Global insurance giant AIG is set to invest up to $500 million into third-party capital and joint-venture vehicles run by RenaissanceRe’s Capital Partners unit, as part of the arrangement that sees the company selling the Validus reinsurance and AlphaCat ILS arms to RenaissanceRe.
The data point has been disclosed in an AIG presentation on the deal, showing the scale of the investment commitment the insurer expects to make to the RenRe Capital Partners business, as well as its intent to continue to benefit from reinsurance-linked returns despite selling its underwriting arm.
As a reminder, RenaissanceRe is acquiring the Validus reinsurance business and Talbot reinsurance book from AIG, while also buying the AlphaCat Managers ILS fund management unit.
Under the terms of the agreement, AIG has an option to make a “substantial” investment into two of RenaissanceRe’s Capital Partners vehicles, the DaVinciRe sidecar-like structure and the casualty and specialty joint-venture Fonatana Holdings.
AIG sees this as a way to continue to participate in the kind of reinsurance business Validus had underwritten.
RenRe anticipates folding some of the Validus Re book into its third-party capital structures, in particular the aforementioned DaVinci and Fontana, so by backing these vehicles AIG will be able to share in the economics of that business still, just via its investment portfolio instead of its underwriting book.
AIG also sees the investment into the RenRe Capital Partners vehicles as a way to further deepen its relationship with a core trading partner.
The $500 million figure could be a significant injection of new capital into the RenRe third-party capital platform.
As we reported, RenRe is also expecting to raise even more third-party capital to support the addition of some Validus business into the DaVinci and Fontana vehicles.
As we explained earlier this week, with AlphaCat Managers having roughly $3.3 billion of capital under management at the end of 2022, according to Artemis’s data, these investments from AIG and further capital raises expected to be made, will further boost RenRe’s ILS and third-party capital AUM.
That third-party AUM figure stood at $6.6 billion at the end of the first-quarter, so it’s easy to suspect it may near or surpass $10 billion of ILS and related reinsurance third-party assets managed, once the Validus deal and AIG investments, plus any related capital raising, are all completed.
– RenRe buying AIG’s Validus reinsurance units, AlphaCat ILS manager.
– AIG to make “substantial” investment in RenRe’s DaVinciRe and Fontana.
– RenRe to raise third-party capital to support Validus Re portfolio integration.
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