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Original Risk: A Society for Change Agents

Alignment gives third-party capital partners confidence to reinvest: RenRe CEO


The fact RenaissanceRe continued to raise third-party investor funds for its Capital Partners business through 2022 and into 2023 demonstrates that this is a permanent part of the reinsurance firm’s capital base, CEO Kevin O’Donnell explained recently.

kevin-odonnell-ceo-renaissance-reRenRe’s CEO highlighted the way his firm thinks about aligning itself with its third-party capital partners, sharing in the fortunes of underwriting, while helping them access its underwriting expertise and the returns this generates.

Speaking during a recent investor call, Kevin O’Donnell explained why he feels the Capital Partners business at RenaissanceRe has been so successful.

“We have always taken a differentiated approach to our Capital Partners business,” he said.

“First and foremost, this is because we are recognised leaders in underwriting property and casualty risk and always approach this business as underwriters would. This means, we start with sourcing desirable risk and only then seek to match it with the most efficient capital.

“Second, we have a long and successful track record of managing third party capital and are always strongly aligned with our investors. Our partners know that we always stand alongside them, sharing any losses that they take, this provides them with the confidence to reinvest with us after large events.

“Finally, we offer the broadest suite of investment vehicles with both owned and managed balance-sheets for every risk that we take. This includes Fontana, the only rated third-party balance-sheet dedicated to casualty and specialty risk.”

As well as these three features of RenRe’s approach to managing third-party capital, O’Donnell said that some of the structural choices the reinsurer has made, when setting up vehicles to partner with investors, have helped use capital more flexibly.

O’Donnell said that, “In addition to being innovative, our vehicles are highly flexible from a capital perspective and have features allowing us to call capital when it is needed and return it when it is not. This allows us to navigate difficult markets, as we did in 2022 and also to facilitate the liquidity needs our institutional investors demand.

“This differentiated approach is highly appreciated by our partners. It also explains our success in raising capital in 2022, as both new and existing investors chose to trust us with their capital.”

In 2022, RenRe raised around $1.4 billion for its third-party capital vehicles and ILS structures, while the company raised a further $403 million in time for the January 2023 reinsurance renewal.

He moved on to discuss the importance of the Capital Partners business unit and his ambitions to expand its activities further.

“That we can continue to scale our Capital Partners business, even under the most difficult circumstances, demonstrates that it is a permanent part of our franchise,” O’Donnell said.

Adding that, “We have every intention of continuing to grow it in the future, in order to bring reliable, sustainable capital to our customers. We fully expect our Capital Partners business to increasingly generate low-volatility fee income for the benefit of our shareholders.”

He closed by saying that Capital Partners is the third (of three) key financial tailwinds that RenaissanceRe benefits from, the first two being its underwriting and investment operations.

Alignment of interests is a critical factor in managing ILS and third-party reinsurance capital. However, alignment can sometimes be questioned when it comes to traditional reinsurers managing investor funds.

With RenRe having now achieved such scale in its Capital Partners business, this third-party capital is a particularly important source of growth capacity for the company and critical to it achieving its underwriting aims, adding to the feeling of alignment for investors, we suspect.

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