RenRe finds investors for cat bonds, can’t hold collateralised reinsurance

RenaissanceRe managed to raise only half the third party capital in Q2 that it had swept up in Q1, chiefly to cat bond vehicles, then watched as investors took money out of collateralised reinsurance/retro at a nearly matching pace.

RenaissanceRe's Q2 gross take of $350.5 million went predominantly to the red-hot ILS segment of cat bonds. Gross flows included $170.5 million into the open-ended cat bond-focused fund Medici and $150.0 million to a newly formed segregated account focused on ILS securities, also primarily catastrophe bonds. Management claimed investment gains, both realised and unrealised, on the Medici portfolio.

But redemptions picked up elsewhere, particularly as investors swept up cash as trapped capital was released from the Upsilon Diversified Fund. RenaissanceRe claimed $313.0 million in outflows, of which $285.6 million came on capital freed at Upsilon. RenaissanceRe did not account for the remaining.

Q2 tallies extended flow trends from Q1 already tipped heavily to cat bond funds and away from the group's collateralised reinsurance/retro ILS offer. Medici had been the top taker in Q1 and into Q2; Upsilon's collateralised reinsurance and retrocession offer brought $140 million in outflows, 2/3 of the Q1 total.

The Upsilon open-ended fund that RenaissanceRe packs with collateralised reinsurance and retrocessional risks was listed as the top Q1 redemption.

Management made no mention in its Q2 preliminary earnings release of net flows vis-a-vis the group's flagship property cat and specialty ILS vehicle DaVinci, save to claim "Strong underwriting results".

Management fee income across the ILS units rose by $12.7 million or 41.5% in the second quarter and got a long-awaited boost from performance fees, up 3.7 times to $13.2 million on the improved current year underwriting.

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