Another big reinsurer is setting up in Bermuda to address the current supply shortage for property catastrophe reinsurance.

Aeolus Ltd., through its wholly-owned subsidiary, Aeolus Re, will operate as an unrated reinsurance platform and provide property catastrophe protection to insurers and reinsurers on both an ultimate net loss and industry loss warranty basis.

It will have initial capitalisation of up to $500 million financed by a group led by Warburg Pincus and the company?s founders, Peter Appel and David Eklund.

Mr. Appel, former president and CEO of Arch Capital, will serve as chairman and CEO of Aeolus Ltd. while Mr. Eklund, former President and Chief Underwriting Officer of Renaissance Re, will serve as chairman.

Arch Capital Group Ltd. has also agreed to invest in the company, subject to Board approval.

The new company is being set up at a time when the demand for property catastrophe reinsurance capacity continues to outstrip supply following the 2004 and 2005 hurricane seasons.

?This imbalance continues to grow, driven in part by the changes in rating agency guidelines and catastrophe models that have significantly increased capital requirements for rated reinsurers,? Mr. Eklund said. ?We believe we can provide a real service to the industry by offering substantial limits and fully collateralized security to insurers and reinsurers seeking protection against property catastrophe risks.?

Warburg Pincus has been a leading private equity investor for 35 years and forming reinsurance businesses has been a hallmark of its investments in the financial services sector. The firm invested in Renaissance Re in 1993 and Arch Capital in 2001.

Kewsong Lee, a Warburg Pincus Managing Director said: ?We?re excited to continue our long-standing relationships with Peter and Dave. We believe that the team at Aeolus is well-suited to address the current market opportunity in the reinsurance sector, as well as future market dislocations when they occur.?

Pending regulatory approval, Bert Golinski, most recently a Managing Director and head of the Bermuda office of Guy Carpenter & Co., will serve as President of Aeolus Re, and Joseph King, the former head of Arch Reinsurance Company?s US property department, will be the Chief Underwriting Officer of Aeolus Re.