RenaissanceRe, the Bermuda-based reinsurance firm and third-party capital management specialist, has seen a decline in its external capital under management, across joint-venture and ILS fund structures during the third-quarter, as the total fell by 5.5% to roughly $6.32 billion due to losses from hurricane Ian.
Previously, RenaissanceRe (RenRe) had reported its third-party external investor sourced assets across its range of joint-venture reinsurance vehicles and insurance-linked securities (ILS) funds as around $6.7 billion at July 1st 2022.
Over the third-quarter it RenRe’s third-party capital assets have been dented due to the impacts and losses from hurricane Ian, causing a decline in overall assets under management (AUM) across the catastrophe reinsurance and retrocession exposed structures it manages within the RenaissanceRe Capital Partners division.
As we previously reported, RenaissanceRe had passed on some $372.4 million of losses to investors in some of its managed reinsurance and ILS structures during the third-quarter of 2022, with hurricane Ian the main driver.
Which aligns almost perfectly with the latest third-party capital assets under management data Artemis has available for the company in our Insurance-Linked Securities Investment Managers & Funds Directory.
Having had just slightly under $6.7 billion of external capital under management at July 1st, that figure has fallen 5.5% to $6.32 billion as of October 1st.
So, that’s a decline in third-party AuM that is roughly aligned with the amount of catastrophe losses RenRe shared with the noncontrolling interests (third-party investors) in its joint-ventures and ILS funds after Q3.
While hurricane Ian has resulted in a decline in third-party investor assets at RenRe, due to losses and loss provisions being set, the impact to the managed joint-ventures and ILS strategies differs depending on the product and risk levels being written and allocated to.
The Upsilon fund, RenRe’s collateralized reinsurance and retrocession focused investment vehicle, has seen the biggest decline in assets on the back of losses from hurricane Ian.
As of July 1st, RenRe’s Upsilon ILS strategy had overall AuM of around $1.66 billion, $1.46 billion of which was from third-party investors.
Overall, Upsilon’s AuM is now $1.46 billion, so a 12% decline, while the third-party investors allocation to Upsilon dropped 13% to $1.27 billion due to the losses suffered.
DaVinci Reinsurance Ltd. (DaVinciRe), perhaps the best-known of the RenaissanceRe reinsurance joint-venture vehicles, a rated and mainly third-party investor capitalised vehicle that operates like a balance-sheet reinsurance sidecar alongside RenRe, also declined, with its overall equity and debt AuM falling by 11% from $2.81 billion at July 1st to $2.49 billion as of October 1st.
The DaVinciRe third-party investor capital, in its equity and debt, declined 7.3% from $1.91 billion to $1.77 billion over that period.
The Medici fund strategy, which is largely a catastrophe bond focused investment fund, saw the next largest decline, with its overall AuM dropping 9% from $1.21 billion at July 1st to $1.1 billion at October 1st.
The third-party investor contribution to Medici declined around 8.6% from $1.05 billion to $960 million over the same period.
Those three joint-ventures and ILS strategies accounted for most of the decline in third-party assets managed at RenRe over the third-quarter, with a slight drop in its casualty focused ILS structure Fontana due to asset side effects, while the Vermeer Re JV reinsurer actually increased its equity slightly, as a new capital commitment outweighed any loss impacts.
When you include all of the RenRe Capital Partners joint-ventures and ILS vehicles, taking into account the reinsurance company’s own shares in each, the overall assets under management of the business unit have fallen by roughly 4.5%, from $12.1 billion at July 1st 2022, to $11.56 billion as of October 1st.
What does this all show?
That RenaissanceRe’s asset decline is aligned with the losses experienced from hurricane Ian, implying there has been no change to investor commitments, just a reduction in assets due to losses being paid, or reserved for.
Also, the percentage declines appear aligned with market experience, especially on the Medici cat bond fund side, where, like the cat bond market as a whole, some recovery of value may also be likely as secondary marks recover for some bonds.
For Upsilon, given it is a riskier strategy that also writes retrocession, the percentage decline in assets seen might actually be considered relatively low, considering the type of strategy it is and the riskier opportunities it allocates to than Medici, so it will be interesting to see how this moves over time.
Given the severity of hurricane Ian and the significant industry losses it has caused, of which RenRe took a reasonable share given its market presence in property catastrophe risk underwriting, a decline in assets was always going to be seen for these structures, like any ILS fund or strategy.
It’s notable how quickly RenRe’s Capital Partners team has applied these AuM reductions though, given these figures are as of the end of September, which was just one week after hurricane Ian hit.
By estimating losses quickly and factoring them into assets, through claims or losses, or reserving, RenRe can give greater clarity to its investors on what type of impact to expect in relatively short-order.
RenRe is likely among the best-positioned to raise new capital from ILS investors going forwards, given the range of ILS strategies it offers, the access to risk it can provide, the longevity of its strategy, and also the way it has transparently reported its AuM figures so soon after this major hurricane event.
You can see more details of the individual vehicle assets under management in our RenaissanceRe Capital Partners entry in Artemis’ Insurance-Linked Securities Investment Managers & Funds Directory.