RenRe bought more retrocession at 1/1. To secure additional at June as well: CEO

RenaissanceRe secured additional retrocessional protections at the 1/1 renewals this year, ceding more in the way of its property catastrophe premiums than it had a year earlier.

Last week, during the RenaissanceRe first-quarter 2024 earnings call, the firm’s CEO and CFO discussed the protections the company has bought and said it expects to renew more retrocession at the June renewal as well.

Interestingly, this came after a discussion of the forecasts for a very active Atlantic hurricane season in 2024, which could be a driver of the increased retro buying, although reasons for more retro being purchased were not given during the call.

CFO of RenaissanceRe Bob Qutub commented, “We had a phenomenally successful 1/1 renewal and retained the combined RenaissanceRe and Validus portfolio according to plan. As a result, gross premium written were up 43% with robust growth across both segments.”

But Qutub went on to add that, “Net premiums written were up slightly less at 41%,” saying that “This reflects our decision to purchase some additional ceded protection in our property catastrophe book as part of our gross to net strategy, as well as some timing differences.”

Qutub went into more detail specifically on the property catastrophe reinsurance book at RenRe.

He explained that, “Gross premiums written were up by 44% and net premiums written were up by 30%. We ceded about $277 million, or 21% of property catastrophe business, compared to 12% in Q1 last year.”

So that seems a larger amount of retrocession being used to manage the catastrophe exposure at RenaissanceRe this year, which it’s reasonable to think could at least in part be a reaction to the forecasts for a very active Atlantic wind season.

Later in the call, RenaissanceRe’s CEO Kevin O’Donnell also discussed retrocession purchases.

O’Donnell said that, “At 1/1 we saw continued discipline around retro structures and pricing was relatively flat. We primarily traded with our long-term partners and were able to secure additional capacity.”

The CEO went on to explain that, “As we renew the Validus portfolio onto RenaissanceRe balance sheets it is incorporated into our various retro programmes.”

He then added that, “The next major renewal for our retro programme is in June and we expect that we will be able to purchase the limit that we desire.

“That said our strong capital and liquidity position provides us significant flexibility, and we will only purchase additional limits if it improves our overall portfolio.”

We’ve heard of a number of companies positioning for the chances of a more active hurricane season this year, with retrocession purchases and instruments such as industry-loss warranties (ILW’s) being procured.

While we can’t say for certain that this is a driver for RenRe’s increased use of retrocession in 2024, the company has a naturally larger catastrophe book thanks to the acquisition of Validus, it’s likely one of the factors that are weighed when the company considers how best to protect itself, its shareholders and other investor stakeholders.

Of course, the growing third-party capital resources of the Capital Partners unit at RenRe are also a factor in how the company manages its catastrophe risks.