Capital “augmented” for RenRe’s two Fontana joint-venture reinsurers: AM Best

The two reinsurers established as underwriting vehicles for RenaissanceRe’s Fontana Holdings third-party capitalised casualty and specialty reinsurance focused joint venture have had their capital augmented, rating agency AM Best said also recognising the likelihood of Fontana’s reinsurers delivering profits and positive income in most periods.

RenaissanceRe (RenRe), the Bermuda-headquartered reinsurance and third-party capital management specialist, launched its first third-party reinsurance capital backed joint venture focused on casualty and specialty risk, Fontana Holdings L.P., in 2022.

The Fontana joint-venture launched with $475 million of capital and a goal to provide its institutional investor backers with returns from casualty and specialty reinsurance business, including long-tailed lines.

As we reported around that time, RenRe had registered two re/insurers in Bermuda as underwriting companies for its Fontana joint-venture platform.

The two Bermuda Class 3A licensed re/insurers are named Fontana Reinsurance Ltd. and Fontana Reinsurance U.S. Ltd., the latter being a US focused underwriting entity.

AM Best gave the pair Financial Strength Ratings (FSR) of A (Excellent) and Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent), about one year ago.

Now, the rating agency has affirmed those ratings and given them a stable outlook, while commenting on the progress made with Fontana so far by RenRe.

AM Best said that both Fontana Re and Fontana Re US have very strong balance-sheets, adequate operating performance, neutral business profile and very strong enterprise risk management.

Fontana began its operations by assuming a whole account quota share of RenaissanceRe’s casualty and specialty book, AM Best explained.

Then adding that, “Fontana’s capital has been augmented since to support growth at Fontana Re and Fontana Re US.”

With the strength of their sponsor RenaissanceRe, AM Best notes that Fontana will see benefits accrue because of this.

At the same time, AM Best believes that Fontana will “generate underwriting profits and positive operating income in most periods,” while the rating agency also expects Fontana’s “risk-adjusted capitalization will be maintained at levels that are broadly consistent with RenaissanceRe’s other underwriting entities.”

It’s a glowing first review for the Fontana casualty and specialty ILS investment structure managed by RenaissanceRe’s Capital Partners team.

Recall that Fontana is also set to expand further soon, with AIG set to invest in the structure as part of the deal that saw RenRe acquiring Validus and AlphaCat from the firm.