Bermuda headquartered pure-play reinsurance firm PartnerRe has expanded its third-party capital activities at the renewal, adding a new Torricelli segregated account to its Lorenz Re sidecar vehicle and completing a $67 million quota share with investors.
Lorenz Re has been PartnerRe’s main collateralised reinsurance sidecar and special purpose insurance vehicle for some years now, growing its quota share to $195 million at the mid-year 2018, as the reinsurer expanded its third-party capital activities.
That Lorenz Re quota share sidecar provides its investors with access to the returns of a share of PartnerRe’s book of its largest clients, so select accounts only where the reinsurer could use the third-party capital support most effectively.
Now, with the launch of this Torricelli segregated account within the Lorenz Re vehicle, PartnerRe has expanded the access to its risks for investors, with this new deal featuring a quota share of its worldwide property catastrophe reinsurance business, so effectively a slice of everything.
As a result, the original Lorenz Re transactions, which renew at the mid-year, can be considered a subset of this new Torricelli arrangement.
For 2019, PartnerRe has completed a nearly $67 million quota share ($66.6m to be precise) with third-party investors through the Torricelli segregated account.
Interestingly, Herve Castella, Head of Third Party Capital at PartnerRe, explained to us that Torricelli is a net quota share, so benefits from retrocession similar to its own protection.
A net quota share means that the investors in Torricelli share in the portfolios losses and returns after retrocession, benefiting from any retro recoveries made, with the retrocession inuring to the benefit of the quota share.
Castella said that Torricelli was launched as a way to broaden PartnerRe’s third-party investor base as well, with the majority of the investors in this transaction being new to Lorenz Re.
Given the worldwide focus of the subject business, the Torricelli transaction is likely a little more exposed to attritional losses, but given the net nature of the quota share the alignment is stronger between PartnerRe and its investors net results and with PartnerRe retaining the majority of the risk. There is also more diversification within the covered portfolio than in the typical select accounts Lorenz Re quota share deals.
Castella commented to Artemis, ” Our plan would be to grow our third-party capital vehicle as PartnerRe grows its footprint with its own clients. Hence we seek more organic growth with the support of third-party capital alongside our balance-sheet.
“We have an underlying strategy on the underwriting side to be more relevant to our clients. These straight quota shares are a good alignment with investors and supports us with all of our clients.
“We hope Torricelli will help us to grow our third-party capital strategy.”
For large reinsurers like PartnerRe finding new ways to slice its book and offer attractive products that access its returns to ILS investors can provide an efficient way to leverage the depths of the capital markets in its underwriting business.
With Torricelli the reinsurer is expanding its activities and opening up its worldwide catastrophe book to investors, which could provide a valuable source of efficient capital for driving further growth.
For more details on reinsurance sidecar investments and transactions view our list of collateralized reinsurance sidecars.