Hedge funds eye reinsurance to boost returns (George Soros)

AFX ^ | Wednesday December 15, 08:37 PM

[Calpernia]

SAN FRANCISCO (AFX) -- Seeking new ways to boost returns, some of the largest hedge funds in the world are getting into the reinsurance business.

Soros Fund Management, run by billionaire investor George Soros, and $5 billion hedge fund HBK Investments helped start Glacier Re, a new Swiss reinsurer that's expected to begin underwriting risks next month with $300 million in capital.

Soros and HBK own about 90 percent of the company, while U.K.-based reinsurance broker Benfield Group (LSE: BFD.L - news) and Glacier Re management own the rest, according to a Benfield spokeswoman.

In addition, Ken Griffin's $10 billion, Chicago-based hedge fund firm Citadel Investment Group has set up a dedicated reinsurance unit and hired Chris McKeown, former chief executive of Ace (NYSE: ACE - news) 's catastrophe reinsurance business Ace Tempest Re, to run it, according to industry newsletter the Insurance Insider.

'Hedge funds are expected to become a significant source of capital' for reinsurers, Maurice 'Hank' Greenberg, chief executive of American International Group (NYSE: AIG - news) , said earlier this month at a reinsurance conference in New York. 'They want to use their capital to get involved.'

Soros Fund Management, Citadel and HBK declined to comment for this story.

Reinsurance represents an interesting new source of returns for some hedge funds, because profits in the industry are relatively uncorrelated with equity and debt markets.

Further driving momentum is the fact that hedge fund assets have soared in recent years, increasing concerns that returns will decline as more money chases a finite number of investment ideas.

Initially, hedge funds such as Nephila Capital and BNP Paribas (Paris: FR0000131104 - news) ' CooperNeff began investing in and trading catastrophe bonds in the late 1990s and early in this decade.

Since then, some hedge funds have begun to take on reinsurance risks more directly. Some have agreed to underwrite chunks of business parceled out by a reinsurance company.

Now, hedge funds such as Soros and HBK are making direct, private equity-type investments in new reinsurers. This allows them to retain more control over the risks they underwrite.

The arrangement also gives them more control over their investment: If the venture goes well, an initial public offering would help crystallize gains. If it's not a success, the company could be closed down.

This story was supplied by CBSMarketWatch. For further information see www.cbsmarketwatch.com.

[Calpernia]

Ping

Thank you for the heads up Jer33. You are right, I don't feel good about this either.

[Calpernia]

Soros ping

[Calpernia]

ping

[nw_arizona_granny]

If Soros is involved, it must be evil.

[nw_arizona_granny]

Soros Ping

[Calpernia]

The first thing I thought of was the hedge fund investment with the airlines.

Now this investment is insurance.

I can't help but wonder what he is looking to profit off of.

[steve86]

Insurance to cover financial speculations was big in 1929.

[M. Dodge Thomas]

Ah yes, the joys of Hedge funds - the way *rich* fools get parted from their moeny.

I was looking a week or two ago, at yet another such report, this one of a study that concluded that after correcting for fees, backfill and survivor biases the average hedge fund returnd around 7 percent from 1995-2003, (well below the S&P500, for example), and that that winners' performance (top 50% performers) had nearly random persistence from year to year.

If it's not been moved into the paid-access area yet, it's at:

http://nytimes.com/2004/12/09/business/09scene.html?pagewanted=all&position=

[McGavin999]

Just what do you think he's trying to do here? And just what is he betting on?

[Mr Ducklips]

You can lose your shirt in the reinsurance business just as you can in the direct insurance business. I hope Soros does.

[Freebird Forever]

Now, hedge funds such as Soros and HBK are making direct, private equity-type investments in new reinsurers. This allows them to retain more control over the risks they underwrite.

Just speculation here, but I think it is safe to state that anything the soros group underwrites would be free from any al qaeda attack.

[GSlob]

"If Soros is involved, it must be evil."
Well, Warren Buffett has been involved in reinsurance business since 1776, IIRC. And he has been a pretty decent investor.

[Grampa Dave]

"Just speculation here, but I think it is safe to state that anything the soros group underwrites would be free from any al qaeda attack." Thanks for posting this. As I'm reading this I start to remember the old mom insurance in NYC and Chicago that businesses paid not to be burnt up or blown up by the mob.

[Grampa Dave]

"If Soros is involved, it must be evil."

Below is the Yahoo search results for "Reinsurance SEC SCAM"


http://search.yahoo.com/bin/search?p=Reinsurance%20SEC%20Scam

[SierraWasp]

since 1776, IIRC."

Huh??? I had no idea Warren Buffett was over 200 years old!!!

Grampa Dave, I din't get why you posted that link!!! Why???

[Grampa Dave]

There are over 500 references to scams in the reinsurance business in that one link.

What was the one you had re the worthless AG of NY and the reinsurance business?

[SierraWasp]

OH!!! I'll hafta go look that up!!! I've got a ton of Spit Head Spitzer articles that I've snared by emailing the links to my own email address.

[investigateworld]

ping

[Grampa Dave]

You should link some of your finds to this thread.

Maybe this is why Spitzball is leaving the likes of $orea$$ alone.