Third Point Re fundraising for new $250m property catastrophe fund

Bermuda based reinsurer Third Point Re, backed by a hedge fund and institutional investors, is actively raising capital for a new fund to support underwriting additional property catastrophe business. Third Point Re is backed by Daniel Loeb’s Third Point LLC hedge fund, who manage and invest the reinsurers assets in the typical hedge fund reinsurer style. Third Point Re already have $750m of capital after their launch, the new fund will see them move over $1 billion.

According to Bermuda’s Royal Gazette who spoke with Third Point Re CEO John Berger (their full story here), they aim to raise the $250m by the end of the year, no doubt to put the capital to work providing reinsurance capacity at the January renewals. John Berger told the Royal Gazette that while $250m is the near term target for the new fund, they eventually hope to take it beyond $500m with additional fundraising.

Berger said that $250m is small in the world of property catastrophe reinsurance and he feels that a sustainable size for a fund in that business is around $500m to $600m. He added that if they can achieve that size and get a track record for catastrophe reinsurance business then they may go even bigger.

Berger added that at the moment they don’t focus very much on catastrophe business at Third Point Re, they have a mandate for lower volatility reinsurance business to complement a more aggressive investment philosophy at the hedge fund. It seems that the new Third Point Re cat fund will reverse that by seeking out catastrophe risk while investing its assets more conservatively. That should please investors looking for a good mix of returns as they can invest in the existing Third Point Re funds, which underwrite largely non-catastrophe business or the new fund which it seems will offer catastrophe reinsurance sized returns.

The article also mentions some of John Berger’s aspirations for Third Point Re. In five years he see’s the reinsurer operating underwriting offices in London and New York, as well as their Bermuda headquarters. Third Point Re are launching their London office very soon, as we covered previously here. He also said that they will IPO at some point in the future, but equity valuations and market conditions are not conducive for that right now.

We suspect other similar reinsurance fund management companies will also be thinking about fundraising at this time, with a view to offering additional capacity to clients at the January renewals.