RenaissanceRe bought more retro than anticipated at 1/1: CEO O’Donnell

At the key January 1st reinsurance renewal season, RenaissanceRe, the global reinsurance firm and third-party capital manager, purchased more retrocessional protection that had been anticipated, according to CEO Kevin O’Donnell.

Commenting on the state of the global market for retrocession at 1/1 2023, O’Donnell acknowledged during the RenaissanceRe (RenRe) earnings call yesterday, that conditions had been particularly challenging.

“As we expected, the retro market was highly dislocated heading into the January 1st renewal, with rates up materially, terms and conditions very tight, and an ongoing shift to occurrence from aggregate structures,” O’Donnell explained.

Which presented an opportunity to RenRe, as it has been looking to expand into the hardening property catastrophe reinsurance marketplace.

“This allowed us to build a strong inwards book of business,” O’Donnell said. Adding that, “Against this backdrop, we had several successes on our ceded (retro) placements as well.”

Buying retrocession has been almost as challenging as raising capital to underwrite it with, around the January 2023 renewals, it seems. But RenRe clearly felt it had some success and O’Donnell was keen to explain this to analysts and investors during the call.

He explained that, “First, we purchased more retro protection than originally anticipated, a testament to our strong relationships and consistent track record.

“Second, we were able to grow with our long-standing partners on our structured reinsurance products.

“Finally, in early January, we issued our Mona Lisa cat bond, albeit for reduced limit.”

RenRe secured a $185 million catastrophe bond renewal with the Mona Lisa Re Ltd. (Series 2023-1) deal, but the maturing cat bond sponsored for the start of 2020 had been $400 million in size.

O’Donnell said that, “Given current market conditions we believe we successfully executed our gross-to-net strategy and that it materially improved the efficiency of our portfolio.”

One other factor that is relevant to the retrocession market and RenRe’s renewals activity, is its collateralized reinsurance and retro ILS fund strategy Upsilon.

The Upsilon strategy has shrunk considerably over the last year or so, partly due to losses, but also due to shifts in investor allocations, we understand.

From RenRe’s perspective, some of the products offered by Upsilon sit better on the rated reinsurance balance-sheet of its DaVinci Re, equity-backed and sidecar-like joint-venture vehicle, which has grown over the same period.

“We reduced the footprint of Upsilon into the market because the product that Upsilon sold was better sold into rendering in DaVinci,” O’Donnell said yesterday “That’ll change the gross written premium, but the net economics coming to us are better reflected in net written premium, because of that shift.”