After announcing this morning a back years’ structured reinsurance deal on its Syndicate 1458 casualty book, RenaissanceRe has once again engaged TigerRisk to gauge appetite in the Lloyd’s legacy market for a separate transaction covering the Syndicate’s 2018 year of account, The ReInsurer can reveal.

RenRe and TigerRisk

  • Confirms Syndicate 1458 casualty retroactive reinsurance deal with R&Q today 
  • New process begins for 2018 YoA; R&Q in pole?
  • Retroactive market buoyant as carriers look to free up capital in hard market

Today, RenaissanceRe and London-listed R&Q finally confirmed an adverse development cover (ADC) for Syndicate 1458’s casualty exposures on the 2009-2017 years of account, a transaction first flagged by this publication.

But The ReInsurer has also learned that RenRe and its adviser TigerRisk are separately considering a follow up transaction relating to net reserves of ~£114mn/$150mn for Syndicate’s 1458’s 2018 year.

Today’s ADC – together with details of a new process on the Syndicate’s 2018 whole account – highlights the buoyant nature of the legacy markets and how attitudes towards their services have changed.

LPT vs ADC

Once regarded as a move of “last resort” for failed businesses, now (re)insurers regard the sector as a provider of essential capital management tools which enable carriers to free up solvency capital by transferring back year liabilities and reserves to specialist acquirers such as R&Q. 

And no market is more active than Lloyd’s where this publication has tracked at least six live processes in addition to a number of recently completed deals.

Active legacy deals in Lloyd’s market-3

These include the proposed sale of discontinued Lloyd’s insurers Neon and Vibe together with growth-focussed carriers such as Canopius and Apollo who – like RenRe – see a back years/retroactive deal as a way of releasing capital to focus on active underwriting. 

Syndicate 1458 performance 2014-19...

Today’s announcement also highlighted how legacy acquirers are evolving their solutions to maximise capital efficiency while also providing comfort to sellers over the claims settling process. R&Q said today it had provided structured cover in the form of a loss portfolio transfer (LPT) which attaches at 70 percent of held reserves with an additional limit for ADC. 

“This allows RenaissanceRe Syndicate Management Ltd to retain control of the claims handling process, whilst benefiting from balance sheet protection in the event of significant deterioration from the book’s modelled loss picks,” explained R&Q.

Although the London Stock Exchange announcement did not disclose numbers, The ReInsurer understands total casualty reserves are in the region of $392mn.

In his statement, R&Q chairman Ken Randall said the completed ADC/LPT transaction is “another example of R&Q helping strong-performing Syndicates to remove reserve risk allowing them to release capital which they can use to take advantage of the positive rating environment”. 

He added: “The evolution of the legacy market continues apace, and we are seeing a pipeline of such structured solutions both for Lloyd’s syndicates and across the wider insurance market”. 

RenRe’s recent Lloyd’s activity…

The separate 2018 YoA reinsurance deal is also likely to be structured as an LPT. Sources suggest R&Q is likely to be in pole position but TigerRisk may also gauge the appetite both of traditional Lloyd’s legacy acquirers - Enstar, RiverStone and R&Q - together with newer participants such as Premia

A number of other legacy acquirers - including Compre and recent start-up Marco - have also signalled their desire to entire the Lloyd’s market but they are currently focussed on transactions which also provide a Lime Street platform.

R&Q used its wholly-owned Syndicate 1100 to provide the LPT/ADC casualty deal.

RenRe and TigerRisk did not respond to requests for comment regarding the proposed 2018 YoA transaction. R&Q declined to comment.

The ReInsurer Comment:

Retroactive reinsurance is coming of age in a market where (re)insurers are highly motivated to recycle back years liabilities and expand into an accelerating hard market.

Watch out for more transactions – inside Lloyd’s and out – in Q4 2020….