Trapped capital flees RenaissanceRe again Q4, FY net flows in the red
RenaissanceRe suffered its second straight quarter of net outflows of third party capital from its stable of ILS vehicles as once-trapped capital in collateralized reinsurance structures flew the coop yet again, pushing the full-year net tally on RenaissanceRe ILS into the red.
Management could only cheer with word that that third party funds raised for the 1.1 reinsurance renewals had risen notably from the prior year take.
In the fourth quarter, RenaissanceRe suffered a net outflow of $170.6 million from its facilities, a 68% increase against Q4 2022's negative net tally despite a rebound in inflows vis-a-vis the moribund prior-year period following Hurricane Ian.
Q4 2023 redemptions of $364.5 million matched the prior quarter pace as once-trapped capital was released from collateralized reinsurance structures and headed straight for the door. Outflows included $300 million of released capital from one of the Upsilon funds, a fund group packed with collateralized reinsurance and retrocession structures on property cat exposures.
Those Upsilon collateralized property cat funds have suffered throughout 2023. The same Upsilon fund had lost $122 million in freed capital in Q3, $285 million in Q2 and an unspecified portion of $140 million in Q1 outflows which had been more generically attributed at the time to the larger Upsilon family.
Third-party capital raised in Q4 clearly avoided collateralized reinsurance vehicles, as had been the case in prior quarters. The $193.9 million in Q4 raised funds went primarily to the cat bond fund group Medici, the casualty and specialty risk unit Fontana as well as a sidecar property cat vehicle in the Upsilon group.
Management made no mention in its Q4 preliminary earnings release of net flows vis-a-vis the group’s flagship property cat and specialty ILS vehicle DaVinci, but did claim “strong underwriting results” for the unit.
Management worked to soften the blow from net outflows with word that it had raised a further $494.8 million from third-party investors for the January 1, 2024 reinsurance and retro renewals, a 23% increase on the sum claimed for the prior-year exercise.
The Q4 tally on third party capital tipped RenaissanceRe $72.6 million into the red for the full-year. Third party capital inflows of $1.18 billion for the full year was still down from levels closer to $1.4 billion in the prior year period.
Management fee income across the ILS units rose handily against the depressed prior year period. Management income rose 82% year on year to $47.8 million, including booking of some deferred management fees, while performance fees rose 5x to $23.0 million, driven by improved current year underwriting results, primarily in DaVinci.
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