Expect more hedge fund-backed reinsurers

  • Asset management focus: EY partners Jessel Mendes (left) and Craig Redcliffe speak about last week's EY Hedge Fund Symposium (Photo by Akil Simmons)

    Asset management focus: EY partners Jessel Mendes (left) and Craig Redcliffe speak about last week's EY Hedge Fund Symposium (Photo by Akil Simmons)

  • Economic Development Minister Grant Gibbons (Photo by Akil Simmons)

    Economic Development Minister Grant Gibbons (Photo by Akil Simmons)

  • ILS Capital Management CEO Don Kramer(Photo by Akil Simmons)

    ILS Capital Management CEO Don Kramer(Photo by Akil Simmons)

  • Pictured (from left) are Craig Redcliffe, Don Kramer, Minister Grant Gibbons and Jessel Mendes. (Photo by Akil Simmons)

    Pictured (from left) are Craig Redcliffe, Don Kramer, Minister Grant Gibbons and Jessel Mendes. (Photo by Akil Simmons)

  • EY partner Craig Redcliffe (Photo by Akil Simmons)

    EY partner Craig Redcliffe (Photo by Akil Simmons)


Expect to see more hedge fund managers setting up reinsurance companies in Bermuda as a way of boosting their investment returns.

That was one of the takeaways from the seventh annual EY Hedge Fund Symposium last week which packed the Harbourview Ballroom at the Fairmont Hamilton Princess with around 200 industry professionals.

EY Bermuda partner Craig Redcliffe told The Royal Gazette after the event that he expected to see more structures like 2012 arrivals Third Point Re, SAC Capital Re and PaCRe — each backed by huge hedge funds — in the coming months and years.

He said the successful stock market flotation of Third Point Re in August had raised interest in this strategy to a “new level”.

“In six months to a year I expect to see another couple of asset managers starting up reinsurance companies and there are a number of others in the pipeline,” Mr Redcliffe said.

Backed by hedge fund manager Dan Loeb and headed by reinsurance veteran John Berger, Third Point Re sold shares for $12.50 at its initial public offering three months ago. Yesterday it was trading above $17, more than 36 percent higher.

The IPO provided an opportunity for investors to take out some of their money through the sale of shares, adding the benefit of liquidity to the hedge fund-backed reinsurer strategy, he said.

One of the topics discussed at the symposium was the boom in insurance-linked securities (ILS), which has opened up growing opportunities for fund managers, such as reinsurance veteran Don Kramer, the chief executive officer of Bermuda-based ILS Capital Management.

Mr Kramer noted after the event that it was “very possible” that more hedge fund managers would be setting up reinsurance companies on the Island, particularly following the success of the Third Point Re stock market flotation. Bermuda provided an excellent base for this strategy, as it allowed investments to build up tax-free, while growth was further boosted by reinsurance premiums, Mr Kramer said.

Jessel Mendes, a partner with EY in Bermuda, and a leading player in Bermuda’s drive to attract asset managers to the Island, said there was a “good feeling” among industry participants at the event about the opportunities for growth.

The results of EY’s Global Hedge Fund and Investor Survey were unveiled. One of the most consistent views among those surveyed was that regulatory intrusions — and its accompanying costs — would increase in the coming years.

Two out of three hedge fund managers said their top priority was growth and they were recruiting talent and adding new strategies and products to achieve it.

Operational efficiency is becoming a larger issue in a maturing industry. While two out of three managers reported an increase in revenue and a net inflow into their funds in 2012, only half had seen an improvement in margins.

Mr Mendes said a new approach had taken root, which effectively boiled down to “selling the jurisdiction to asset managers, rather than marketing it”, through building relationships. It had to be a unified effort, he said.

“The big thing is that everyone understands the importance of the asset management industry to Bermuda and the ILS opportunities for Bermuda,” Mr Mendes said. “It’s a joint effort involving the Government, the regulator and the industry.”

Lawyers had helped the authorities understand what they needed to do to create an attractive environment in Bermuda for fund managers, Mr Mendes added. An example was last month’s amendment to the Investment Funds Act, designed to modernise the regulatory framework to make it faster, easier and more cost-effective to set up a fund on the Island.

“That would not have happened if we had not had everyone working together to make it happen,” Mr Mendes said.

Economic Development Minister Grant Gibbons also spoke at the Symposium. Afterwards, he told this newspaper that the One Bermuda Alliance government was focused on bringing investment and jobs to the Island and added that their efforts were bearing fruit.

“There is more trust and more confidence in Bermuda and a sense that we are moving in a good direction,” Dr Gibbons said. “We’re going to focus on job creators.”

Government was using a two-pronged approach, he added. Firstly trying to encourage the Island’s existing businesses to add jobs, and secondly, seeking out investors to set up new operations here, an effort being spearheaded by the Bermuda Business Development Agency (BDA).

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Published Nov 26, 2013 at 8:00 am (Updated Nov 25, 2013 at 10:13 pm)

Expect more hedge fund-backed reinsurers

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