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RenRe has ample third-party capital, but will be opportunistic: CEO O’Donnell

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The RenaissanceRe Capital Partners vehicles, which are the range of third-party investor capitalised balance-sheets, reinsurance joint-ventures and insurance-linked securities (ILS) funds operated by the company, do not really need any more capital, the firm’s CEO Kevin O’Donnell said yesterday.

kevin-odonnell-ceo-renaissance-reRenaissanceRe’s (RenRe) CEO was speaking during the firm’s earnings call yesterday and explained that he feels the third-party capital business, under RenRe’s Capital Partners division, is now “rightly sized.”

As we explained yesterday, the company successfully raised $495 million in new funds for the January renewals, which it later in the day turned out had a significant component from AIG’s expected allocation to certain joint-venture vehicles.

RenRe fully deploys its third-party capital vehicles at most opportunities, so does not tend to have additional capital on-tap, but it is important to remember there may also be an element of additional capital at the disposal of the RenRe Capital Partners team this year, having consumed the Validus AlphaCat Managers ILS business with that acquisition recently.

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So, the third-party capital business at RenRe enters 2024 very well-set for another year of deploying investor capital into the strong reinsurance rate environment, which are dynamics that help to explain O’Donnell’s comments.

During the earnings call he said, “I think we’ll continue to look for opportunities to deploy into the market.

“Right now, all of our vehicles are sufficiently capitalised to achieve the target state of where we want to renew the Validus book, the RenRe book and the additional growth that we have.”

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O’Donnell went on to say, “So, we do not need additional capital in any of the vehicles, but will be opportunistic should we see more opportunity.

“So, I would say we’re rightly sized for where we want to be right now.”

However, O’Donnell did also say that he expecting further growth from the Capital Partners business at RenRe, over time.

“We have a fee business that continues to grow and we expect greater Capital Partners participation, not only in our own portfolio but on Validus’ portfolio,” O’Donnell said.

O’Donnell also explained how the broader RenaissanceRe, in combination with the Capital Partners business, is positioned after the recent 1/1 renewals, the first major renewal where the Validus book was also being renewed.

O’Donnell commented, “At the recent January 1st renewal, our overriding objective was to retain Renaissance Re’s legacy lines, while renewing the Validus business we choose to keep. Critically, we sought to do so without disrupting the favourable market conditions, brought about by the step-change in reinsurance.

“I am pleased to report that we were overwhelmingly successful in this endeavour. Clients and brokers broadly supported our efforts to become a larger and more relevant partner, a role that we are proud to serve. The result was beneficial to all of our stakeholders.

“Our customers benefited from increased access to our highly-rated, well capitalised balance-sheets. Brokers benefited from access to an expanded and more influential market, known for providing certainty of execution and a market-leading view of risk.

“Our Capital Partners benefited from increased access to desirable risk. And our shareholders, of course, benefited from improvements in each of our three drivers for profit.”

Also read:

RenRe raised $495m of third-party capital for 1/1, fee income doubled in 2023.

AIG invested $350m in RenaissanceRe’s Capital Partners vehicles at 1/1.

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