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Alternative Market Briefing

Hedge funds facing hike in insurance prices

Wednesday, March 14, 2012

Beverly Chandler, Opalesque London: Insurance and risk management advisory group SKCG believes it has evidence that the regulatory crackdown on hedge funds has pushed rates for insurance covering potential lawsuit costs going ever higher. The firm finds rate hikes of 5-10% for directors and officers of a company and coverage of 'errors and omissions’.

The company says that this partly due to the effect of supply and demand, infamous insider trading cases and the recent collapse of MF Global Collapse. The company has nicknamed it the "Galleon Effect" and says that insurance companies are anticipating more insider trading investigations and investor lawsuits as well as increased claim payouts.

SKCG finds that even the best-run hedge funds are beginning to see requests for increases, while insurers want premiums that are 15% higher, or more, from fund managers with poor performance and large redemptions.

"Insurance companies are responding to expectations of a more aggressive approach by regulators towards Wall Street as fraud and debacles such as MF Global continue to dominate the headlines and force carriers to pay out more claims" the company says, reporting that the SEC is focusing on compliance issues, including insider dealing and the role of expert networks, while the FBI says it has enough information to keep its investigations of suspected illegal insider trading at hedge funds going for at least five more years.

"Insurance carriers know that hedge f......................

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