Written managed catastrophe premiums decline further for RenRe

by Artemis on February 1, 2017

Bermudian reinsurer RenaissanceRe (RenRe) has reported a reduction in managed catastrophe premiums during the fourth-quarter and full-year, 2016, and also revealed that it took in more capital for its Upsilon funds in the period.

According to its recent financial results release, RenRe’s managed catastrophe premiums fell by roughly 47% in the fourth-quarter and by more than 4% for the full-year 2016, when compared with the previous year, to $9.09 million and $914.7 million, respectively.

The firm operates a number of joint-ventures, third-party backed reinsurance vehicles and insurance-linked securities (ILS) funds via its Ventures unit, and of which the performance and impact on the company’s results are included in its managed catastrophe premiums segment.

The reinsurer and third-party capital management specialist reported a decline in managed catastrophe premiums during the third-quarter of 2016, a trend that continued for the remainder of the year. This contributed to a decline in the underwriting income of its catastrophe segment during Q4 2016 of 32% to $94.3 million, and to roughly $350.3 million for the full-year, compared with $440.2 million in 2015.

Of course RenRe has been on an expansion phase over the last couple of years, shifting increasingly into casualty and specialty risks in order to bring more diversification to its business and to support growth. It is possible that the managed cat premiums shrinkage is not just a reaction to recent market conditions, but also due to its changing appetite.

The reinsurer’s combined ratio within its catastrophe reinsurance segment, during the fourth-quarter and for the full-year 2016, weakened when compared with the previous year, to 29.8% in Q4, and 37.3% for the full-year.

The company also revealed that it has grown its collateralised reinsurance and retrocession focused Upsilon funds platform by just shy of $93 million, after it issued $134.1 million of Upsilon RFO non-voting preference shares to existing investors, which includes $9.5 to RenRe, after returning $41.8 million to investors at the same time, during January 2017.

The reinsurer explains that effective January 1st, 2017, the company’s participation in the risks assumed by Upsilon was 18.8%.

Perhaps the most well-known RenRe ventures within its managed catastrophe premium segment is its rated reinsurance vehicle DaVinci Re, a platform that has fast become an influential and important element of its overall business operations.

During January 2017 the DaVinci vehicle redeemed $75 million in outstanding shares from existing shareholders, which includes RenRe itself, and the reinsurer also announced that during January it sold an aggregate $24 million of its DaVinci shares, reducing the firm’s noncontrolling economic ownership in the vehicle to 22.6%, as at January 1st, 2017.

DaVinci recorded net premiums written of $230 million for the full-year 2016, and experienced a net realised gain on investment of $10 million.

Net income available to DaVinci common shareholders declined to $22 million in the fourth-quarter when compared with the previous year, but actually increased for the full-year to $156.2 million. The vehicle recorded a combined ratio of 41.7% in Q4 and 47.3% for the full-year, compared with 27.2% and 45.6% a year earlier, respectively.

Top Layer Re, which is also included in the firm’s managed catastrophe premiums segment, reported catastrophe premiums of $1.38 million in the quarter, and $39.6 million for the full-year.

The reinsurer also reported that effective January 1st, 2017, Fibonacci Reinsurance Ltd raised $140 million of capital from third-party investors, of which the company’s economic ownership interest was 10.2%.

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