Winter storm Uri drove performance fee decline for RenRe ILS vehicles

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The decline in performance fees experienced by RenaissanceRe’s third-party reinsurance capital and insurance-linked securities (ILS) vehicles in the first-quarter of 2021 was driven by the impacts of winter storm Uri, CFO Bob Qutub said yesterday.

renaissance-reinsurance-logoAs we explained yesterday, RenaissanceRe (RenRe) reported that its managed insurance-linked securities (ILS) funds drove negative performance related fee income in Q1 2021, which we assumed was from catastrophe losses suffered.

Speaking during RenRe’s earnings call yesterday, CFO Qutub revealed that a $23 million decline in performance fees was due to winter storm Uri and the related Texas freeze.

“This decline was driven by a $23 million reduction in performance fees, primarily in DaVinci and Upsilon related to Uri,” Qutub explained.

DaVinci Re is RenRe’s third-party capitalised and market facing reinsurance company and Upsilon RFO Re Ltd. is RenaissanceRe’s collateralised reinsurance and retrocession focused ILS fund structure.

Qutub also explained that DaVinci and RenRe’s Medici fund, which is largely catastrophe bond focused, also suffered reported losses during the period, which contributed alongside the Upsilon impacts to net noncontrolling interest attributable to these vehicles reaching $47 million for Q1.

With Medici, this will likely have been down to the mark-to-market losses on catastrophe bonds exposed to winter storm Uri.

Qutub further explained, “As a reminder, when a significant event occurs in the quarter, we typically unwind previously booked profit commissions. This can result in negative performance fees like you see this quarter.”

Vermeer Ltd., RenRe’s joint-venture reinsurance company launched with the investment banking of major ILS player PGGM, fared better though, reporting income for the quarter.

Vermeer has a more top-layer style strategy, investing in reinsurance at higher attachments, so appears to have avoided as much impact from winter storm Uri.

It’s natural that RenRe’s third-party reinsurance capital vehicles and ILS structures would feel the effects of a large industry event like Uri.

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