No easy route into reinsurance for Pine River Capital Management

by Artemis on April 28, 2014

The hedge fund and institutional asset manager Pine River Capital Management is seemingly not having an easy time getting into the reinsurance industry and launching its rumoured Pine River Re, according to recent reports.

It was reported earlier this year that Pine River Capital Management was actively seeking to raise up to $750m for the launch of its own reinsurance firm, Pine River Re Ltd., which it would manage the asset side of while putting together a team of seasoned reinsurance executives to run the underwriting side.

Previously there had been reports that Pine River were seeking to by the SAC Capital owned reinsurer SAC Re, but there the asset manager seemingly missed out as SAC Re morphed into Hamilton Re under the guidance of reinsurance industry stalwart Brian Duperreault.

Pine River is already active in the insurance-linked securities space, with a portfolio managed by experienced ILS executive Albert Selius, but it clearly wants to get more directly into underwriting reinsurance business both for profit and as a way to source more permanent capital for its asset management arm as well.

It was reported that the establishment of Pine River Re would see the return of Bill Jewett, former President of Endurance Specialty Holdings, to the reinsurance sector. Pine River also attempted to hire SAC Re’s former chairman Ken LeStrange, but according to FINalternatives that has also fallen through.

So, the latest rumour regarding Pine River and its reinsurance ambitions, according to FINalternative, is that it is seeking a partnership with Allied World Assurance Company (AWAC). That might be a much better move, to try to establish something with the backing of AWAC which could operate as a quota share sidecar as well as underwriting its own business, with Pine River operating the asset side of the firm.

That would help AWAC to grow its business, recoup some additional profit share and allow it to offload quota shares, giving the firm another angle to its insurance and reinsurance business. For Pine River it would be a simpler way into the market, with the backing of a player that clearly enjoys new strategies and appreciates asset management (AWAC already enjoys a very profitable relationship with Aeolus Capital Management).

One thing is certain, we will see Pine River in a reinsurance operation at some point this year. Sources suggest that a target of the end of the year may be more realistic than the June renewals, although if it was a lean reinsurer business model, operating initially as a sidecar of sorts to AWAC then perhaps June could be realistic? One thing is certain, partnering with a firm like AWAC should be a much easier route into reinsurance for Pine River than trying to go it alone.

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