gulf Re and whatever capital is required, we will add it, as the company grows over time," Mr. Al-Razzuqi added.