Introduction
This article discusses the investment thesis that involves shorting Blue Capital Reinsurance Holdings (BCRH). The key reasons for the 'short' thesis are: likely higher than reported losses, negative price and earnings momentum, and mostly negative news (psychology).
I expect to see an upward revision of reported losses given 1) market practices of relying on catastrophe loss models (which tend to underestimate losses) and 2) BCRH's practices of upward revision of losses. There's only so many times one can kick the can down the road, but at some point, ever increasing insurance claims