PartnerRe’s third-party capital assets surpass $1bn

PartnerRe, the Bermuda headquartered and EXOR owned reinsurance company, has significantly grown its third-party capital assets under management, lifting them above $1 billion around the January 2021 renewals.

PartnerRe has been managing third-party or alternative reinsurance capital for many years, with a successful quota share sidecar program and a range of other collateralized reinsurance structures utilised in the past.

However, the company hasn’t ever taken the assets under management in insurance-linked securities (ILS) structures to a particularly significant level, considering the size of the reinsurance business.

Until the last year and it seems growth of the third-party capital business has continued and accelerated at PartnerRe, as the company doubled-down on the use of alternative capital from third-party investors towards the end of last year.

In reporting its results late yesterday the company revealed the strong growth in third-party capital assets.

“Significant growth” of third-party reinsurance capital vehicles was achieved in January 2021, the reinsurer said.

PartnerRe President and Chief Executive Officer Jacques Bonneau commented that the company, “achieved significant growth in our third party capital vehicles, with total assets over $1 billion.”

This comes at a time of rising reinsurance rates, so clearly the investor appetite to tap into reinsurance underwriting companies with a strong franchise, like PartnerRe, is elevated at this time and has driven new capital to many reinsurers of late.

Bonneau commented on market conditions, saying, “The 2021 underwriting year has started on a very positive note, and we have remained focused on the continued execution of our strategies to improve profitability in our January renewals. We are seeing positive rate movement in most, if not all of our lines of business.

“We are positioned well by geographic and product line to capitalize on the improving underwriting environment and deliver value to our clients, capital partners and shareholder in the year ahead.”

PartnerRe achieved an underwriting profit in 2020, with a 98.6% combined ratio for its non-life business, despite the impacts of the pandemic and significant catastrophe losses.

That will be positively viewed by third-party capital investors and likely positions the company well for further capital raising throughout 2021.

PartnerRe has been developing its third-party capital business over the last few years, moving into direct partnerships with large institutional investors, as well as building out an infrastructure to support that.

Most recently, PartnerRe formalised its third-party capital activities within a dedicated unit, hiring Andrew Hughes (formerly of Hiscox) as its CEO of Third Party Capital.

That came shortly before its latest quota share sidecar arrangement was revealed in January, a collateralized retrocession and specialty reinsurance focused investment vehicle named Laplace-C, which secured its backing from private equity investor Olympus Partners.

Of course, last year, French insurance group Covéa and EXOR, the Agnelli family owned holding company investor, struck an agreement to cooperate on reinsurance-linked investments going forward, with Covéa set to inject €750 million of capital into special purpose reinsurance vehicles managed by PartnerRe.

It’s not clear whether some of this capital from Covéa is included in this “over $1 billion figure.”

Also of note, and helping to drive third-party capital growth, PartnerRe had expanded its reinsurance investment partnerships introducing a relationship with Dutch pension investor PGGM, the largest ILS investor in the market, through its Huygens structure.

These initiatives, likely amongst other private quota share ILS arrangements and perhaps also its older sidecar focused collateralized reinsurance vehicle Lorenz, PartnerRe has been successful in introducing growing amounts of third-party capital into its underwriting business.

It will be interesting to watch how reinsurers like PartnerRe expand their third-party capital business and how that pool of capital compares to their equity and total capital over time.

As of the end of 2020, PartnerRe had common shareholder’s equity of $6.7 billion, but total capital of $9.3 billion.

So, even at over $1 billion, the third-party capital pile is a relatively small percentage of PartnerRe’s underwriting firepower overall, but it will be interesting to see how the capital mix changes at the firm as it increasingly embraces the capital markets and ILS management.