Daniel Loeb is an American hedge fund manager and founder of Third Point LLC. Prior to founding the firm, he graduated from Columbia University and worked at Citicorp. He recently started a reinsurance company that can invest in his hedge fund to seek more permanent capital.
David Einhorn is President of Greenlight Capital, a long-short value-oriented hedge fund, which he began with $1 million in 1996. Einhorn started his reinsurer in 2004 and started writing insurance a year later.
Dan Loeb follows Einhorn in creating a reinsurer as a way to raise capital for his hedge fund. Reinsurers are paid a reinsurance premium for the risk transferred to them from the insurers.
Third Point Re is based in Bermuda and has about $500 million capital. It hired John Berger as the chief investment officer, who has almost 30 years of experience in the reinsurance business. He was the former president and founder of Chubb Re Inc. and was most recently the chief executive officer of reinsurance for Alterra Capital Holdings Ltd.
The letter sent on Wednesday to Third Point Investors said that, “We believe that the combination of Third Point’s longstanding exceptional asset management returns, Mr. Berger’s standout underwriting track record, and a reinsurance market that may improve following multiple events in the past 12 months make it a promising time to launch Third Point Re”.
Reinsurance rates tend to increase after natural disasters. According to a report from Guy Carpenter & Co., Earthquakes in Japan and New Zealand as well as flooding in Australia caused over $70 billion insured losses in the first half of the year.
To take advantage of rising rates after natural disasters, banks, private-equity firms and hedge funds have formed reinsurers in the past. After Hurricane Katrina and other storms caused huge losses, the so-called Class of 2005 reinsurers were formed.