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Demand shift to cat bonds a positive for RenRe. Medici hits $1.7bn: CEO O’Donnell


The acceleration of activity in the catastrophe bond market in 2023, as cedent demand for covers in the upper-layers of their reinsurance towers has risen and the ILS market has responded to it, is seen as something that will positively benefit the bottom-line at RenaissanceRe.

kevin-odonnell-ceo-renaissance-reThis despite the Bermuda based reinsurance and third-party capital management specialist also writing catastrophe-exposed business on its own balance-sheet.

But, having multiple managed third-party joint-venture balance-sheets and its dedicated ILS fund structures, means the company still stands to benefit and can participate in earnings from different layers of the risk tower.

While the acceleration of catastrophe bond market activity in 2023 has helped the company grow its Medici cat bond fund to a new high.

As we reported this week, RenaissanceRe (RenRe) raised additional funds for its catastrophe bond fund Medici and a new segregated account structure focused on investments in cat bonds.

These additional assets drive fee income benefits for RenRe and the firms CEO Kevin O’Donnell highlighted that cat bonds play to the reinsurers’ strengths in an earnings call on Wednesday.

At the mid-year reinsurance renewals O’Donnell noted that, “Cat bonds were increasingly used in more risk-remote layers.”

He went on to explain that, “The growth in cat bonds plays to one of our unique strengths, our industry leading Capital Partners business.

“These market opportunities allowed us to grow our cat bond strategy substantially, which will benefit our fee income.”

Continuing to say that, “The risk-remote layers covered by cat bonds typically do not fit well on our wholly-owned balance sheets due to their capital consumptive nature.

“Consequently, this shift in demand to cat bonds should positively benefit our bottom-line.”

O’Donnell called the Medici cat bond fund a “highlight” of RenRe’s success so far this year.

“Medici continued to see strong capital inflows, from both new and existing investors and as a result exceeded $1.7 billion in assets under management,” he explained.

Adding that, “In aggregate we have capital commitments of over $700 million so far this year for deployment into cat bond strategies, either through Medici or segregated accounts.”

As we also reported this week, RenaissanceRe reported a significant year-on-year uplift in its fee income earned from third-party reinsurance capital and insurance-linked securities (ILS) operations, with the second-quarter 2023 seeing the total earned rise by 65.5% to $56.7 million.

View information on many dedicated ILS fund managers, as well as reinsurers offering ILS style investment opportunities, such as RenaissanceRe, in our Insurance-Linked Securities Investment Managers & Funds Directory.

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