NEW YORK (Bloomberg) — Greenlight Capital Re Ltd., the Cayman-based reinsurance company led by hedge fund manager David Einhorn, raised $194.8 million in an initial public offering.Einhorn, a shareholder activist whose hedge fund has posted a 29 percent annual average return over the last 10 years, is chairman of the reinsurer and owned a 17 percent stake before the share sale. Greenlight sold 10.3 million Class A shares for $19 apiece, after the company projected a range of $16 to $18, the Cayman Islands-based reinsurer said yesterday in a statement.

Einhorn, 38, began underwriting insurance last year after Hurricanes Katrina, Rita and Wilma pushed up catastrophe reinsurance prices as much as threefold. Greenlight is the third reinsurer to make an initial share sale this year, following in the footsteps of two bermuda-based post-Katrina start-ups. Shares rose 21 percent to $23 as of 10:50 a.m. in Nasdaq Stock Market trading.

"It's a new company, it doesn't have a book of Katrina losses, and that gives them a competitive advantage," said Francis Gaskins, president of IPODesktop.com in Los Angeles. "I think the window is there for this type of insurance company, and the window doesn't stay open forever."

The two Bermuda companies made initial share offerings in March. Flagstone Reinsurance Holdings Ltd. raised $176 million and Castlepoint Holdings Ltd. got $111 million. Reinsurance is coverage for insurers.

Einhorn owned 3.62 million B shares before the share sale. Though the shares confer 10 votes each, Einhorn and his affiliates are limited to wielding 9.5 percent of total voting power, according to the company's prospectus.

The prospectus said Einhorn was expected to purchase $50 million in additional B shares in a private placement at the initial share price. Einhorn spokesman Steve Bruce wasn't immediately able to say if Einhorn completed the planned private placement. The company had 18 million A shares before the sale.

Underwriters have the option to sell another 1.54 million shares if demand warrants.

Greenlight Re sold policies worth $74.2 million in premiums from nine reinsurance contracts in 2006, its first year of underwriting. The policies covered casualty and marine risks, homeowners and catastrophic property losses. The company's net income was $57 million for the year. DME Advisors LP, controlled by Einhorn, will manage Greenlight Re's investment portfolio until at least 2010, according to company filings with the US Securities and Exchange Commission.

Proceeds from the share sale will "substantially" be used to underwrite more policies, according to the company's prospectus.

Berkshire Hathaway Inc. Chairman Warren Buffett told investors at the company's annual shareholders meeting on May 5 that he is reducing the amount of catastrophe coverage Berkshire sells because reinsurance prices are falling from their 2006 highs.

In 2003, Einhorn paid $250,100 in a charity auction to have lunch with Buffett. At the time, it was a record bid for the annual benefit.

Einhorn also made headlines in August when he took 18th place in his first appearance at the World Series of Poker "No Limit Texas Hold'em" tournament in Las Vegas. He won $659,730, which he said he would donate to charity.

Einhorn, founder of Greenlight Capital LLC, has about $4.7 billion in assets under management at the New York-based fund, which is known for pressuring companies to make changes that boost share prices. The fund as of March 31 owned a 2.2 percent stake in Ameriprise Financial Inc., the money manager spun off from American Express Co., and 7.7 percent of Helix Energy Solutions Group Inc., which invests in offshore oil and gas production, according to an SEC filing.

Greenlight Capital LLC bets on rising and falling prices of stocks. Hedge-fund managers run private pools of capital for wealthy investors and share significantly in gains on money they invest.

Einhorn was a member of mortgage lender New Century Financial Corp.'s board before mounting losses from loans to riskier borrowers sent the company into bankruptcy in April. Einhorn resigned in March, and declined at the time to discuss his reason for quitting.

The Greenlight Re share sale was managed by Lehman Brothers Holdings Inc., UBS AG, Citigroup Inc., Dowling & Partners Securities and Fox-Pitt, Kelton Ltd.