RenRe buys less third-party retro, shares more risk with partners: CEO

RenaissanceRe is managing the volatile ceded reinsurance and retrocession market by leveraging its ability to cede more risk to its managed capital and so buy less on the open market, according to comments made by its CEO.

Speaking during the RenaissanceRe second-quarter 2022 earnings call yesterday, CEO Kevin O’Donnell was asked how the company is managing retrocession and whether it is retaining more risk, or finding other capital sources to cede it to.

O’Donnell acknowledged that the open-market for reinsurance and retrocession has been more challenging.

“Ceded reinsurance has become more expensive and with that we are looking at this carefully,” he explained. “We’ve got some long term partnership deals that continue to support the portfolio and then we have more straight excess-of-loss.

“We’ve been very successful buying a similar program to support the London business.”

But for some other areas of the RenRe business, less protection has been bought given market conditions, it seems.

“Some of the other portfolios we have reduced the amount of third-party outward ceded that we purchased, just from a from a capacity and from a pricing standpoint,” O’Donnell explained.

Of course, with RenRe managing somewhere approaching $7 billion of third-party investor capital in its range of insurance-linked securities (ILS) funds, structures and joint-venture reinsurance vehicles, the company has the ability to leverage investor appetite to help it manage its book and exposures.

“With the flexibility of our platform, we have added more capital to some of our joint ventures and allowed them to participate on the risks that otherwise would have been written and protected in RenRe Ltd.,” O’Donnell explained.

This can be a far more efficient way for a company like RenRe to secure its own reinsurance and retrocession, enabling it to avoid the challenging open-marketplace and leverage its long-term investor partnerships to manage its exposures.

Ultimately this benefits those investors too, as by helping RenRe manage its risks, it means the company can better mould the portfolios of its ILS structures and joint-ventures to be as appealing as possible to investors as well, so third-party capital can be significantly additive when used in this way.

Summing up on buying reinsurance and retrocession, O’Donnell said, “The answer is, yes we are buying less third-party and we are sharing more with partners.”

Also read: Cat models don’t properly reflect climate change: RenRe CEO O’Donnell.