Hedge fund SAC Capital Advisors LP, founder Steve Cohen started a reinsurance company that can invest in his hedge fund, following Daniel Loeb and David Einhorn in entering the business to get more permanent capital.
John Paulson made a deal with reinsurer Validus Holdings few months ago. Dan Loeb‘s Third Point LLC set up a reinsurer called TP Re, Now Steve Cohen’s SAC Capital has just set SAC Re. They followed on the model of David Einhorn and his Greenlight Capital Re Ltd.
Paulsons’s PaCRe Ltd, had been formed with an initial capitalization of $500 million to write reinsurance, which insurance companies use to backstop portions of their risk.
Validus put up 10 percent of that capital and will underwrite the company’s policies, collecting a commission based on its profits. The source of the rest of the capital was not immediately clear. Paulson & Co will manage PaCRe’s investment portfolio, Hedge Funds have been attracted to the reinsurance business in part from the fees to be gained on managing investments. Most have set up and funded reinsurers to profit from both the underwriting side of the business and portfolio management
SAC Re Holdings Ltd. is being run by Simon Burton and will focus on high-margin property catastrophe and other property classes, the Bermuda-based company said in a statement today. The company’s investments will be managed by SAC Capital, which oversees about $14 billion out of Stamford, Connecticut.Cohen joins Loeb, the founder of Third Point LLC who started Third Point Re in Bermuda last year, and Einhorn, head of New York-based Greenlight Capital Inc., in creating a reinsurer to help to raise money for his hedge fund that isn’t subject to investor withdrawals. Reinsurers, which help insurers shoulder risk, earn premiums that they invest to make a profit. SAC Re “leverages the combined strength of our reinsurance executive team and SAC Capital’s asset management capabilities,” Burton, the company’s chief executive officer, said in the statement.The company raised $500 million in a private placement from founding investors including Cohen and private-equity fund Capital Z Partners III LP, which invests in the Bermuda reinsurance market, according to the statement.Einhorn started his reinsurer in 2004 and began writing insurance a year late.