Aelous Re has become Bermuda?s latest post-Hurricane Katrina start-up with a capital base exceeding $1 billion, the company announced yesterday.

Demand for extra capacity in the property catastrophe market and high reinsurance rates in hurricane-prone areas of the US are two factors that have fuelled an influx of capital into the Island?s insurance and reinsurance companies.

Aelous?s announcement came the day after new Island company Ironshore Insurance declared that it had raised $1 billion capital, primarily for property catastrophe coverage in the US.

The bulk of the investment has come from two private equity investors, Warburg Pincus and Merrill Lynch Global Private Equity, who have each put in $350 million.

In addition, Arch Reinsurance Ltd., a subsidiary of Arch Capital Group Ltd., and an initial investor in the company, has also increased its investment to $50 million, while other investors include Banc of America Capital Investors and Wachovia Capital Partners.

Aelous Re was incorporated in June last year with an initial capitalisation of $500 million, financed by a group led by Warburg Pincus and the company?s founders, Peter Appel and David Eklund.

Aelous Re is the reinsurance unit of Aelous Ltd. and is a provider of fully collateralised property catastrophe protection to insurers and reinsurers on both an ultimate net loss and industry loss warranty basis.

Mr. Appel, the chairman and chief executive of Aeolus Ltd., said: ?We very much appreciate the support of our investors. The additional capital will allow Aeolus to provide our clients with their most sought after and difficult to find capacity ? fully secured protection against their property catastrophe risks.?

Aeolus Re chairman Mr. Eklund added: ?Our acceptance in the marketplace has made it clear to us that there exists significant demand for a property catastrophe company that can combine the best security in the industry with very large limits of protection and a deep understanding of our clients? businesses. Our additional capital will help us strengthen Aeolus Re?s quickly established presence in the market.?

Warburg Pincus, a private equity investor since 1971, has raised 12 private equity investment funds which have invested more than $24 billion in approximately 550 companies in 30 countries. It has invested more than $2.5 billion in financial services companies, including investments in Bermuda-based Renaissance Re Holdings and Arch Capital Group.

Merrill Lynch is one of the world?s leading wealth management, capital markets and advisory companies with offices in 36 countries and territories and total client assets of approximately $1.5 trillion.