Reinsurer Welcomes Hedge Funds Into Fold

Feb 25 2013 | 11:29am ET

Hedge funds' reinsurance business may not be great public relations, but they are great for the reinsurance business, according to one industry player.

The hedge fund industry's move into reinsurance got something of a black eye last week, when reports indicated that they could be used as tax shelters. But Hiscox, a Bermuda-based insurer and reinsurer, said in a new report that it has been a boon for it and for the insurance business.

Hiscox has partnered with Third Point's reinsurance business and has committed US$30 million to its planned catastrophe fund. And it says it is seeing the benefits that third-party capital will have on the markets.

"The reinsurance market is evolving and we must change with it," CEO Bronek Basojada said. "New forms of capital are entering the industry, selling collateralized policies or buying catastrophe bonds issued by cedents like Hiscox, in competition with traditional markets."

Third Point Re has agreed to buy some tailored portfolios of catastrophe reinsurance exposure from Hiscox as part of their partnership.

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