Validus, Paulson Team Up For New Reinsurer
[Updated]: Bermuda-based Validus Holdings, Ltd. announced today [Apr.4] the capitalization of PaCRe, Ltd, a new Bermuda Class 4 reinsurer.
PaCRe is funded with $500.0 million of contributed capital and is rated “A-” [Excellent] by A.M. Best Co.
Validus Underwriting Services, Ltd. will underwrite business for PaCRe for which it will be paid a profit commission based on the company’s underwriting results.
PaCRe will commence deploying capacity for the June 1, 2012 renewal season. Validus has invested $50.0 million in PaCRe’s common equity.
The new Bermuda reinsurer is a joint venture with New York hedge fund manager John Paulson.
Mr. Paulson became a billionaire by short-selling subprime mortgages in 2007, and made $3.5 billion that year. In 2010, he beat a hedge-fund record by making nearly $5 billion.
His New York-based Paulson & Co will manage PaCRe’s investment portfolio, Validus said in a statement. Wall Street firms like Paulson & Co. have been increasingly attracted to the reinsurance business in recent years in part from the fees to be gained on managing investments.
Validus put up 10 percent of the initial PacRe capital. The source of the rest of the capital was not immediately clear.
PaCRe’s investment portfolio will be managed under a long term investment management agreement by Paulson & Co. Inc. Paulson & Co. has approximately US$24 billion in assets under management and has offices in New York, London and Hong Kong.
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- A.M. Best Assigns Ratings To PaCRe Ltd. | Bernews.com | April 9, 2012
Hmm, wonder how the OBA will find a way to make this good news nothing to do with the PLP.
OH NO! this flies in the face of Bob and the OBA! a company actually is starting up???? (refer to notes)
UMMM.. How many jobs do you think will be created? a big FAT NONE!
@ previous two commenters.
I’m not saying this in support of OBA but this is not a major initiative and I doubt this will result in significant new hiring in Bermuda. Validus will handle underwriting and the rest of the operation will be managed from New York. Very low risk investment in Bermuda so I doubt they care what happens to the Island in the next few years. I seriously doubt that any companies will relocate/grow major operations to Bermuda right now, and that’s the problem.
Also, Bermuda’s reinsurance industry has proved resilient but unfortunately it is only one piece of the IB puzzle. Other important financial services (eg. trust/fund management) are facing stiff competition from other jurisdictions.
Perhaps – but there will be some financial benefits derived from this formation at the minimum by way of fees etc. Hopefully this could also spark some additional development.
Concerned,
Is this good news or not? Seriously doubt the any companies will relocation. So 3rd point and SAC, and now this and you somehow throw cold water on it.
If it creates any jobs thats a positive.
It is good news as it reinforces Bermuda’s expertise in niche (specialized) insurance and further locks in the industry from going to Cayman. And yes, Validus will likely have to hire 1-2 people to manage this new line of business and fees will be generated (assuming Validus can earn profit). Will the new hired be Bermudian? Doubtful.
Anyway, I am mainly responding to the first two commenters who think this initiative is actually a vote of confidence in the island and PLP – it’s not. There’s a big different between partnering with a Bermudian firm and establishing a NEW Bermudian firm.
What do you say to SAC Re & Third Point?
I would say again that reinsurance is only ONE piece of the IB puzzle. Trust services, fund management, etc are very important as well – especially as the concept of holding money in a Trust gains popularity with Asia’s rich.
New reinsurance companies are great but if Bermuda’s economy becomes dependent on a single industry it becomes very vulnerable to shocks. For example, a really bad year for catastrophes could knock out 10 companies in Bermuda – then what?