Hedge Funds Insurance Rates On The Rise

Mar 15 2012 | 11:12am ET

It's getting expensive to insure your hedge fund—and will get more so, according to a new report.

Professional liability policies are costing 5% to 10% more this year, SKCG Group said. Those policies had been getting cheaper and cheaper over the last few years, with a $200 million hedge fund paying less than $70,000 a year for $5 million of coverage six months ago, down from $125,000 three years ago.

"They are starting the conversation with requests for 10 percent increases, and are eyeing those higher 2009 price levels as a goal for the next few years," SKCG's Richard Canter said.

For now, they're settling for a slight increase over late 2011 prices. The same $5 million policy mentioned above now runs about $75,000.

Hedge fund liability policies cover legal fees in the event of legal or regulatory action. And it is the aggressiveness of the latter that is driving the current jump in rates, according to Canter.

"Insurance carriers know that hedge funds are in regulators’ cross hairs," Canter said.

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