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July 31, 2005
Insurance underwriting looking good to Hedge Funds
Hedge Funds have discovered a new sector to invest in – The Insurance Sector. Investing in this sector translates into diversification of risk since this is a completely uncorrelated sector. Hedge Funds have recently been seen purchasing ‘Catastrophe Bonds’ from Insurance and re-insurance companies. This way they provide the much needed money to them in times of catastrophes such as hurricanes and earthquakes. Insurance companies also purchase re-insurance policies in order to spread their risks to help them in times like this. According to a report, the hedge funds have been found to be participating in re-insuring companies like - Glacier Reinsurance AG of Switzerland; CIG Reinsurance Ltd. of Bermuda; and Ritchie Risk-Linked Strategies Ltd of Bermuda. It is predicted that more and more hedge funds are likely to invest in this sector due to reduction in trading opportunities in the markets. Hedgeco.net reports:
“New reports show that many hedge fund managers have been active in purchasing “catastrophe bonds” through such transactions money is provided to insurers as well as re-insurers when catastrophic events such as hurricanes and earthquakes occur.”
Read More: Hedge Funds may enter into insurance underwriting
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