For global reinsurance firm RenaissanceRe, the Medici catastrophe bond focused investment fund strategy has been one of its sources of growth in third-party capital assets under management in recent years, a trend that continued in 2022.
Like many other managers of third-party reinsurance capital assets, or insurance-linked securities (ILS) strategies, RenaissanceRe saw outflows from some vehicles after the consecutive heavy loss years since 2017.
But catastrophe bond fund strategies have remained more robust, thanks to the more remote-risk nature of their coverage and the higher layers of reinsurance towers cat bonds tend to feature in.
Which has enabled significant growth of the catastrophe bond market in recent years, as documented in our regular cat bond market reports, our detailed cat bond market statistics and charts, and our data that tracks the UCITS cat bond fund segment.
As we reported recently, during the second-quarter of 2022, RenRe reported that it had raised new capital for the Medici cat bond fund.
RenRe’s third-party assets under management, in managed ILS and joint-venture funds or vehicles, had reached $6.8 billion during the quarter.
RenRe had raised additional funds for its catastrophe bond focused strategy, Medici, near the start of the year, with another $147 million raised for the cat bond focused investment vehicle after Q1 ended, including $10 million from RenRe.
The Medici fund had reached $1.2 billion in size by April this year, including RenRe’s stake in the vehicle.
Speaking during RenRe’s earnings call, CEO Kevin O’Donnell commented on the growth of this cat bond strategy, “The cat bond market continues to be an attractive market and as a result, Medici’s assets under management are up 25% so far this year.”
This growth in Medici is evident in the non-controlling interests in the cat bond fund that RenRe reported in its recent results, as they increased from $856.8 million at the end of 2021, to almost $1.053 billion at the mid-point of 2022.
Third-party investors account for roughly 87% of Medici’s capital, with RenRe taking the remaining share, suggesting the fund remains above $1.2 billion in size, even despite a hit from mark-to-market price changes and foreign exchange effects in recent months.
During the first-half of 2022, RenRe raised new subscriptions from third-party investors amounting to $325 million for the Medici ILS fund strategy, which is not far off double the amount of subscriptions received in H1 2021.
With the catastrophe bond market seeming poised for activity later in the year, if the pipeline is as strong as market sources suggest, while investors should have plenty of capital to allocate given the maturities coming and attraction to relatively uncorrelated sources of return, RenRe may have further opportunity to grow its Medici cat bond fund later in 2022.
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