The fate of SAC Re isn’t frightening investors away from the hedge fund-backed reinsurance model, Randall Swan, chairman of the board at Swan Re, tells Bermuda:Re. Swan Re, part of a new wave of hedge fund-backed reinsurers setting up shop in Bermuda, hasn’t encountered any headwinds on account of SAC Re’s recent troubles following multiple indictments for insider trading at parent company SAC Capital.
Swan says: “we haven’t had investors express any issues with that—at least not to our faces. It’s out there, but there are many more success stories in terms of Greenlight, Third Point and Berkshire Hathaway. These companies have blazed the trail and will allow us to come in and be successful. The concerns have been minimal.”
While Swan takes inspiration from the hedge fund-backed reinsurers that have gone before, Swan Re will be backed by an investment strategy he believes will set it apart.
He explains: “you always want to build on the success of others, but we will differentiate ourselves going forward through our investment strategy. It’s more suited for an insurance company play. We’re able to start off with a premium-to-capital ratio of 2:1, while other hedge-fund backed companies are much more conservative due to the volatility of the underlying investment.”
Swan hopes to go public with Swan Re sometime this year, and in the meantime has pulled investors from the ranks of high net worth individuals, accredited investors and those with close relationships to Swan Wealth Management. Swan Re is targeting a 20 percent return on equity on a tax-deferred basis.
Swans says: “I suspect that’s higher than traditional reinsurance companies. Our cost structures are also lower to start off with.”
The reinsurer, according to Swan, is a long-term play, and the hedge fund’s low-volatility investment strategy makes a perfect match with the high frequency and low severity business the reinsurer intends to write.
He concludes: “we like the concept of having capital that we can invest in our investment strategy long-term. It’s a perfect combination of business, and we hope to be doing this for decades.”
Swan Re, hedge fund-backed reinsurer