RenaissanceRe completes Tokio Millennium Re acquisition

RenaissanceRe (RenRe), the Bermuda based reinsurer, third-party reinsurance capital and ILS investment manager, has now completed its $1.5 billion acquisition of Tokio Millennium Re (TMR).

RenaissanceRe revealed in October 2018 that it would pursue an acquisition of the Tokio Millennium Re reinsurance operations of Japanese giant Tokio Marine Holdings.

Regulatory approval for the acquisition was received just over a week ago and now the deal has moved rapidly to completion, providing RenaissanceRe with an enlarged platform for future growth.

Kevin J. O’Donnell, President and Chief Executive Officer of RenaissanceRe, commented on the news, “The acquisition of TMR accelerates our strategy and enhances RenaissanceRe’s global reinsurance leadership, product offerings and access to attractive risk”

He continued, “The bespoke structure of this transaction also strengthens our long-standing relationship with Tokio Marine Group.”

The acquisition features the TMR reinsurance underwriting platform based in Bermuda, London and Zurich, with the value of the M&A transaction roughly $1.5 billion in total consideration, made up of payments from RenaissanceRe to Tokio Marine of around $1.22 billion of cash and $250 million of RenaissanceRe common shares.

Also involved in the arrangement was a $500 million adverse development cover provided by Tokio Marine to protect it on TMR’s stated reserves at closing of the acquisition, including any unearned premium linked.

In addition, RenRe will benefit going forwards from the relationship with Tokio Marine, with enhanced access to the Japanese insurance giants international reinsurance placements that were also secured as part of the arrangement.

RenRe and Tokio Marine are also set to offer continuity to the fronting cedants and business partners that had been working with TMR for a defined period.

RenRe itself said it had no desire to maintain the fronting and risk transformation for ILS operations of the TMR business, with the strategic focus of the acquisition being the portfolio and reinsurance underwriting platform and closer relationship to Tokio Marine.

Of course, investors in RenRe’s third-party capital vehicles and ILS strategies stand to benefit from the continued expansion of the reinsurance firms reach and the access to Tokio Marine’s program will no doubt add attractive options for those joint venture partners going forwards.

“Our entire team is excited about the expanded opportunities that the TMR platform will bring to deliver the best underwriting solutions in the business while maximizing shareholder value,” O’Donnell said.

Now, with the deal done, analysts and shareholders will be watching closely to see whether the acquisition can help to continue RenaissanceRe’s growth, while delivering on the promises made.

At the same time the ILS market will be looking to others to fill the fronting and risk transformation gap left by the exit of TMR from this space.

As we reported before, the gap in terms of fronting services for collateralised reinsurance and ILS markets left by the acquisition of TMR has already been partially filled by some of the other usual suspects that find this facilitation business attractive.

Bermudian insurance and reinsurance group Arch Capital is also expected to step into the fronting for ILS business, having hired some former TMR employees.

RenaissanceRe has itself been growing its third-party capital assets under management in recent months, now reaching approximately $5 billion of ILS related assets.

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