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David Einhorn’s Greenlight Re Loses Key Executive

The departure of the COO comes as the reinsurer continues to struggle.

The executive brought into David Einhorn’s reinsurance company Greenlight Capital Re to be what he called a “second set of eyes” on its struggling operations is leaving the company. 

On Friday, Greenlight Re announced that Michael Belfatti, a 20-year reinsurance veteran who joined as chief operating officer last September, is stepping down “for personal reasons.” 

It is the latest exodus from the reinsurer, whose stock is down nearly 31 percent year to date. An executive in the underwriting department, Tim Aidair, left several months ago and has joined another reinsurer, the United Insurance Company.  

The announcement of Belfatti’s departure came Friday, a day after he and Greenlight Re reached a settlement on his departure terms, which was filed with the Securities and Exchange Commission after the market close. All disputes between the parties, such as unfair or wrongful dismissal, have been settled, and an undetermined severance pay package has been reached.  

The terms of the settlement are confidential, and both parties have agreed not to disparage each other — what’s known as a nondisparagement agreement.

“I want to thank Mike for his contributions to Greenlight Re over the last year,” said CEO Simon Burton in a statement announcing his departure. “We wish him all the best in his future endeavors.”

Added Belfatti, “I am proud of our accomplishments during my tenure with Greenlight Re. I wish the Company and the team much success.” 

After Belfatti joined Greenlight last year, he moved swiftly to beef up its loss reserves. “I was a new set of eyes over the last few months,” he said in the company’s fourth-quarter earnings call  when the question had been raised about the move. In response to another question, Belfatti added that Greenlight Re sets its reserves based on “internal review,” not outside auditors.

When Belfatti was hired last year, Greenlight Re said it created the role of chief operating officer for him, noting his long career at other insurers. 

As COO, Belfatti was charge of overseeing the reinsurer’s pricing, actuarial and risk management functions, and led lead data collection, analytics and technology efforts across the firm.

“I have followed Mike’s career closely over the past 15 years and he is one of the most capable people I know,” Burton said at the time. “Mike’s extensive experience overseeing reinsurance pricing and risk management, and his deep knowledge of data analytics innovation, make him an ideal fit for our long-term goals.”

Traditional reinsurance experts have a difficult time at hedge fund-run reinsurers, according to a former executive of Greenlight Re. The “good underwriters and smart auditors” Greenlight Re has employed are “under tremendous pressure because of the [poor] performance of the investment portfolio,” this person says. “That’s killing them.” 

Greenlight Re declined to comment. 

Traditional insurance companies take risk on the underwriting side, but have conservative investment portfolios. Greenlight Re flipped that around, the former executive said. Because most of the risk was on the investment side, it structured insurance deals to limit its risk — which also meant it couldn’t participate in the upside there to soften the blow from losses, the insurance executive added.

This year, Greenlight Re is doing far worse than its rivals, in part because its investment portfolio was down 15.2 percent through June. Other hedge funds that run reinsurance companies and whose investments have performed better are doing slightly better — but their reinsurance efforts are still dragging down the stocks.

For example, shares in Third Point Re are down nearly 14 percent so far this year (Third Point’s flagship hedge fund returned 0.8 percent through June).

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