Log In

Reset Password
BERMUDA | RSS PODCAST

Berger: US scrutiny has eased on reinsurers

NEW YORK — Dan Loeb's Bermudian-based Third Point Reinsurance Ltd said scrutiny of the industry's offshore tax advantage has lessened after hedge fund manager John Paulson closed a venture that stood out as an “outlier” for its aggressive use of strategies that were criticised as abuses.

The Paulson reinsurance operation, based in Bermuda and known as PaCRe, “had no employees, they wrote very little business and they had a big amount of capital sitting offshore. And I think that got a lot of attention,” Third Point Re chief executive officer John Berger said yesterday at a conference held by Morgan Stanley. “Well, that's off the table now, they shut that down. So I think the pressure to do something about that has diminished.”

US senator Ron Wyden has urged the Treasury Department since 2014 to crack down on operations that help hedge fund managers minimise taxes on some trading profits when the investments are tied to insurers in locations such as Bermuda. The IRS has never clearly defined how much insurance a company must sell to qualify for the favourable tax treatment. Validus Holdings Ltd., which partnered with Paulson on a reinsurance venture, said in January that his PacRe Ltd. was shut down.

Berger has long sought to distinguish his company from PacRe. Bermuda-based Third Point Re, which counts on Loeb to oversee investments through his hedge-fund strategies, takes on underwriting risks from US mortgage guarantors and auto insurers and has added staff to win more contracts.

“If you take any reasonable test of what is a real insurance company, we pass it, from the amount of business we're writing to the amount of reserves we have,” Berger said.

The CEO said he's heard nothing new recently from the Internal Revenue Service about the industry's tax treatment and that action may have been stalled amid the presidential race. Representatives for the IRS, Paulson and Wyden, an Oregon Democrat, had no immediate comment.

Berger acknowledged that competition has made it more difficult to find profitable underwriting opportunities. Third Point Re is headed for its third-straight annual decline in New York trading and still trades below its 2013 initial public offering price of $12.50 a share. The stock closed at $11.28 yesterday, down 9 cents from Tuesday's close.

We pass the test: John Berger, CEO of Third Point Re

You must be Registered or to post comment or to vote.

Published June 16, 2016 at 9:00 am (Updated June 15, 2016 at 9:03 pm)

Berger: US scrutiny has eased on reinsurers

What you
Need to
Know
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon