June 11 (Bloomberg) -- Axis Capital Holdings Ltd. hired Edgar Bautista and Sandeep Ramachandran, formerly of Morgan Stanley’s commodities unit, as the reinsurer expands in capital markets tied to weather.
Bautista and Ramachandran will be co-heads of the weather and commodity markets initiative, the Bermuda-based company said today in a statement. The two established a weather and outage risk management team at Morgan Stanley, Axis said.
“The global weather and commodity related risk markets have seen significant growth over the past decade,” Jay Nichols, chief executive officer of Axis Re, said in the statement. “We look forward to Edgar and Sandeep’s combined contributions to help position us to actively participate in these important markets.”
Reinsurers are expanding in dealmaking as investors seek new ways to bet on risks such as storms and other natural disasters. White Mountains Insurance Group Ltd. established a capital markets initiative last month and XL Group Plc hired Craig Wenzel from Deutsche Bank AG as a senior vice president in December to help a push into insurance-linked securities.
Low interest rates on corporate debt are attracting investors to catastrophe bonds, which offer higher yields in exchange for the risk that holders’ principal can be wiped out by natural disasters. The securities have climbed 4 percent since the beginning of last June according to the Swiss Re Cat Bond Price Return Index. The measure tracks dollar-denominated debt sold by insurers and reinsurers.
Morgan Stanley cut 1,700 jobs in January and deferred more pay for senior bankers and traders as it looks to cut $1.6 billion in costs over the next two years as part of CEO James Gorman’s push to double return on equity. The firm also held talks with Qatar’s sovereign wealth fund last year about selling a stake in its commodities unit amid lower revenue from the business and new capital rules.
The bank has said that the second and fourth quarters of 2012 featured the worst commodities revenue in 17 years. Gorman said at the company’s annual meeting last month that the firm is “always looking at different structural alternatives” for the business. Mark Lake, a spokesman for New York-based Morgan Stanley, declined to comment.
Bautista and Ramachandran both worked in units of Swiss Re Ltd. related to energy and weather prior to joining Morgan Stanley. Bautista was director of client markets in Swiss Re’s weather and energy unit. Ramachandran helped start Swiss Re’s capital markets weather and outage business and was head of weather and electricity outage protection products.
Bautista, who has a Ph.D. in engineering mechanics from Columbia University, previously established the weather business unit at PartnerRe Ltd. Ramachandran has an undergraduate degree in civil engineering from the Indian Institute of Technology and a master’s in civil engineering and operations research from Princeton University.
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