RenRe’s third-party capital fee income soared 27% in 2020

RenaissanceRe, the Bermuda-based reinsurance firm and third-party capital management specialist, saw a 27% increase in fee income earned from its third-party capitalised and managed joint-ventures and insurance-linked securities (ILS) funds, with growing capital under management and performance in the final-quarter seemingly key drivers.

RenaissanceRe (RenRe) revealed it had raised fresh capital for the January 2021 renewal season, adding more than $730 million of capital to some of its managed joint ventures and insurance-linked securities (ILS) vehicles.

That helped its newly named RenaissanceRe Capital Partners lift its third-party assets under management to $6.4 billion, as we detail in Artemis’ ILS fund manager directory.

The increase in funds under management within these ILS and joint-venture reinsurance structures is driving significantly higher fee income now, with RenRe benefiting considerably from the added income in its reported earnings.

For the full-year 2020, RenRe reported earning almost $145.2 million of total fee income from its third-party capital management activities.

That’s up by 27% on 2019’s $114 million.

Breaking that down somewhat, management fees are the majority at almost $111.5 million for 2020, up on 2019’s $96.4 million.

But performance is also much higher, in particular among the insurance-linked securities (ILS) managed fund products that RenRe offers to investors.

For 2020, RenRe reported almost $16 million of performance fees earned across its managed ILS funds, up from just $420,000 earned in 2019.

That huge increase is partly due to better performance for some of the key ILS fund strategies in 2020, we understand, but also as the capital within the funds is now significantly higher than a year earlier.

Overall, performance fees earned across the third-party capital management activities at RenRe came out at almost $33.7 million for 2020, almost a 90% uplift on the prior years $17.8 million.

RenRe’s ILS fund offerings delivered for the company in the fourth-quarter of 2020, as its management and performance fee income hit new highs.

RenRe earned roughly $9.5 million from each, management fee income and performance fee income, for its managed ILS funds in Q4 2020, up on the $8.6 million of management fee income earned in Q3 2020 and a significant improvement on the performance side, as this looks like it is the best quarterly ILS fund performance fees RenRe has earned in at least a year.

Which suggests the third-party investors backing RenRe’s ILS funds, so with the more catastrophe bond focused Medici and and collateralized reinsurance or retrocession focused Upsilon being the main candidates, will have earned healthy returns in Q4 2020 and for the full-year as well, given the performance related nature of much of RenRe’s income from these activities.