RenRe’s 3rd-party capital AUM nears $7bn. Raises for new Upsilon managed account

Third-party investor capital under management in reinsurance joint-ventures and insurance-linked securities (ILS) funds managed by RenaissanceRe’s Capital Partners division reached almost $7 billion at the start of 2024, with the firm’s catastrophe bond fund strategy driving the largest share of the last year’s growth.

Over the course of 2023, RenaissanceRe’s Capital Partners unit added $750 million to its total third-party capital under management, with new capital offsetting a continued shrinking of the firm’s Upsilon collateralized reinsurance fund strategy.

But there was a bright spot there at the end of last year as well, as RenRe launched a new managed account under Upsilon for a single investor.

It’s the first time RenRe has noticeably raised funds for a new Upsilon branded strategy for quite some time, as this ILS strategy which is typically focused on collateralized reinsurance and/or retrocession has been shrinking for a number of years now, which is a similar experience to many other private ILS contract focused funds in the marketplace.

But, in the final quarter of 2023, in time for the January renewals, RenRe launched the $90 million Upsilon RFO Diversified IV managed account for a single investor, we understand.

This is another signal that investor interest in collateralized reinsurance or retro private ILS strategies is increasing, with investor sentiment having been aided by the strong performance of ILS strategies over the past year and improved reinsurance contract terms now being entered into market-wide.

RenRe’s third-party Capital Partners assets under management rose from $6.2 billion at the start of 2023, to reach $6.95 billion at the start of 2024, reflecting outright expansion of $750 million over the last year.

Some $670 million of growth came through the Medici catastrophe bond fund, as RenRe capitalised on investors’ attraction to cat bond strategies to lift this fund’s third-party assets to $1.73 billion, while the Medici cat bond fund’s overall AUM including RenRe’s stake has now risen to $1.94 billion.

RenRe’s DaVinciRe joint-venture reinsurance vehicle, which operates like a kind of market-facing sidecar backed by third-party capital, lifted its third-party assets by $160 million over the course of last year.

Another highlight of 2023 for RenRe’s Capital Partners was the continued expansion of its Fontana specialty and casualty focused reinsurance joint-venture vehicle, which entered 2024 with $450 million of third-party capital and $620 million when including RenRe’s co-investment stake. Part of the Fontana raise was down to the $50 million investment from AIG.

The growth in some strategies was offset by the main Upsilon diversified fund shrinking across the year, falling to $490 million of third-party capital by January 1st 2024, $570 million including RenRe’s stake.

That’s down from $1.17 billion of third-party capital in Upsilon at 1/1 2023 and a total size of $1.34 billion at that time. It’s worth noting that much of this reduction in scale of the Upsilon fund is down to capital being returned to investors.

But the latest news of a new $90 million Upsilon focused managed account is a good signal of the potential for RenRe to add more assets over time to this collateralized reinsurance and retro strategy, which has positive read-across for the rest of the ILS fund sector as well.

With almost $7 billion in third-party capital across the range of joint-venture reinsurers and ILS funds, RenaissanceRe remains one of the largest managers of assets in the ILS market.

Including its own stakes in each vehicle and fund, total capital managed across the RenaissanceRe Capital Partners vehicles reached $8.19 billion at January 1st 2024, not including the $4 billion of capital that sits in Top Layer Re.

The growth in assets and strong performance from 2023 helped in RenaissanceRe delivering a significant year-on-year uplift in fee income earned from third-party reinsurance capital and insurance-linked securities (ILS) operations, with the total doubling last year.

View information on many dedicated ILS fund managers, as well as reinsurers offering ILS style investment opportunities, such as RenaissanceRe, in our Insurance-Linked Securities Investment Managers & Funds Directory.