Bermuda-based Max Capital Group Ltd. and Harbor Point Ltd. are set to merge and create a new company after the board of directors approved an amalgamation deal.

The combined company will be named Alterra Capital Holdings Ltd., will have $3 billion in capital and will trade on the Nasdaq Global Select market.

Under the terms of the agreement, holders of Harbor Point common stock will each receive 3.7769 Max common shares for each Harbor Point share.

Max had previously announced an agreement to merge with IPC Holdings Ltd. one year ago, but that fell through when IPC shareholders rejected the deal after rival Validus Holdings Ltd. came in with a successful hostile takeover bid.

In addition, the new company is expected to declare a special cash dividend of $2.50 per share following closing to all shareholders (approximately $300 million in total).

Following the merger, Harbor Point shareholders will own approximately 52 percent of the combined company on a fully diluted basis, with Max shareholders owning approximately 48 percent.

Completion of the transaction is dependent on the approval of shareholders and is expected to close in the second quarter of 2010.

Marston (Marty) Becker, chairman and CEO of Max will be the new president and CEO of Alterra and serve as a director, while John Berger, director, CEO and president of Harbor Point will be CEO of reinsurance of Alterra and vice-chairman of the board of directors.

Mr. Berger will also chair the board's underwriting committee. The board of directors of Alterra will consist of fourteen directors, including Messrs. Becker and Berger, in addition to six directors appointed by each of Max and Harbor Point.

Michael O'Reilly, chairman of Harbor Point's board of directors and former vice-chairman and chief financial officer of The Chubb Corporation, will be the non-executive chairman of Alterra's board of directors.

Mr. Becker said: "The Max-Harbor Point transaction is a true merger of equals and brings together two strong and vibrant organisations with good balance at both the board and senior management level, and robust balance sheets to create Alterra Capital Holdings Limited, a diversified and balanced global insurance company with much greater scale, capital, and financial strength.

"We have chosen Alterra, 'high ground', as our new brand name, as we believe the company will be a provider of superior security for our clients — a market leader at the pinnacle of our industry. With capital of approximately $3 billion, in a market that values strength and size as a sign of franchise safety and sustainability, Alterra will be well positioned to take full advantage of profitable growth opportunities in the P&C insurance and reinsurance markets.

Mr. Berger said: "Alterra will benefit from an exceptionally strong combination of global underwriting platforms with limited operating overlap, and outstanding management and underwriting teams. There are very few companies of Max's size that have the diversification and global reach it enjoys.

"The combination of our companies will produce a highly diverse portfolio of specialty insurance and reinsurance business, including a mix of long and short-tail lines. As a result, we expect that Alterra will have less volatile underwriting results than either of its individual components, as well as more flexibility to efficiently manage capital.