Transatlantic Holdings and Allied World Assurance, have signed a merger agreement to create a global specialty insurance and reinsurance company that would have total capital of $8.5bn, with 39 offices located across 18 countries.

Upon completion of merger, the combined entity company named as TransAllied Group Holdings will have total invested assets of $21bn, total shareholders’ equity of nearly $7bn, offering specialty insurance and reinsurance products and services via two brands -Transatlantic Reinsurance and Allied World Insurance.

The transaction, structured as a merger of equals, with US-based Transatlantic receiving 0.88 Allied World common shares for each Transatlantic common share held.

Following the merger, Transatlantic shareholders will own approximately 58% of the combined company, with Allied World shareholders owning approximately 42%.

Upon completion of the transaction, Allied World Assurance chairman, president and CEO Scott Carmilani will become president and CEO of the new company.

Transatlantic executive vice president and chief operating officer Mike Sapnar will become new company’s president and CEO.

Both Carmilani and Sapnar will serve on the combined company’s board of directors, which will have 11 seats, six appointed by Transatlantic and five by Allied World.

Richard Press, Transatlantic’s non-executive chairman, will serve as the non-executive chairman of the board of directors for the combined company.

Transatlantic president and CEO Robert Orlich, who will retire upon the closing of the transaction, said that Transatlantic and Allied World make great merger partners in every sense of the term.

"For Transatlantic in particular, the transaction delivers strategic and financial benefits, including primary insurance operations, a Lloyd’s presence and a bigger capital base outside the US, allowing for greater capital allocation flexibility," Orlich said.

The transaction is expected to close by the fourth quarter of 2011 and is subject to customary terms and conditions.