Paulson Reinsurer Sells Few Policies In First Year

Apr 29 2013 | 3:12pm ET

A partner of Paulson & Co.'s reinsurer has dismissed charges that the business is merely a tax shelter.

New York-based Paulson set up Pacre last year with Bermuda reinsurer Validus Holdings. Pacre, which received US$500 million in initial funding—invested in Paulson's hedge funds—collected just US$11 million in premiums in the year-ended March 31, or 2.3% of shareholders' equity. According to Bloomberg News, the average ratio for publicly-traded Bermuda reinsurers in 68%, and Paulson's fellow hedge fund reinsurers also underwrite much more coverage that Pacre. Greenlight Capital Re's ratio was 53%. SAC Re targeted premiums of 30% and Third Point Reinsurance 19%.

Despite those figures, Validus CEO Ed Noonan told Bloomberg that the idea that Pacre is merely a tax dodge is "nonsense." According to Noonan, Pacre specializes in extremely unlikely natural disasters, which makes its premiums small but its risk large. Pacre posted no insurance losses in its first year.

"Pacre takes on a lot of risk underwriting the business," Noonan, whose own firm's coverage ratio was 48% in its first year, said. "We also take on a lot of risk in the investment portfolio, much more so than other insurers or reinsurers. You can't take on that much risk on both sides of the balance sheet and write the type of premiums that you would write in a traditional reinsurer."

Noonan added that Pacre's capital is necessary to meet regulatory requirements and maintain its financial-strength rating.


In Depth

Q&A: Pantheon’s McCrary Says Private Equity Market ‘Robust’

Dec 17 2014 | 8:32am ET

Dennis McCrary is a partner at Pantheon, a private equity firm with $32.2 billion...

Lifestyle

Cohen Donates $1.5M To GOP Governors Association

Dec 10 2014 | 7:13am ET

The Republican Governors Association raised close to $25 million from October 1...

Guest Contributor

Q&A With Daniel Gallancy: Institutional Interest In Bitcoin Is Growing Steadily

Dec 12 2014 | 7:54am ET

Daniel Gallancy is founder and CEO of SolidX, a provider of total return swaps for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.