SNL Financial Reports Investment Firms' Move Into Insurance Market with Q3'13 IPOs

According to research from SNL Financial, Investment firms backed the three insurance IPOs announced or completed during the third quarter, continuing the movement of nontraditional players into the industry.

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This is somebody with an established Rolodex, and that means that he can compete for business without saying, 'I have to sacrifice pricing.' He just knows people, and he knows how to underwrite and knows what to accept.

(PRWEB) October 11, 2013

According to research from SNL Financial, Investment firms backed the three insurance IPOs announced or completed during the third quarter, continuing the movement of nontraditional players into the industry.

Investment firms continued their push into insurance in the third quarter, backing a trio of IPOs aimed at serving narrow parts of the industry.

The offerings represent the latest step in hedge funds' and private equity firms' migration into the sector in search of new, profitable opportunities. Funds have poured cash into the reinsurance industry during the past couple years, setting up and investing in alternative vehicles that promise better returns than their typical investments. Private equity firms elbowed their way into the primary insurance business by snapping up brokerages and accumulating cheap blocks of annuities business.

Now, major firms are spinning off companies of their own, entering parts of the industry where they think their reputations and deep pockets might give them an advantage.

Perhaps the highest-profile public offering in the third quarter was the August debut of Third Point Reinsurance Ltd. Developed by Daniel Loeb and his firm, Third Point LLC, the company follows the path of similar hedge fund-backed reinsurers such as Greenlight Capital Re Ltd. and S.A.C. Re Ltd. That class of reinsurers has helped reshape the sector in recent years, as investment firms crowd into the business in search of broader sources of capital.

Although the influx of participants and lack of major catastrophe losses have driven prices down, analysts see opportunities for Third Point Reinsurance to thrive through shrewd underwriting and its investment portfolio connections to Third Point. The reinsurer courts quota share agreements within underserved areas of the market, leaning on Loeb's reputation and strong relationships with brokers to win business.

"This is somebody with an established Rolodex, and that means that he can compete for business without saying, 'I have to sacrifice pricing,'" Keefe Bruyette & Woods analyst Meyer Shields told SNL. "He just knows people, and he knows how to underwrite and knows what to accept, so it's entering at what's clearly not a great point but having skills that will at least allow the company to maneuver through that."


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