Vermeer Reinsurance Ltd., the latest joint-venture vehicle from RenaissanceRe that is backed by Dutch pension fund manager and significant ILS investor PGGM, has got off to a strong start at the beginning of 2019.
Vermeer Reinsurance Ltd. (Vermeer Re) was launched in time for the January 1st 2019 reinsurance renewals, as RenaissanceRe (RenRe) teamed up with a long-time insurance-linked securities (ILS) institutional investor to launch its first managed rated reinsurance vehicle for a single pension fund investor.
The Vermeer Re launch, as well as additional fundraising for its other third-party capital vehicles, helped RenRe take its joint-venture and insurance-linked securities (ILS) capital under management to around $5 billion so far this year, a figure that could increase further at the mid-year renewals.
With Vermeer Re, an initial capitalisation of $600 million was funded by PGGM and the pension fund manager also has an option to add another $400 million to this, to underwrite any available growth opportunities in 2019 and take the vehicle to $1 billion by year-end.
It seems that ceding companies have responded well to the launch of Vermeer Re, which targets writing the more risk-remote layers of U.S. property catastrophe reinsurance programs.
According to Kevin O’Donnell, CEO of RenRe, traction has been forthcoming and he sees the potential for Vermeer to continue to make progress towards its targeted first year capitalisation.
Speaking about the first-quarter during RenRe’s latest earnings call, O’Donnell explained that, “This quarter, Vermeer Re was off to a strong start, writing more than 40 transactions.”
He continued to say, “We are pleased with the timing of Vermeer, and current limitations on market capacity should allow us to serve our customers while working toward the goal of deploying the full billion dollars available to us.”
Vermeer Re will likely have a particularly low cost-of-capital, making it a competitive source of rated reinsurance capacity for ceding companies and a force to be reckoned with in the renewal market, we’d imagine.
It’s known that PGGM is particularly hot on ensuring it gets value for money from those managing its ILS and reinsurance-linked investments, so its focus on fees and associated costs is keen, meaning the capital often comes with a lower overall hurdle for the underwriters.
For a reinsurer like RenRe, where this top-layer reinsurance capacity is additive to its own strategy, this makes perfect sense as it helps the company to enhance its relevance with its clients.
But that also probably means that the scale and reaching the billion dollars of capitalisation is also important, as RenRe likely needs to hit hurdles of its own in order to earn the full benefits from the joint-venture as well.
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