US private equity firms look for reinsurance opportunities
US private equity firms are looking for opportunities in the reinsurance market, according to a report by Reuters.
The 2008 Atlantic hurricane season was particularly active, following two relatively quiet years that prompted a drop in insurance premiums and led to predictions of consolidation amongst brokers and underwriters.
However, earlier this month Swiss Re reported that insured losses increased to $50 billion in 2008, making it among the most expensive years ever and second only to 2005.
Payouts for this year and volatile financial markets have therefore left some providers struggling and US private equity houses are apparently looking to start up reinsurers while competition in the sector is weak.
According to Reuters, a properly-capitalised reinsurer can generate returns of 20% per year and while conversations between private equity firms and the industry are described as in early stages, there is already evidence that private equity could fill a gap left by hedge funds.
Many hedge funds have been overwhelmed by the credit crisis and investor redemptions; according to a prediction made in October by billionaire investor, George Soros, the industry is set to shrink by up to two-thirds.
Category: Insurance News
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