Retrocession news

Alternative capital has been responsible for a change in reinsurance market dynamics, as following the major losses of 2017 reinsurance pricing has not rebounded as it typically would have in the past, suggesting that the reinsurance market cycle is now flatter than it used to be, according to Fitch.

Lutece Re, a collateralized retrocession underwriting start-up launched by insurance-linked securities (ILS) and reinsurance linked asset manager Lutece Investment Management Ltd. began underwriting retrocession at the renewals, but found that the rate environment was “still challenging.”

The January 1st 2018 reinsurance renewals were “one of the most unique and challenging renewal seasons witnessed in recent times” for the retrocession market, according to broker Willis Re, but still underlying retrocession and reinsurance pricing remain mismatched for now.

Specialist global insurance and reinsurance firm MS Amlin is the latest to announce the launch of a collateralised reinsurance sidecar vehicle for 2018, announcing a $60 million plus vehicle named Viribus Re Ltd, which will provide collateralised reinsurance support to its Lloyd’s syndicate.

Global reinsurance firm Hannover Re has increased the size of its regular K-Cession capital markets retrocession placement to $600 million for 2018, as the reinsurer continued to leverage ILS funding as a source of protection and to augment its own capacity.

Reinsurance giant Munich Re has sponsored a second issuance for 2018 from its latest collateralized reinsurance sidecar, with a $216.34 million tranche of Series 2018-1 Class B participating notes issued by its Eden Re II Ltd. sidecar vehicle, taking the total size of the 2018 issuance to $300 million.

International specialty insurer Chaucer plc has launched Thopas Re Ltd., a Bermuda domiciled fully collateralized reinsurance sidecar that will provide additional capital markets backed capacity to the firm’s Chaucer Syndicate 1084’s global reinsurance portfolio in 2018.

Munich Re has successfully sponsored and placed an almost $83.7 million tranche of Series 2018-1 participating notes from its Eden Re II Ltd. collateralised reinsurance sidecar vehicle with investors, as it sets up its retrocessional sidecar facility for the coming year.

In the wake of recent catastrophe loss events, many major players in the global reinsurance market are pushing for rate increases at the renewals, seeking either to be paid back after bearing losses for their clients, or seeking pricing that they feel is more commensurate with the risks they underwrite.

Farmers Insurance has reported a $1.2 billion gross loss from the northern California wildfires that struck the states wine region in october 2017, but robust reinsurance arrangements mean the insurer only expects to retain $90 million of the bill.