John Paulson joins hedge funders in the reinsurance business making a deal with reinsurer Validus Holdings. Dan Loeb’s Third Point LLC set up a reinsurer called TP Re, while Steve Cohen’s SAC Capital has set plans to open up 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.
Validusput 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 operations.
Read More: http://www.reuters.com/article/2012/04/04/us-validus-paulson-idUSBRE8331BL20120404