Einhorn Reinsurance Looks To Diversify Term Risk

Einhorn Reinsurance Looks To Diversify Term Risk
David Einhorn InsiderMonkey (CC BY-ND 2.0)

As the general quest for acceptable low risk yield among professional investors becomes more intense, and the search for sticky money intensifies, some money managers are considering expansion of their exposure to longer term insurance risk.

Einhorn poached two industry executives for business improvement

With a backdrop of searching for more profitable re-insurance risk, Greenlight Capital Re, Ltd. (NASDAQ:GLRE), a re-insurance company covering mostly short term risk, recently poached two industry executives to improve results and target new markets. Tim Adair, who was formerly with managing director at Guy Carpenter, the reinsurance brokerage at Marsh & McLennan Companies, joins Greenlight along with Cliff Dunigan, who was senior vice president at the reinsurance subsidiary at W.R. Berkley Corp.

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Adair and Dunigan will face a growing challenge at Greenlight, which faced losses in the first six months of 2014. Greenlight paid out 100.7 cents on claims and expenses against every one dollar for premium.  Compare this to 98.3 cents in payouts in 2013 relative to every premium dollar collected. After the company exited certain business lines, Greenlight’s revenue fell to $199.5 million, down 18 percent on the year.

David Einhorn: Increased competition for insurance business

The issue is apparently increased competition for insurance business, with companies lowering their acceptable premiums relative to the risk profile.

“It’s a very difficult market and it’s hard to find new business now,” Greenlight Re Chief Executive Officer Bart Hedges said in an interview with Bloomberg. “We need to make the pipeline bigger.”

To combat this growing loss of profitability, Greenlight seeks to expand its maturity exposure. The report said Adair and Dunigan will expand Greenlight’s market by competing for longer term casualty insurance risk.

“We’ve never really seen a broad portfolio of casualty business,” Hedges was quoted as saying. Adair and Dunigan will “add some duration” on the underwriting side.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)www.valuewalk.com
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