RenaissanceRe looks to targeted growth in Lloyd’s marine and energy

Bermuda-based reinsurer RenaissanceRe is looking for targeted growth in the Lloyd’s marine and energy reinsurance market in 2017, CEO Kevin O’Donnell told an investor webcast on Wednesday, which coincided with the reinsurer’s release of it full-year 2016 results. RenRe manages syndicate 1458 at Lloyd’s. O’Donnell said that RenRe had been “diligently building capabilities in this area, and our hope is that we will be able to grow this book.” He added that RenRe intended to continue to grow the Lloyd’s platform overall.

A questioner after the webcast observed that, although pricing had stabilized in marine and energy, it was still at “pretty low levels”. He asked: “Why the attractiveness at this point? There’s plenty of capacity there too.”

O’Donnell repliedthat he agreed with these observations, stating: “We are not looking to write an index of the marine and energy market. We’ve built good tools and we’ve built good relationships. We’re looking to come in in a pretty targeted way. And we are coming in with our eyes wide open. There’s full recognition, particularly on the insurance side. It’s a very competitive market, and a lot of that translates to the reinsurance side. I do think there are some opportunities there, and we are going to leverage into it slowly”.

RenRe also adopts an aggressive capital management strategy, ceding half its property book and about a third of its casualty/specialty segment.

“While we find the casualty and specialty business attractive overall, and diversifying to our portfolio, we nonetheless make significant retro purchases on this book”, said O’Donnell, giving three reasons:

1) It helps maximize shareholder value by optimizing the company’s risk-adjusted return profile.

2) It allows the company to maintain leadership lines in certain areas as the company can offer larger limits

3) The gross-to-net strategy enables the company to transfer risk income into fee income.

For 2016 RenRe reported GWP of $2.37bn, up from $2.01bn the previous year. NWP rose by less, up to $1.53bn from $1.42bn. Net income rose to $480.6m, from $408.8m. The combined ratio in casualty & specialty for the year was 96.9% (2015, 95.0%), compared with 49.6% for property (2015, 42.3%).