Royal Gazette – Standard and Poor’s (S&P) said yesterday that the hedge fund reinsurers philosophy of running a higher risk portfolio in order to underwrite at lower rates could be flawed.
The idea that hedge-fund reinsurers will earn higher investment returns than a typical reinsurer running a low-risk asset portfolio, with the result that they can compete by underwriting at lower rates, is flawed because hedge fund reinsurers need to allocate more capital as a buffer against the greater investment risk, thus offsetting the benefit of the extra return, the rating agency argued.
