LONDON Dec 4 British equity investors have put
$100 million into a new reinsurance fund, the latest example of
mainstream investors seeking exposure to the sector's rising
prices and relative immunity from financial shocks.
Blue Capital Global Reinsurance Fund, set up by Bermudan
reinsurer Montpelier Re, raised the cash through a
listing on the London Stock Exchange's specialist fund market,
it said on Tuesday.
Blue Capital plans to make money by selling reinsurance to
primary insurers, putting up its own cash as collateral to
absorb potential claims.
It is offering shareholders annual returns of 6 percentage
points above the London Interbank Offered Rate (LIBOR), the
average rate at which banks lend to each other.
Some investors are attracted to the reinsurance sector
because costly natural disasters including Hurricane Sandy are
expected to push up reinsurance prices when policies are renewed
The industry is also seen as relatively insulated from
economic and financial slumps as demand for reinsurance
generally holds up well during recessions.
"We expect the upcoming January 1st renewals to present us
with a number of excellent opportunities to start deploying our
capital," Blue Capital chairman John Weale said in a statement.
Reinsurance funds such as Blue Capital offer exposure to the
sector without buying shares in listed reinsurers, which are
mostly trading below asset value due to lingering suspicion of
financial stocks following the 2008 crisis.
Investors seeking to bypass the stock market have also been
setting up their own reinsurance vehicles and buying specialist
securities such as catastrophe bonds, which offer an income in
return for agreeing to pay some of an insurers' claims if a
hurricane or earthquake strikes.
Hedge fund managers Dan Loeb, Steve Cohen and John Paulson
have all set up reinsurance companies in the past year, and
Dutch pension fund PGGM, with some $152 billion under
management, said in May it was putting more cash into