hedge fund

The U.S. Treasury Internal Revenue Service has now published a draft rule (link to the draft at the bottom) on the perceived tax issue associated with hedge fund reinsurance strategies, but is asking for comments and feedback to help it ensure it accurately identifies those taking advantage of any loophole.

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.

Greenlight Re, the Cayman Islands domiciled, hedge fund strategy reinsurance firm backed by David Einhorn and his Greenlight Capital, Inc. hedge fund, has slashed its premiums written again in the last quarter as it declined to renew business deemed unprofitable.

The U.S. Internal Revenue Service will aim to release regulations related to the hedge fund reinsurance strategy within 90 days, after its commissioner was quizzed on the lack of movement on an issue that has been raised repeatedly in Senate.

Multi-Strat Re Ltd., the Bermuda based reinsurance venture that seeks to enable asset managers, such as hedge fund managers, to enter the market with less friction, has added another asset manager to its ranks in Crabel Capital Management LLC.

One of the criticisms of the hedge fund or asset manager backed reinsurance business model is that some firms horde their capital, rather than deploying it to underwrite risk, but in Hamilton Re’s case that’s not true, said CEO Kathleen Reardon.

Bloomberg has reported that once again the U.S. Treasury department is actively considering targeting the hedge fund backed reinsurance sector, as it seeks to close what it considers a “tax loophole”.

The hedge fund backed reinsurance mode which seeks to leverage premium inflows as investment capital in hedge fund strategies in an attempt to outperform on the asset-side, is not treated as a new business model by rating agency A.M. Best.

It’s not just hedge funds that are entering the insurance and reinsurance market in search of so-called long-term capital to put to work in their strategies, private equity firms targeting the space are also seeking opportunities to add assets under management.

In a newly published report ratings agency Standard & Poor’s questions the viability of the hedge fund backed reinsurance strategy, asking whether combining the hedge fund and reinsurer strategy can create higher risk-adjusted returns.