Among the many challenges facing hedge fund managers, two loom particularly large: raising and retaining assets, and achieving uncorrelated returns.  A growing number of brand-name hedge fund managers are addressing these twin challenges through an innovative solution – launching reinsurance businesses, typically in offshore jurisdictions.  If properly managed, the premiums collected by a reinsurance business can offer a stream of income – in effect, a return on investment in the business – that is uncorrelated with returns on other assets; and those premiums provide capital that can be deployed in a manager’s other investment strategies.  But reinsurance businesses are not without challenges, notably including the specialized skill set required to manage such businesses effectively and the possibility of large claims following catastrophes.  This article is the first in a two-part series designed to highlight the primary legal, business and risk considerations for hedge fund managers contemplating the launch of a reinsurance business.  In particular, this article provides background on the reinsurance business; explains how reinsurers generate revenue; discusses how hedge fund managers can participate in the reinsurance business; and describes some principal benefits and drawbacks for hedge fund managers considering launching a reinsurance business.  The second installment will discuss how hedge fund managers generally approach starting a reinsurance business; the best domiciles for reinsurers; a checklist of steps required to launch a reinsurance business; how hedge fund managers invest the “float” generated by such a business; conflicts of interest raised by a hedge fund manager’s side-by-side management of a reinsurance business and an investment management business, and how managers should address such conflicts; and policies and procedures that hedge fund managers should implement to accommodate the operation of a reinsurance business.