Winston-Salem Journal – In late January, a private-equity fund called First Reserve Corp. discovered firsthand how much the market has changed. First Reserve, based in Greenwich, Conn., wanted to buyan oil-and-gas platform in the Gulf of Mexico. During a conference call with colleagues in Houston, the fund’s executives learned that insuring the project would cost about $25 million a year, notthe $2 million they had expected.
“That kind of shut the room up,” said Mark McComiskey, a managing director at First Reserve. The company decided to kill the deal.
In the wake of Hurricane Katrina, billions of dollars poured into the insurance industry from investors hoping to profit from rising premiums. After hard hurricane seasons, such cash influxes often buoy insurers and help stabilize premiums.
But this time, the new capital was insufficient to soak up the increase in demand. “There’s just this loud sucking sound in the market now,” said J.C. Sparling, an executive vice president at Mercator Risk Services Inc., an insurance brokerage.
