RenaissanceRe (RenRe), the Bermuda-headquartered reinsurance and third-party capital management specialist, has secured AM Best ratings for the two reinsurers it had established for its Fontana Holdings third-party capitalised casualty and specialty reinsurance focused joint venture.
RenRe launched its first third-party reinsurance capital backed joint venture focused on casualty and specialty risk, Fontana Holdings L.P., earlier this year.
The Fontana vehicle launched with $475 million of capital, with institutional investors contributing $325 million of its launch capital, while the remaining $150 million coming from RenRe.
It targets generating returns from casualty and specialty reinsurance business, including long-tailed lines, for its investors, with Renaissance Underwriting Managers, Ltd. and the RenRe Capital Partners team managing the structure.
Both are Bermuda Class 3A licensed re/insurers, named Fontana Reinsurance Ltd. and Fontana Reinsurance U.S. Ltd., which as you can imagine might mean the latter is a US focused underwriting entity.
Now, AM Best has assigned Financial Strength Ratings (FSR) of A (Excellent) and Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) to both Fontana Reinsurance Ltd. (Fontana Re) and Fontana Reinsurance U.S. Ltd. (Fontana Re US), all with stable ratings outlooks.
AM Best said that the ratings for both Fontana Re and Fontana Re US reflect their balance sheet strength, which the rating agency assesses as very strong, their adequate operating performance, neutral business profile and very strong enterprise risk management (ERM).
AM Best explained that, “The ratings assigned to the Fontana entities reflect the strength and depth of RenaissanceRe’s management team and its leadership in ERM, as well as the benefits that should accrue to Fontana as a result of RenaissanceRe—through RUM—managing underwriting, pricing, risk selection, reserves, investments, claims, etc.”
As we wrote when the Fontana joint venture was launched, given the two reinsurers registered specifically for it, the JV will have the flexibility to become market-facing and write business directly for its reinsurance counterparties.
Now, with ratings for both of these reinsurers, Fontana can more readily go to market and write its own business with cedents, instead of relying on risks being ceded to them from RenaissanceRe itself.
At its launch, Fontana only took a quota share of RenRe’s casualty and specialty lines reinsurance book.
That looks set to change and we could see the newly rated Fontana reinsurers writing business at the renewals, we imagine, flowing that casualty and specialty business back to the JV, to the benefit of the third-party capital partners and RenRe itself.