Greenlight Repositions Catastrophe Reinsurance, Waiting Out M&A

Hedge-fund backed Greenlight Capital Re has pivoted its catastrophe reinsurance business during the January renewals as new alternative capital players entered the market and continued to put pressure on pricing catastrophe risk.

Separately, David Einhorn‘s firm says that while the current reinsurance merger boom will restrict business to “only the largest reinsurance companies in the industry” there are still opportunities to pick up new business.

Greenlight “repositioned” its catastrophe retrocession business “from predominantly excess of loss contracts to quota share contracts,” the company said in its most recently released earnings statement Tuesday.

“We have found there to be less available capacity from alternative capital providers for quota share contracts in this area and as such terms and pricing are more favorable,” the company said. “Additionally, we have recently secured new contracts with larger, syndicated reinsurance placements for general casualty and professional liability business which have a longer duration of claim payments than the business we have written in the past.”

The company added that it remained wary of the M&A deals that have been reshaping the reinsurance business in 2015.

“We believe there is likely to be further consolidation in the industry. However, this consolidation will not likely result in a significant reduction in total capital within the industry, but simply a concentration of capital in fewer, larger participants,” the quartlery filing stated. “ We also believe that while some business may be further restricted to only the largest reinsurance companies in the industry, this consolidation may create an opportunity for us as more capacity may be made available to other reinsurers.”

Greenlight Re reported its fourth quarter earnings Tuesday, earning net income of $60.7 million for the fourth quarter of 2014 compared to net income of $83.9 million for the same period in 2013.

The company addded that it remained hesitant about catastrophe reinsurance pricing in the current soft market.

“[If] the reinsurance market continues to soften, we anticipate that we will seek to maintain or even reduce premium writings rather than accept mispriced risk in order to conserve our capital for a more opportune environment,” the company explained.

Greenlight reported gross written premiums of $74.3 million in the fourth quarter of 2014, compared to $124.8 million in the fourth quarter of 2013. Net earned premiums were $75.2 million, a decrease from $141.5 million reported in the prior-year period.

“We are pleased with our progress and ability to attract new business in this competitive reinsurance market,” said Bart Hedges, Chief Executive Officer of Greenlight Re. “Overall, our 2014 premium numbers decreased due to the impact of not renewing certain business, which we believe was inadequately priced.”

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