RenRe added property cat at 1.1 and is poised for a deeper dive

Renaissance Re upped its property cat allocation in the 1.1 renewals and will be on the prowl for even more at both pending mid-year deadlines and in private deals as cedents look to cover shortfalls from January treaties, top officials have claimed.

“We increased allocation to property cat as it became increasingly profitable relative to other property,” CEO  Kevin O’Donnell (pictured) told his company’s Q4 earnings call, co-hosted with CFO Robert Qutub. “Property cat will grow substantially,” he said of the outlook for 2023.

“Right now property cat is preferred and we will continue to emphasise the growth there,” the official said. “We are going to grow into property cat and shrink a bit in [non-cat] property, which I think is a good trade.”

At the 1.1, cedents largely proved price conscious, agreeing to higher retentions and resigning from new higher layers after being hit by price tag shock, O’Donnell said. Limits in the US ended largely flat, he suggested.

“Buyers ultimately made wallet decisions for how much they wanted to spend, but I don’t think how much they want to buy has changed.”

“Over time we expect this demand to return to the market,” O’Donnell said. Demand at higher layers will likely come from larger firms seeking to protect balance sheets, officials said. “We will always have the most efficient capital to assume property cat risk, so it should sit with us.”

Growth should also be visible at upcoming renewals deadlines. RenRe still has about half of their US exposed property cat limit ahead of renewals, with mid-year deadlines as key milestones.

“We expect many opportunities to deploy additional capacity over the next six months,” an official told the call. “In addition to the growth we have already achieved, we have additional capital to deploy.”

In casualty & liability, RenRe is extending into a number of more dislocated lines, especially where the war in Ukraine and geopolitical uncertainties have made lines appear “very dislocated”.

“We continue to see opportunities across casualty and specialty classes,” CEO O’Donnell said. Some specialty classes such as marine and energy, terror, and aviation “were particularly attractive and achieved increased rate and retentions.”

“Overall, we are confident this casualty renewal will drive sustained profitability growth,” O’Donnell said. “We have written what is likely to be our largest and most attractive portfolio to date,” fully capable of continuing to hit RenRe’s combined ratio target in the mid-90’s.

The nature of the 1.1 renewals, “a fundamental reset in the relationship between insurers and reinsurers,” fit well with RenRe’s plan to whip its own book back into shape.

“These changes benefited us in particular.” The late nature of the renewal season favoured RenRe. “Creating options and providing alternatives is a skill that can reap outsize rewards.”

The 2022 slate of cat events would have left RenRe with “substantially higher” returns given the price, terms and structure of the new 2023 book, officials insisted. Primaries are retaining more risk and paying more for the lingering coverage. Winter storm Elliot wouldn’t even have touched the reinsurer.

Insurance market reforms in Florida have yet to make an impression on RenaissanceRe. “It will not change our appetite,” officials said. Focus remains on price, attachment points and the economics of the deal, they said.

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