A lot of disasters but even more premiums? Easy Straße.
Not so many disasters but you overcharged for the risk?* Ditto.
Loss ratio over100+your cost of funds? Boulevard of Broken Dreams.
From DealBook:
In its latest move to bolster its asset management arm, Kohlberg Kravis Roberts has found an unusual partner: a hedge fund seeking to invest in natural disasters.
The investment firm said on Wednesday that it had taken a 24.9 percent stake in Nephila Capital, an $8 billion firm that focuses on reinsurance opportunities tied to catastrophes like hurricanes and earthquakes. (The investment is being made by the firm itself, rather than through any of its private equity funds.)*After the 8.8 magnitude Chilean eathquake in 2010 we posted "No Surprise: Chile Leads to Reinsurance Rate Increase Debate" BRK-A; BRK-B:
Long known as a private equity powerhouse, K.K.R. has steadily built up other businesses that diversify its operations, moves arising in part from the firm’s transformation into a publicly traded company.
The investment in Nephila is the latest expansion by K.K.R.’s asset management business, which has grown in recent years through moves like a deal to buy Prisma Capital Partners, a fund of hedge funds.
But Nephila may be one of the division’s most unusual partners yet. The nearly 10-year-old firm, a spinoff from the Willis Group, makes money by taking on the risk of natural disasters from insurers. The bet is that by spreading out its investments across an array of catastrophes — a hurricane hitting the northeastern United States, an earthquake roiling Japan — will offer enough diversification to limit risk from any one incident....MORE
No kidding.Always remember, to an insurer/reinsurer a catastrophe is just a great reason to raise rates.
A brisk breeze gets the boys in Omaha, Zurich, Munich and London (Lloyds) talking about premium increases.
Not to mention the herverzekering crowd in Amsterdam, they're tough bastards.
Which is why a KKR likes the action.
