Private equity firm Golden Gate Capital invests in Nassau Reinsurance

San Francisco based private equity investor Golden Gate Capital has seed funded a new reinsurance company, Nassau Reinsurance, with up to $750m of start-up funding, further demonstrating the attraction to reinsurance as investment opportunity.

Private equity firms have been increasingly showing interest in accessing the returns of reinsurance businesses, as well as a desire to follow a similar model to hedge fund reinsurers where the insurance or reinsurance business can provide the investor with access to permanent capital.

Golden Gate Capital has backed Nassau Reinsurance with the lions share of $750m of start-up capital, to get the new onshore and offshore insurance and reinsurance firm off the ground.

Nassau Reinsurance will follow a strategy focused on the underwriting of long tail insurance and reinsurance liabilities, concentrating on the life, annuity and long-term care sectors. These long-tailed liabilities will bring with them longer term capital and assets to manage, something which will definitely be attractive to Golden Gate Capital.

The $750m in funding comes from a number of the private equity firm’s funds under management, part of the roughly $12 billion of assets it controls. The firm’s funds are said to have no time horizon, allowing it to make long-term investments without any constraints on liquidity.

Insurance industry executives Phillip J. Gass, previously Chairman of Fidelity & Guaranty Life and Managing Director of financial services investment firm HRG Group Inc. (Harbinger), and Kostas Cheliotis previously Director and Chairman of the Compensation Committee of FGL and Senior Vice President & Deputy General Counsel of HRG, are the executives founding Nassau Reinsurance. Gass will serve as Chairman & Chief Executive Officer, and Cheliotis will serve as Executive Vice President & Chief Operating Officer.

Mr. Gass commented; “We are very pleased to have partnered with Golden Gate Capital as we look to build a dynamic platform with insurance, reinsurance and asset management businesses. With Golden Gate Capital’s long-term investment philosophy, permanent capital structure, and strategic focus on insurance and financial services, we believe we are uniquely positioned to grow our franchise and build significant value over a long time horizon.”

“We are very pleased to be partnering with Phil Gass and Gus Cheliotis, two accomplished and successful executives in the insurance industry, on this exciting new venture,” said David Dominik, Managing Director of Golden Gate Capital. “Phil and Gus have a compelling track record of launching and leading profitable insurance platforms, and share our values and philosophy of building strong, sustainable businesses for the long term.”

Rob Little, Managing Director of Golden Gate Capital, added; “Since 2000, financial services has been a focus area for Golden Gate, and today’s announcement reflects our firm’s commitment to supporting a robust insurance platform. We are confident that Nassau Reinsurance will grow and flourish under Phil and Gus’ strong leadership.”

Nassau Reinsurance will have a strong asset management focus, given the lines of life, annuities and long-term care that it is targeting. That will bring permanent capital with long investment horizons, which with the founding teams experience in insurance, asset management and private equity as well as the backing of Golden Gate Capital, should make Nassau an interesting start-up to watch.

The firm’s website says that they intend to “reshape the insurance industry.” If Nassau Reinsurance can outperform on the asset management side it could be very competitive as an underwriter and risk transfer provider, which could shake up some of the older business models that target these sectors of the market.

Further evidence that insurance and reinsurance remains an attractive place to operate and invest capital, just so long as you are approaching it with a fresh or innovative strategy and with a desire to do things a little differently.

Also read: Private equity follows hedge funds into reinsurance for long-term capital.