RenRe buys $180mn retro cover
RenaissanceRe bought a new $180mn retro cover for its Florida book in the second quarter to protect against frequency and lower-level cat events within the state.
This publication has previously reported that RenRe was trying to buy as much as $275mn of retro cover for Florida but was unable to place the full amount sought at the prices it was after.
The increased cessions led the reinsurer's net catastrophe premiums written down by 47 percent in Q2.
But RenRe also shrank its gross cat book by 33 percent, as president and CEO Kevin O'Donnell warned that buying retrocession cover was not a panacea for falling reinsurance rates.
In response to an analyst's question last month about reinsurers that are increasing or keeping stable their gross premiums and saying that buying "cheap retro" is compensating for lower rates, O'Donnell noted that there is never a perfect match between a retro cover and an inwards reinsurance book.
"I think [that] thinking about adding more risk and rebalancing the portfolio without taking more net risk is a difficult proposition in today's market," he added.
Reinsurers trying to use outwards retro to help make up lost income from lower rates were relying on one of two scenarios playing out, he explained.
"One is you need scale... so you need to write a lot more and then cede a lot more, hoping the spread between the two captures the lost income," he said. "Or you need a very large spread in pricing between primary reinsurance and retro."
However, O'Donnell said that at this point the market has not seen a complete dislocation between retro and primary reinsurance rates.
The CEO noted that there had been some resistance to declining pricing close to the 1 June renewals, but was pessimistic when questioned about whether cat pricing could be close to finding a floor.
"I think markets often don't change without some catalyst. So whether the market flattens out or continues to decline, it's something that remains to be [seen]," he said.
RenRe sold part of its stake in DaVinci Re to an existing investor for $38.9mn on 1 July, thereby reducing its ownership interest from 26.5 percent to 23.4 percent.