WEST PALM BEACH, FL (www.hedgeco.net) -Many hedge fund managers with significant cash at hand have made investments in property catastrophic insurance, a multi billion dollar business. Now with the destruction caused by Hurricane Katrina in the gulf, such managers are in for a test of their new ventures. According to published reports, the initial damage estimates for insurers and reinsurers range from $9 billion to $25 billion.

Insurance experts believe much of the bills for the damages caused by the hurricane would go to reinsurers and hedge funds that recently entered the insurance sector. Robert Cooney, chief executive of Max Re, a Bermuda reinsurer told Reuters, “Hedge funds are not necessarily long-term investors; they may get out if there are a string of losses, or if rates fall too low.”

Cooney said that Hurricane Katrina could be the first real test for hedge fund backed insurers. Last year according to published reports, hurricane damage was estimated to cost about $23 billion. However, those losses were encountered prior to hedge funds becoming active in the insurance sector.

Last year, CIG Re, of Bermuda entered the castrophic insurance business, backed by the Citadel Investment Group. Other hedge funds such as West End Capital Management (Bermuda) Ltd., formed a new reinsurer, Rockbridge Reinsurance Ltd in the Cayman Islands. Max Re’s Cooney told Reuters, “Hedge funds are known for their nimbleness to get in and out.”

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net

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