RenRe raises $767m from investors. Medici cat bond fund hits $1.5bn

RenaissanceRe, the global reinsurance firm and third-party capital manager, has continued to have great success in raising funds from third-party investors for its range of joint-venture and insurance-linked securities (ILS) structures, adding just over $767 million so far in 2023, with its Medici catastrophe bond fund strategy taking more than half the inflows.

RenaissanceRe (RenRe) has continued to raise capital for some of its third-party capital vehicles and ILS fund strategies, but as we reported earlier this year, where those assets are flowing to is telling.

In particular, the destination of third-party investor asset inflows are telling of the overall state of the insurance-linked securities (ILS) market, in particular investor appetite for collateralized reinsurance and retrocession.

The assets raised are almost exclusively flowing to RenRe’s equity-backed but balance-sheet sidecar-like DaVinci Re vehicle and Medici catastrophe bond focused fund strategy, reflecting current investor priorities among its strategies.

Conversely, RenRe’s Upsilon collateralized reinsurance and retro fund vehicle has seen additional outflows during the first-quarter of the year, the company has reported.

In reporting its Q1 2023 results last night, RenRe has revealed an impressive $621.2 million of third-party capital raised in the first-quarter for its DaVinci Re and Medici strategies.

In addition, RenRe has also disclosed a further $145.9 million raised for the Medici cat bond fund subsequent to March 31st.

The Q1 ILS assets raised flowed as $377.2 million to DaVinci Re and $244 million to the Medici cat bond fund, the company has reported.

So, with the assets raised subsequent to Q1, it totals $767.1 million of third-party capital raised from investors so far in 2023 for RenRe, split as $377.2 million to DaVinci Re and nearly $390 million into the cat bond fund Medici.

Thanks to the additional assets raised for the Medici catastrophe bond fund strategy, RenRe said that this managed fund strategy now counts over $1.5 billion in assets under management, which we understand is the first time it has been that large.

For comparison, Artemis data on ILS investment managers shows that RenRe’s Medici cat bond fund strategy had $1.21 billion of assets as of Jan 1st 2023, including the reinsurers co-invest portion.

That’s another impressive landmark for RenRe, as it continues to grow its third-party capital assets under management and demonstrates that having a range of strategies available has helped it navigate the more challenged capital raising environment that we’ve seen over recent years.

While the inflows are particularly impressive, especially considering they come on top of the $403 million of capital RenRe raised from third-party investors in time for the January 2023 renewal season, there are also outflows, reflecting investors changing priorities and affinity to ILS strategies, as well as RenRe’s efforts to unlock trapped capital.

RenRe reported that it experienced $207.3 million of investor outflows during the first quarter of 2023, of which $139.4 million was from the Upsilon collateralized reinsurance and retro fund strategy.

This reduced the size of Upsilon, RenRe said, explaining that it was “as a result of the release of collateral associated with prior years’ contracts.”

As we’d previously reported, RenRe has been having some success in freeing trapped collateral within the Upsilon strategy, recovering capital that may have been thought lost to catastrophe events, but can then be returned to investors.

Also impressive is the fee income that RenaissanceRe has reported earned by its Capital Partners strategies during the first-quarter of 2023.

Fee income from third-party capital, joint-ventures and ILS funds reached $44.8 million for Q1 2023, up by 58% on the prior year’s $28.35 million.

Management fee income has been boosted significantly by the increased assets under management (AUM) that RenRe’s third-party capital and ILS strategies now hold, reaching $40.9 million for Q1 2023, up from $27.2 million a year earlier.

Management fees rose thanks to the higher capital managed at DaVinciRe Holdings, Vermeer Reinsurance, RenaissanceRe Medici Fund, and Fontana Holdings, RenRe explained.

It was also helped by the recording of previously deferred management fees in DaVinci, which the company said was related to the weather-related large losses experienced in prior years.

Performance fee income reached almost $3.9 million for the period, up from $1.13 million in the prior year quarter.

The increased performance fees were driven in part by favorable development on prior year events as well, especially in DaVinciRe and some of RenRe’s structured reinsurance products.

Finally, RenRe has also cited strong underwriting results for Q1 for DaVinciRe and the Vermeer Re joint-venture reinsurer that is backed by large ILS investor PGGM.

Thanks to this, higher investment yields and realised and unrealised gains on investments in the joint ventures and managed funds, RenRe said that net income attributable to noncontrolling interests, so third-party investors interests, reached $267.4 million for the first-quarter of 2023.

That’s an impressive delivery of capital benefit back to third-party investors in the joint-ventures, managed ILS funds and third-party capital strategies for a single quarter.