Comment - The long-term strategy is still key.

(From Reinsurance)

Byline: Henry Keeling, chief executive of reinsurance operations, XL Capital.

Again, it is the 'catastrophe' element of our world that has grabbed the headlines. And, once again, this is a field that seems to have found popularity among other of our financial classmates.

With George Soros entering our number and lending the weight of his reputation, not to mention capital, to our sector, our self-inflicted status as pariahs in the financial world seems to be relaxing. In fact, Mr Soros is only part of a growing interest, including a number of hedge funds that are looking to reinsurance as a source of fresh profit, relatively untouched by the equities markets and diversified from other asset classes. I welcome this injection of new capital and fresh ideas and firmly believe the market can always do with a new reinsurance company, despite the truism that they will rest on the foundations laid by the work of established players - or established failures!

The determining factor in whether these new companies (including Glacier Re, CIG Re and hedge funds Cochran Caronia and Cooper Neff) are good for the market in the long term, however, will be the way in which they disport themselves. While none has followed the example set by the putative Compass Re some 11 years ago - publicly stating its plan to exit the market after three years - there is always a concern that they may be in it for the short term and will seek a return on their outlay sooner rather than later.

This is not a problem in itself; venture capitalists and private equity holders are the typical founders of new companies and it is understandable that they will want to mature out of their investment, either through the sale of stock or entire books. We only have to look at the post-9/11 start-ups for evidence of this. Rather, there is an interest in the way they serve their clients and respect the conduct of the market for the duration of the time they are in business. A short-term approach can be disruptive for the market, both for established players and for buyers of the product who do not necessarily get stability with planning, thus exacerbating the cycle for all.

Their ability to offer long-term planning can differentiate increased capacity of ...