Vermeer Re balance-sheet hits $1.3bn, as PGGM/PFZW grows investment

Vermeer Reinsurance Ltd., the joint-venture and rated underwriting vehicle that is managed by RenaissanceRe and capitalised by Netherlands-based pension investor PGGM, expanded its balance-sheet to $1.3 billion in 2021, as the investor added a small amount to its commitment during the year on behalf of Dutch pension PFZW.

During 2021, Stichting Pensioenfonds Zorg en Welzijn (PFZW), the Dutch healthcare and social welfare sector pension that is the end-investor in Vermeer, subscribed for another $50 million of participating, non-voting common shares in Vermeer.

That’s slightly more than the $45 million subscribed for in 2020 and shows that PFZW has an appetite to continue expanding Vermeer, to match the growing market opportunity, especially in the firming environment.

Vermeer Reinsurance Ltd. (Vermeer Re) was launched in time for the January 2019 reinsurance renewals, as RenaissanceRe (RenRe) teamed up with long-time insurance-linked securities (ILS) institutional investor PGGM to launch the first managed and ‘A’ rated reinsurance vehicle for a single pension fund investor.

Vermeer Re began life with an initial capitalisation of $600 million, which pension investment manager PGGM arranged on behalf of one of the pensions it administers, the Dutch healthcare and social welfare sector’s PFZW pension.

PFZW retains all of the economic interests in Vermeer Reinsurance Ltd., as a result of which the increases in capital allocated since have helped to grow the reinsurance vehicle, enabling it to write more risk each year and capitalise on improving reinsurance market conditions.

PFZW, via PGGM, added $355 million more in capital to Vermeer Re in 2019, which alongside retained earnings took Vermeer Re’s balance-sheet to roughly $1 billion by the start of 2020.

Then, another $45 million of shares were subscribed for by the pension investor in 2020, followed by this latest injection of another $50 million of capital in 2021.

The result of which is that the balance-sheet of Vermeer Re, stood at roughly $1.3 billion by the end of December 2021, which was around a $200 million increase since the end of 2020, thanks to retained earnings and the additional shares subscribed for.

Vermeer Re’s liabilities also doubled in 2021, to reach almost $70 million by the end of the year, likely a reflection of a more challenging underwriting environment as well as loss activity.

Vermeer’s incurred losses approached $11.4 million in 2020, but for 2021 the joint-venture reinsurance vehicle experienced lower underwriting income, which we assume was due to catastrophe loss experience.

Both winter storm Uri and hurricane Ida resulted in losses that affected Vermeer during 2021, as well as some additional smaller weather or catastrophe events.

RenaissanceRe reported that just over $32.8 million of its weather-related large losses during 2021 were attributable to the non-controlling interests in Vermeer Reinsurance.

That’s a relatively low level of loss for these major industry catastrophe events, against which some $408 million was attributable to the non-controlling interests in the DaVinci Re vehicle, which shows off the low-volatility strategy of Vermeer.

Income attributable to Vermeer’s non-controlling interests reached $38.2 million for the year, down from $61 million in 2020, as the effects of the loss activity dented returns for the pension investor backing the reinsurer.

It’s assumed that earnings will have been retained again in 2021, allowing for further steady growth of the reinsurer as Vermeer Re builds out its portfolio and strategy, while the pension investor behind it grew its commitment a little again.