Private equity investor Capital Z to buy into BMS Associates

Specialist financial services and re/insurance focused private equity investment firm Capital Z Partners Management LLC is buying into insurance and reinsurance broking and underwriting group BMS Associates.

According to a press release from BMS this morning, the firm and Capital Z have reached agreement on a proposal which will see Capital Z invest $50.7m in BMS Associates.

BMS is perhaps better known for its insurance and reinsurance broking activities, but the group is also the holding company for Pioneer Underwriters, a fast growing underwriting agency. The investment will give Capital Z access to the investment return of Lloyd’s, both through the BMS broking business and Pioneer underwriting.

The agreement remains subject to shareholder approval. The investment from Capital Z will be made through the acquisition of preference shares and warrants over a minority interest in BMS Associates ordinary share capital. BMS said that the investment will provide it with a strong capital base to support expansion of the BMS broking business and the underwriting activity of Pioneer.

Christopher Hopton, Group Chairman at BMS Associates, commented; “This investment is a highly significant event for the Group. I am particularly pleased to welcome Bob Spass to our board. His experience in our industry is extraordinary and his participation, together with the involvement of Capital Z, places the Group in an exceptionally strong position to accelerate our growth and command further market share.”

Robert Spass, managing partner at Capital Z, added; “I have been impressed with the strength and depth of the management team at BMS, their vision for the future and their opportunities to generate significant growth. Capital Z is pleased to have reached this agreement which makes us strategically and economically part of the Group’s future success and I look forward to working with the team.”

Dane Douetil, Group Chief Executive Officer of BMS Associates, said; “Over the last three years we have invested in 18 new teams across the Group and our continued successful growth is underpinned by Capital Z’s investment, which I consider to be pivotal in our development. We have been absolutely determined to maintain the owner/manager ethos of the Group while finding a partner who can bring in depth knowledge of the industry which will be helpful in our growth. In Capital Z we have found that partner.”

Capital Z has a track record of shrewd investments in the insurance and reinsurance space, having previously invested capital in the likes of Charman Underwriting, British Marine Holding, Jelf Group, Catlin Group, Endurance Specialty, USI Insurance Services, Lancashire Holdings and SBJ Group.

Capital Z’s most recent investment in the reinsurance business saw it participate in the acquisition of hedge fund backed reinsurer SAC Re, as part of the consortium leading its transformation into Hamilton Re under Brian Dupperreault.

Pioneer Underwriting already gives institutional backers of its property catastrophe reinsurance business Pioneer Cat access to the returns of the global catastrophe reinsurance market via Lloyd’s. Bringing more institutional capital onboard from a long-time reinsurance private equity investor should help initiatives like Pioneer Cat to grow, while also providing capital for any growth opportunities at BMS as well.

Capital Z is backed by its own investors and is another example of ways that investors can access the return of the insurance and reinsurance market. Less direct than ILS or an investment in underwriting, but still bringing new capital into the market at a time of competition and capital abundance.