Reflecting the significant growth in its use and management of third-party reinsurance capital over the last calendar year, PartnerRe, the Bermuda headquartered reinsurance company ceded a significant increase in premiums to its main insurance-linked securities (ILS) vehicle in 2021.
PartnerRe had more than $1 billion of third-party capital assets under management back at the mid-point of 2021 and has been developing relationships with large investors, as well as benefiting from special purpose reinsurance vehicle investments that came about through the Covéa / EXOR saga.
It seems the expansion of third-party capital and ILS management activities accelerated significantly through 2021, thanks in part due to the reinsurance investments from the Covéa / EXOR relationship.
PartnerRe has reported having ceded an impressive $634 million of written premium to its Lorenz Re Ltd. vehicle during 2021, a significant increase on the $81 million ceded to Lorenz Re in 2020 and $70 million ceded in 2019.
Lorenz Re is a special purpose insurer registered as a segregated accounts company in Bermuda and given the amount of premiums ceded to it, it’s clear that it remains the most important ILS structure at PartnerRe.
PartnerRe launched Lorenz Re back in 2013, with the structure being used as a kind of collateralized reinsurance sidecar for a number of years, then entering into private quota shares with ILS investors as well.
It’s become a significant retrocessional reinsurance structure for PartnerRe since and in 2021 took in a really significant premium haul, helping PartnerRe manage its catastrophe PML’s.
The expansion in the use of Lorenz Re in 2021 is made even clearer through the booked reinsurance recoverable on paid and unpaid losses that is attributed to Lorenz Re segregated cells, which reached $592 million at the end of 2021, up from $117 million at the end of 2020.
Lorenz Re raises its capital from third-party investors and collateralizes reinsurance agreements with PartnerRe operating companies, issuing non-voting redeemable preferred shares in its individual segregated accounts.
As such, it’s both helping PartnerRe grow, moderate its exposures and earn fees through sharing reinsurance risks with its investor base.
PartnerRe attributes its 2021 growth in part to its expanding use of retrocession and third-party capital, which it’s clear Lorenz Re played a major role in.
“Ceded written premium more than doubled year-over-year, driven by an increase in retrocession purchasing, including from the Company’s third party capital vehicles, as well as growth in premiums written,” the reinsurer said.
PartnerRe expanded into catastrophe lines of reinsurance in 2021, which the growing third-party capital haul will have been instrumental in assisting.
PartnerRe’s latest quota share sidecar arrangement was revealed in January 2021, a collateralized retrocession and specialty reinsurance focused investment vehicle named Laplace-C, with backing secured from private equity investor Olympus Partners. This could actually be another cell of Lorenz Re, given the way the reinsurer has used the structure in previous years.