Private equity, credit investment and hedge fund asset manager Oaktree Capital Group LLC is reportedly in the process of setting up a life reinsurance company as it becomes the latest alternative asset manager targeting the reinsurance space as a source of capital.
According to this Reuters article, Oaktree Capital is hiring William Egan, an investment banker for financial institutions previously at Bank of America Merrill Lynch, to take a leadership role in a new life reinsurance company.
Oaktree Capital, which had $86.2 billion of assets under its management at the end of March 2014, has not made any official announcement about its interests in the reinsurance sector, however sources told Reuters that a life reinsurer was in the asset managers future.
Oaktree Capital would then join the ranks of competitor Apollo Global Management and its Athene Holding life insurance and reinsurance business, which has successfully delivered significant premium income to Apollo which it manages on behalf of its re/insurance business.
Asset managers and hedge funds are increasingly looking to insurance and reinsurance as they see the premium income as a source of more permanent capital to invest in their various strategies. Many asset managers target lower volatility and longer tailed classes of re/insurance business as it allows them to invest the premiums for a longer period.
Oaktree Capital is not the only asset manager reportedly looking into the reinsurance sector right now. Hedge fund manager Golub Capital is said to be working alongside ex-Alterra reinsurance exec Tom Wafer to establish a reinsurance start-up, according to the Insider.
This trend shows no sign of slowing. The reinsurance space is a good fit for asset managers, who look for long-term sources of capital to match with their asset management strategies. Observers believe a number of these hedge fund backed reinsurers are currently in the works (see Tony Ursano’s comments in this piece) and that we could see a number of new asset manager backed reinsurers launch by year-end.