Some well-known hedge fund managers have launched reinsurance businesses to address the twin challenges of raising capital and obtaining uncorrelated returns. If properly structured and operated, reinsurance businesses offer hedge fund managers a steady stream of investable capital in the form of reinsurance premiums, which in turn can be invested in the manager’s other strategies. However, few hedge fund managers start with the expertise or infrastructure necessary to launch and operate a reinsurance business effectively, and reinsurance businesses present unique challenges relating to people, risk management, structuring and regulation. Moreover, running a reinsurance business alongside a hedge fund management business raises various compliance issues. In short, launching a reinsurance business can help tackle some of the more elusive challenges facing hedge fund managers, but such launches entail risks to which managers typically are not accustomed. To assist managers in capturing some of that upside while mitigating the risks, we are publishing this second article in a two-part series on the primary legal, business and risk considerations for hedge fund managers in launching reinsurance businesses. In particular, this article discusses 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. The first article in this series provided background on the reinsurance business; explained how reinsurers generate revenue; discussed how hedge fund managers can participate in the reinsurance business; and described some principal benefits and drawbacks of launching a reinsurance business. See “How Can Hedge Fund Managers Use Reinsurance Businesses to Raise and Retain Assets and Achieve Uncorrelated Returns? (Part One of Two),” Hedge Fund Law Report, Vol. 6, No. 2 (Jan. 10, 2013).