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(From Reinsurance)
Byline: Mairi Mallon.
Hedge funds have always been high-risk, big-return investors. So it is no wonder that their entry into the reinsurance market by setting up their own firms has the industry sitting up and taking note - and sounding a few alarm bells.
The good investment opportunities offered by insurance have always attracted all kinds of investors. And hedge funds had been happily benefiting from the profits from reinsurance through stocks, shares and catastrophe bonds.
Now a combination of factors has made the hedge funds want to take a less passive role in their investments, and go as far as to set up their own businesses.
The success of the wave of the post-September 11 start-ups, ease of entry into the market, high returns of 20%-30% during the hard market, and an increase of cash in the hedge funds' kitty have combined to make them look again at how to get the most our of reinsurance.
They have been putting sizable chunks of cash to one side, hiring the best executives and starting up their own companies.