RenRe added $730m+ to third-party capital vehicles at 1/1

RenaissanceRe, the Bermuda-based reinsurance firm and third-party capital management specialist, has revealed that it raised an additional over $730 million of capital for third-party managed joint ventures and insurance-linked securities (ILS) vehicles at January 1st 2020.

The company said this is on top of a healthy $1 billion of capital raised for some of its third-party capitalised ILS and joint-venture vehicles throughout 2020.

This confirms RenaissanceRe’s strong growth, in terms of third-party assets under management, over recent months.

As we recently explained, RenaissanceRe (RenRe) had taken its total assets within third-party capital, joint venture and managed insurance-linked securities (ILS) fund vehicles to $6.9 billion by October 2020, $6 billion of which was solely third-party capital, as we detail in Artemis’ ILS fund manager directory.

That figure is likely to have now risen further, as in reporting its fourth-quarter 2020 results yesterday, RenRe revealed this additional $730 million plus capital raise for the January 2021 reinsurance renewals.

RenRe said that the over $730 million of new capital was raised for its collateralised reinsurance and retrocession focused Upsilon RFO Re Ltd., the third-party capitalised and sidecar like reinsurer DaVinciRe Ltd. and its RenaissanceRe Medici Fund Ltd., which invests in catastrophe bonds and other reinsurance-linked assets.

$131 million of this capital was from the company, RenRe said, adding that it also entered into secondary transactions on DaVinciRe shares, with third-party investors purchasing an additional $117 million of them.

Of the more than $1 billion raised in 2020 as a whole, across Upsilon, DaVinciRe, Medici and also the PGGM pension fund manager joint-venture reinsurer Vermeer Reinsurance Ltd., RenRe added that $138.1 million was from its own funds.

Upsilon has been a significant source of growth throughout 2020, as revealed in RenRe’s results where the company said that it ceded property reinsurance and retrocession premiums reached $961.9 million in 2020, up by $185.2 million, or 23.8%, compared to 2019.

This increase in ceded premiums written represents business ceded to third-party investors in RenRe’s managed vehicles, “primarily RenaissanceRe Upsilon Fund Ltd.,” the company explained, as well as an overall increased in ceded purchases of reinsurance or retro protection as RenRe continues to pursue its gross-to-net strategy.

We’re told Upsilon was a significant source of quoting on retrocession at the renewals season and that it’s likely this structure has grown significantly since a year earlier by this stage.

As expected though, RenRe reported an operating loss for the fourth-quarter of 2020, driven by an underwriting loss of $151.7 million and a combined ratio of 114.7% in the period.

RenRe’s property underwriting fell to a loss of $130.0 million for Q4 2020 and had a combined ratio of 125.6%, as catastrophe and weather losses of $239.8 million and COVID-19 losses of $237.2 million both drove an unprofitable period.

Some of the third-party capital vehicles will have been sharing in these losses throughout the period, although given the frequency issues in catastrophes and severe weather this may have been largely attritional in nature.

It appears DaVinciRe may have been the recipient of more losses than some of the other structures, as RenRe reports that the net loss attributable to redeemable noncontrolling interests for Q4 reached $5.5 million, compared to $2.6 million in the fourth quarter of 2019, which the increase mainly driven by underwriting losses in DaVinciRe Holdings Ltd.

For full-year 2020, RenRe has reported an underwriting loss of $76.5 million across the business and a combined ratio of 101.9%, compared to underwriting income of $256.4 million and a combined ratio of 92.3% in 2019.

Property reinsurance underwriting generated positive income of $11.2 million for the full-year though and had a combined ratio of 99.4% in 2020.

Weather and catastrophe related large losses had a net impact of $668.5 million during 2020, while COVID-19 accounted for $351.9 million.

$235 million of these COVID-19 pandemic related losses fell to the property underwriting segment in 2020, RenRe said. It’s not clear whether those have had any impact on any third-party capital vehicles at this stage.

Growth is the other story in RenRe’s results, as property reinsurance premiums underwritten leapt 23.4% during 2020.

Catastrophe reinsurance premiums written reached $1.9 billion in 2020, an increase of $291.3 million, or 18.3%, which is the areas where third-party capital will have been a specific driver for RenRe’s portfolio growth.

However, overall a strong investment gain helped RenRe to report positive net income of $189.8 million for Q4, but an operating loss of $77.1 million.

For full-year 2020, net income reached $731.5 million and RenRe reported an operating profit of $14.6 million.

Kevin J. O’Donnell, President and Chief Executive Officer of RenaissanceRe, commented on the results, “We begin 2021 looking forward and fully focused on executing our strategy into an attractive reinsurance market. The book of business that we wrote at the January 1 renewal is larger and more efficient, with increased expected profitability, and we anticipate further opportunities to improve it over the course of the year. While 2020 brought many challenges, I am particularly proud of the accomplishments of our employees and the continuity of our culture during a difficult year marked by record-breaking weather events and the stresses of the COVID-19 pandemic.”