Bonneau: PartnerRe will deploy property capacity strategically at 1.1

PartnerRe will present a business plan to its board later this month that will budget for a modest increase in cat capacity, which the reinsurer will deploy strategically along with its cyber capacity first to cedants where it can access other business it finds attractive, CEO Jacques Bonneau told The Insurer.

Jacques and Thierry – MC 2022 – 2

And the reinsurer is also looking to harness more capacity through its $1.1bn third-party capital platform, as it holds conversations with potential investors, including a number introduced through Covéa relationships.

The executive was speaking to this publication at the Monte Carlo Rendez-Vous in a joint interview with PartnerRe chairman and Covéa CEO Thierry Derez only two months after the French mutual’s €7.9bn deal to buy the Bermudian reinsurer closed.

And in a wide-ranging interview the duo discussed the rationale behind the transaction and how PartnerRe, as part of a group with a larger balance sheet, will address the upcoming 1 January renewals in a fast-transitioning market.

Derez described the acquisition of PartnerRe as “strategic” for the French mutual.

“We think that together we can offer global diversification and reinsurance expertise which is very important for the future,” he said.

He said that reinsurance companies had a role to play in addressing global issues such as climate change.

Addressing client needs

“We believe that by putting Covéa and PartnerRe in the same group, we will be able to better respond to the issues that most concern our clients. The challenge is not only about climate change, but how to stay ahead of radically changing risks today and for years and years to come.

“To have the expertise of a global company like PartnerRe is crucial to us. PartnerRe is a very strong franchise and of course we will maintain the name of the franchise,” he said.

Thierry Derez PQ

Meanwhile, Bonneau highlighted the benefits to PartnerRe of having a long-term mutual company owner in Covéa that’s “tried and true” in the insurance business with a full understanding of how it works.

That is in contrast to previous owner Exor, which had done “many good things” for PartnerRe, but bore more similarities with a private equity relationship.

He also pointed to the potential, although nothing is guaranteed, for PartnerRe’s A+ S&P rating to move up to the higher AA- level held by Covéa at some time in the future, an outcome which would be advantageous to the reinsurer’s non-life and life business.

The executives confirmed that operationally PartnerRe will continue to function broadly the same as before, with its own balance sheet and capital structure, rather than any consolidation into the broader Covéa group.

Capital allocation decisions are now presented to the PartnerRe board and subsequently to the Covéa board with the possibility to reallocate from other parts of the group to allow PartnerRe to take advantage of market opportunities where it can make a compelling case to its new owner.

Bonneau said that the reinsurer has enough headroom to address current market opportunities, but will be seeking approval for some limited expansion of its cat appetite, with Covéa at the group level mindful of its overall exposure.

Strategic capacity allocation

“We think that the market will be extremely attractive, but there will be a conversation we have with the PartnerRe board about where the limit is on how much we want to underwrite,” said Bonneau.

He added that the reinsurer would only take risk in line with its capital base.

“We’re not backing down … but even if the market got so, so hard, I would say there’s only a certain limit, and I think we’re close to it in terms of what we’re proposing,” Bonneau continued.

Jacques Bonneau PQ

And he said the choice of where to allocate cat aggregate would be highly strategic in a market where demand is set to be significantly up amid surging inflation.

“We view our property cat capacity and what we do in cyber as areas that are strategic for us and we want to offer capacity not exclusively, but first, to those clients where we have other business relationships that we like,” said Bonneau.

PartnerRe’s plans to grow its cat capacity – albeit modestly – are in contrast to a number of other reinsurers that have either pulled out completely (Axis) or significantly retrenched from the business line, including Markel (shifting cat business to Nephila), Axa XL (down 40%), TransRe (down 25%) and Scor (down 21%) against a backdrop of frequency and severity losses, model miss, climate change concerns and rampant inflation.

Bonneau said clients are likely to take into account a reinsurer partner’s willingness and ability to support them in property cat as they look at their relationship across the portfolio.


“There are some companies that have pulled out of property cat, and they are of the belief that they will be able to retain their other reinsurance business. Time will tell,” he commented.

A dominant theme at the Monte Carlo Rendez-Vous has been the availability of cat capacity and how a demand-supply imbalance will drive pricing dynamics at 1 January and through 2023.

Bonneau also highlighted the impact of mark-to-market unrealised losses across the industry, which is another factor in reinsurers determining how much capacity they can put out.

The executive said pricing at 1 January would need to stay ahead of the inflationary trend in order to bring improved margin to reinsurers in property cat after a challenging few years.

And he suggested that the retro market will also remain tight, with PartnerRe expected to maintain a stable position in that segment.

Alignment on inflation

With inflation the key driver of increased demand for property cat reinsurance, reinsurers will be heavily focused on ensuring that they have a full understanding of how cedants are reflecting surging valuations in their underlying portfolios.


Inconsistencies around insurance-to-value have been exposed in the property insurance market in the last couple of years, leading to higher-than-expected claims where properties and schedules have been undervalued – an issue now thrown into sharper relief by surging material and labour costs.

Bonneau said that PartnerRe has been proactively approaching the issue by sending out questionnaires to brokers and some of its larger clients to ascertain how they are looking at inflation, how policies respond and their strategy to keep insured values up to date.

“We are then asking for information to help substantiate what they’re saying. We want to make fact-based decisions, and we don’t want to overcharge people – that’s not the objective. But we do want to make sure we get to the right adjustments and the right price for the risk that we’re taking,” he explained.

He added that cedants looking for an early renewal in a tight market for capacity will need to provide sufficient information early enough so that reinsurers can assess the risk and provide an early quotation.

“The brokers and the clients at the end of the day need price discovery, and if everyone sits around and waits until the end, they’re not going to get it done until the end,” the executive commented.

Third-party capital growth

As well as looking to increase cat appetite on its own balance sheet ahead of 1 January, PartnerRe is also in discussions with potential investors that it hopes will enable it to harness more capacity and add to the $1.1bn of assets under management (AuM) in its third-party capital platform.

“It helps us because there’s a limit to the risk that we can take on our own balance sheet. And what we offer third-party investors is that we are completely aligned. We always have a meaningful participation as a risk taker so there is complete alignment of interest.

“We also have the expertise and the distribution capabilities, and we’ve got the relationships with both the brokers and the clients to access an attractive portfolio,” said Bonneau.

The reinsurer has allocated resources and made investments in the business over the last couple of years, and for 1 January 2022 established three funds for different levels of investor appetite: low risk, medium risk and high risk.

“That’ll probably be the area we will attract the more traditional pension fund money. We do have some pension fund money in our AuM, with the rest coming from private equity and other kinds of investors,” Bonneau suggested.

He acknowledged that raising money from investors for cat is challenging because of a tough few years in the space and concerns around climate change and cat models, but said the company is hopeful that it will attract some new investors or have existing investors increase their allocations.

Bonneau also pointed to the benefit of Covéa ownership as it looks to bring in new investors.

“They’ve got contacts that we don’t have, and they’re in the process of opening some doors for us to have some conversations and discussions with people that they know very well,” he commented.