RenRe raises over $200m of ILS capital in Q2, reports record fee income

RenaissanceRe, the Bermuda-based reinsurance firm and third-party capital management specialist, raised additional funds from investors for its managed insurance-linked securities (ILS) fund strategies during the second-quarter.

Thanks to a more benign quarter for catastrophe losses, the performance of the managed ILS funds and other third-party capital backed joint ventures at RenaissanceRe (RenRe) recovered, with the segment delivering much-improved management and performance fee income to the company.

RenRe reported $456.8 million of net income for the second-quarter of 2021, a significant improvement on a -$290 million net loss experienced in Q1.

Underwriting income for the reinsurance company bounced back to its highest quarterly level in more than one year, at almost $329 million for the period.

The company also continued to expand its book during the quarter, with 23.1% gross premium growth, with property growing 13.5% during the period.

The property catastrophe reinsurance business line grew by $49.5 million, or 7%, which RenRe said was driven by rate improvements, increased shares on existing deals and new opportunities across its range of underwriting platforms.

Kevin J. O’Donnell, President and Chief Executive Officer, commented on the quarterly result, “We delivered a solid quarter for our shareholders, characterized by strong underwriting growth, high quality fee income and robust investment returns. Our Casualty and Specialty team extended its leadership by continuing to find opportunities to support our customers and our Property segment deployed capital in attractive business at the mid-year renewals. I am pleased with the continued execution of our strategy and resulting growth in tangible book value per share, and remain confident in our ability to provide superior shareholder returns over the long term.”

RenRe’s managed insurance-linked securities (ILS) funds platform continued to grow during the period, with an additional over $200 million of capital raised, primarily related to its collateralised reinsurance and retrocession focused Upsilon RFO and its largely catastrophe bond focused Medici strategies.

As a result of this additional growth, RenRe’s Medici fund strategy now has over $1 billion of capital in it and has grown strongly through the last year.

The continued increase in third-party assets under management of its RenaissanceRe Capital Partners business has helped RenRe to expand during a period of reinsurance market firming.

The company reports that, during Q2 2021, its ceded premiums written increased by $41.8 million, or 12.4%, to reach $380.2 million.

The main driver of this was an increase in gross premiums written which were ceded to third-party investors in RenaissanceRe’s managed vehicles, the company explained, principally to its collateralized reinsurance and reto focused RenaissanceRe Upsilon Fund Ltd.

Alongside an ability to underwrite more reinsurance business, helped by investors capital, RenRe has also been able to benefit from improving fee income from its ILS management and third-party capital business, when catastrophe claims allow.

In the last quarter, Q1 2021, RenRe’s managed ILS strategies and joint-ventures were impacted by catastrophe loss activity, principally winter storms in the United States, which dented its performance fee income significantly.

But in Q2 2021, a far more benign period for global catastrophe loss activity, RenRe has benefited from a bounce-back in fee income and the increasing third-party ILS assets under management has also helped to deliver higher management fee income for the company.

Management fee income, across ILS strategies, joint-ventures and structured reinsurance, reached its highest quarterly level ever, at almost $32 million.

Within this, management fees for the joint-venture vehicles reached a recent historical high, which management fees for the managed ILS funds came in a little below recent months, but was not dented significantly.

It is performance fee income that has recovered though, boosting overall fee income at RenRe.

The company reported almost $14.2 million of performance fee income for Q2, taking its overall fee income to $46.2 million for the period, the highest figure ever reported for its third-party capital and structured products segments.

Investors in the RenRe managed ILS funds and third-party capital vehicles all benefited from positive net income during the quarter, as the more benign loss environment saw all the vehicles returning to profit.