Hurricane season events notwithstanding, hedge fund reinsurer Greenlight expects to make an underwriting profit in the coming quarter

Greenlight Re has done most of the hard work to reduce its costs, and is focused on evolving its underwriting strategy, according to its chief underwriting officer Brendan Barry.

He expects an underwriting profit for the Cayman-headquartered hedge fund reinsurer in the next quarter, unless the weather god intervene.

“We anticipate an underwriting profit in the next quarter, with the caveat of whatever might happen in the catastrophe market,” said Barry. “But we write very little cat business anyway.”

Greenlight’s operating costs are relatively low, he points out. The reinsurer’s internal operating cost figure, which doesn’t include brokerage costs, is 3.5%. Adding in such fees and commissions, it is more like 10-15%.

“We’re focused on the evolution of our underwriting strategy,” Barry said. “We’re managing our cost efficiency but I think we’ve already done the hard yards on that.”

The reinsurer has expanded its mortgage reinsurance book with quota share business, he mentioned, citing good margins, as well as taking on more energy and satellite contracts. Trade credit and surety excess-of-loss business has also grown at Greenlight.

Barry said Greenlight would not need to make any changes to its structure in the light of US tax system changes.

“That will have no impact on us, without a US affiliate,” said Barry. “We’ve dealt with the PFIC issue. I expect almost no reinsurers will have PFIC issues by the time they’re done.”

Greenlight has also set up an innovation group this year, with three main objectives, Barry explained. The first of these is to further improve efficiency in the business model; secondly, to improve the reinsurer’s platform and distribution; and thirdly, to work on better data and analytics.