Sandell Asset Management Corporation has become the latest hedge fund manager to join the Multi-Strat Re platform, as the investment oriented reinsurance strategy continues to gain appeal among the asset managers of the world.
Increasingly, asset managers and managers of hedge fund strategies are looking to establish reinsurance vehicles to help them gain access to what is considered more permanent capital, as they follow the strategy of underwriting longer-tailed, low volatility reinsurance business, while utilising the premium float within their investment strategies.
Sandell has sponsored the launch of Sandell Re, a Bermuda based reinsurance company which will invest in the firm’s global event-driven investment strategy. The investments made will be managed in a separately managed account with an investment objective substantially similar to Sandell Asset Management’s main hedge funds.
Sandell Re is a Class 3A reinsurer, incorporated and licensed by the Bermuda Monetary Authority recently. Sandell Asset Management Corp. of New York has an investment management agreement with the reinsurer and will manage the assets of Sandell Re using the firm’s hedge fund strategies.
Sandell Re, which was advised by Multi-Strat Advisors Ltd., is the latest participating reinsurer to join the Multi-Strat Re Ltd. platform. MultiStrat Re is a Bermuda specialty reinsurer designed specifically to launch and grow asset manager sponsored reinsurance companies like Sandell Re.
Multi-Strat Re performs the risk selection and underwriting, while the participating asset managers reinsurers benefit from a pro-rata share of the premium float. The float can be put to work in the asset managers hedge fund strategies, enabling them a low-friction way to enter the reinsurance space.
“We have been evaluating reinsurance opportunities for several years and believe this offers a unique permanent capital vehicle for the firm,” commented Tom Sandell, Founder & CEO, Sandell Asset Management Corp. “Our goals remain aligned with our investors and we are committed to offering the best possible products and services to our clients. Reinsurance will provide one more option moving forward.”
“We are excited to welcome Sandell Re to the MultiStrat platform and look forward to supporting the growth of the company through our focus on specialty underwriting,” added Bob Forness, Chairman and CEO, MultiStrat Re. “Sandell Re is the fifth reinsurer to join the platform and the first for 2015.”
Asset manager backed, hedge fund strategy, or investment oriented reinsurers, are expected to become a growing part of the reinsurance market. The strategy of operating a higher performance asset strategy, while matching asset and liability durations, taking advantage of premium float enables these reinsurers to outperform.
By leveraging a platform like Multi-Strat Re the asset managers can enter the reinsurance sector without the need for hiring underwriters, positioning them to begin to benefit from the permanent capital straight away while allowing them to gain experience of the hedge fund reinsurance business model.