RenaissanceRe, the Bermuda headquartered global reinsurance company, had lifted the amount of assets managed within its third-party capital, joint venture and managed insurance-linked securities (ILS) fund vehicles to $6.9 billion by October 2020, with these structures now getting close to equalling the reinsurers own capital base.
RenaissanceRe’s $6.9 billion of insurance-linked securities (ILS) assets and third-party or joint venture reinsurance capital managed, at October 2020, positions the reinsurer among the top tier managers of ILS, catastrophe bonds and other similar collateralized reinsurance assets or funds in the market, according to data included in Artemis’ ILS fund manager directory.
In terms of third-party assets only, the figure drops to around $6.1 billion when subtracting RenRe’s share in these vehicles.
Growth has been particularly strong in DaVinciRe Holdings Ltd., the third-party capital backed joint-venture and sidecar-like reinsurer that RenRe has managed for almost two decades now, as well as in the Upsilon collateralized reinsurance and retrocession focused ILS strategies.
DaVinciRe, which is largely third-party capital backed and writes property catastrophe reinsurance as well as some low frequency, high severity specialty reinsurance lines of business on a global basis, ended September 2020 with $2.2 billion of capital.
It’s significant growth over the last year or more, as DaVinciRe accounted for just $1.5 billion of capital put into RenRe’s underwriting operations back in early 2019.
The RenaissanceRe Upsilon Fund has also steadily grown since early 2019, having increased from $1.4 billion back then to sit at $2 billion in size by the end of September 2020.
Upsilon has enabled RenRe to capitalise on rising catastrophe reinsurance and retrocession rates in the last year or so, resulting in the company taking a larger slice in particular of the retro market, on a collateralized basis and on behalf of third-party investors.
The RenaissanceRe Medici Fund Ltd., which allocates its capital to catastrophe bond and other insurance-related investment instruments that have returns primarily tied to property catastrophe risk, reached $788 million in size by the end of September 2020.
Again, for the Medici Fund, growth has been steady over recent years, having commanded $500 million of capital back in early 2019.
RenRe has also grown the Vermeer Reinsurance Ltd. joint-venture reinsurer, which was formed with PGGM, the Dutch pension fund manager, since its launch.
Vermeer Re now stands at $1.1 billion in size following an increase in capital allocated to the reinsurer by PGGM in 2019. Vermeer provides its capacity primarily to risk remote layers in the U.S. property catastrophe market.
RenRe also counts another $780 million of capital attributed to its Langhorne Re Ltd. life and annuities focused joint-venture, established with Reinsurance America Group (RGA) which is capitalised by institutional third-party investors. Plus $15 million of capital remaining in its Fibonacci Re sidecar type vehicle, which invests in securitised contracts that look like catastrophe bonds.
That summarises where the $6.9 billion of own and third-party institutional investor backed reinsurance capital sits.
It’s interesting to note that RenRe now counts its own total capital as having reached $7.4 billion as of the end of September 2020, meaning the third-party capital vehicles and ILS funds accounts for almost the same.
As recently as early 2019, the third-party capital and ILS vehicles had $4.9 billion of capital, compared to RenRe’s total capital of $6.6 billion at the time, showing that the third-party capitalised aspect has grown considerably over the last more than one year.
Of course, balance-sheet leverage is only available in some of the joint-venture vehicles, meaning that RenRe’s own capital can go a lot further when it comes to underwriting.
But these figures show just how important third-party capital and ILS structures have become to RenaissanceRe’s overall strategy, as these vehicles provide it with significant optionality when it comes to underwriting and enables the reinsurer to do much more for its client base, to the benefit of its third-party investors and its own shareholders as well.