It remains remarkable that one of the major legislative acts of the Obama years was a bipartisan bill to substantially reduce regulation of the financial sector, the absurdly-named Jumpstart Our Business Startups or JOBS Act. Get it, the acronym spells “JOBS”? So it must be good, right?
Well, it definitely contains some provisions I could get behind. But then you have Third Point Reinsurance, a company based in Bermuda with no American employees whatsoever that is taking advantage of provisions of the law for companies with less than $1 billion in revenue “allowing reduced disclosure about executive pay and waiving requirements for auditors to attest to a company’s financial controls.”
Probably nothing terrible will result from this. Probably. But you never know. Reinsurance is a weird business. The idea is that you provide insurance to insurance comapneis. So it’s the kind of thing where even if your business is totally mismanaged, on any given day things will probably be fine. If your restaurant doesn’t know how to cook tasty food, we’ll find our right away. If your factory can’t actually make cars, we’ll find our right away. But the whole point of reinsurance is that it’s about rare events so it could take a long time horizon for problems to emerge. It’s long been a very stodgy industry as well, dominated by a couple of big firms like Swiss Re and Munich Re. But over the past few years several hedge funds have gotten into the business, and know Daniel Loeb is prepping an IPO for the one his hedge fund started. Creating a new netherworld of untested low-disclosure reinsurrance companies isn’t exactly the job-creating crowdfunding nirvana we were promised. But make no mistake—this kind of broad financial deregulation was always at the core of why the bill had so much legislative momentum.