RenRe’s Fontana casualty/specialty JV has flexibility to be market-facing

The Fontana Holdings third-party capitalised casualty and specialty reinsurance focused joint venture vehicle launched by Bermudian reinsurer RenaissanceRe will have the flexibility to become market-facing and write business directly for counterparties, it seems.

RenaissanceRe (RenRe) recently launched its first third-party reinsurance capital backed joint venture focused on casualty and specialty risk, Fontana Holdings L.P.

The Fontana vehicle launched with $475 million of capital, with institutional investors contributing $325 million of its launch capital, while the remaining $150 million coming from RenRe.

At launch, Fontana assumed a whole account quota share reinsurance agreement of its parent’s global casualty and specialty book, including the credit portfolio, which means it is not market-facing, for now.

But, it’s clear from the platform RenRe is constructing for Fontana, that the casualty and specialty lines reinsurance joint venture vehicle could easily make the transition to underwrite market-facing business.

We’ve now learned that RenRe has registered two re/insurers in Bermuda, specifically for the Fontana platform.

Both are Bermuda Class 3A licensed re/insurers, which are typically relatively small commercial insurers, without two much exposure.

Class 3A re/insurers can be rated and can also be transitioned to become larger commercial insurers, or reinsurers, moving up through the Bermuda Monetary Authority licensing ranks as a Class 3B company.

RenRe has registered Fontana Reinsurance Ltd. and also Fontana Reinsurance U.S. Ltd., which as you can imagine might mean the latter if a US focused underwriting entity.

Alongside those, RenRe also has a limited company, Fontana Holdings Ltd., as well as the core limited partnership joint venture vehicle, Fontana Holdings LP.

With Fontana for now just taking a quota share of RenRe’s casualty and specialty lines reinsurance book, the registration of these Class 3A re/insurers shows a more meaningful likelihood of Fontana becoming market-facing in time, as the quota share approach could have been achieved with a simpler structure, that would likely have been a less onerous licensing application process.

The Class 3A license would be more than sufficient for writing a small amount of casualty or specialty reinsurance from the market, alongside the quota share which we suspect will remain the major source of risk for Fontana anyway.

Being able to access business alongside RenRe, or entirely on its own, could give Fontana much greater scope to hone its own portfolio for the institutional investors that back the reinsurance-linked investment structure.

Also read: RenRe’s Fontana – Investors wanted efficient casualty/specialty access point: Parry