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RenaissanceRe: A jewel in the crown

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RenaissanceRe Holdings Ltd celebrated its 25th anniversary on June 14, marking a milestone not only for the company, but also for Bermuda’s reinsurance industry. RenRe was one of the batch of property catastrophe reinsurers to set up on the island in the wake of Hurricane Andrew –– and it is the only one of the “Class of ’93” to remain as a stand-alone company today.

From its launch with initial capital of $140 million, RenRe set out its stall to bring much more than capital to the marketplace. Its founding chairman and chief executive officer was James Stanard, an actuary with a PhD in finance, who brought a profoundly scientific approach to risk evaluation that established a lasting reputation for RenRe as “the smartest people in the room”.

Andrew destroyed more than 28,000 homes and damaged another 107,000 in Florida and Louisiana. Several US insurers folded and many others suffered devastating losses in a massive shock to a complacent industry. It was the most expensive disaster in US history at the time and it prompted insurers to up their game with regard to data on their catastrophe exposures.

Better data presented an opportunity for reinsurers to go about their business in a more professional and analytical way. RenRe took full advantage through the development of proprietary technology for risk models and analysis, which gave them a better understanding of the huge risks they were underwriting than most of their peers. Financial outperformance followed.

Its innovative drive was also evident in its role as one of the pioneers in the formation of sidecars, vehicles that boost underwriting capacity through the use of third-party capital. These forerunners of today’s insurance-linked securities boom sprang up widely after Hurricane Katrina in 2005, and after the 9/11 terrorist attacks. But RenRe was ahead of the curve. Its Top Layer Re and OpCat entities were active from the 1990s putting to work capital partly supplied by other insurance companies. Through operations including Da Vinci Re, Langhorne Re, Fibonacci Re and the RenaissanceRe Medici Fund, RenRe has built an impressive ILS and managed assets platform, featuring some $2.2 billion in third-party capital, according to the Artemis alternative risk transfer website, as well as joint ventures and ILS fund investment strategies.

Such an innovative capital structure has not only grown RenRe’s capacity to underwrite risks, but has also aided flexibility in ramping up or scaling down according to market conditions, and has improved risk portfolio diversification.

Today RenRe, whose headquarters are in waterside offices on Crow Lane, has operations in Ireland, the United Kingdom, the United States, Singapore and Switzerland. It has grown from that initial $140 million capital into a publicly traded company with market capitalisation of more than $5.3 billion at the time of writing, and a company that deploys $13 billion of capital in the reinsurance market.

While RenRe is undeniably a Bermudian success story, it has not all been plain sailing over the past quarter of a century. In 2005, Mr Stanard resigned after US regulator the Securities and Exchange Commission (SEC) accused him and two other executives of perpetrating a sham “finite reinsurance” transaction, which had the effect of deferring $26 million of RenRe’s 2001 earnings to later years. RenRe was not the only reinsurer to get caught up in the SEC clampdown on such transactions, but that was little consolation to the company that lost its leader, founder and the man who personified its competitive edge.

It is a testament to RenRe’s corporate culture that the company dealt so well with that heavy blow and continued unhindered on its path to growth, with innovative reputation intact. Neill Currie, a cofounder of the company, was named as the new CEO in late 2005. During his eight years at the helm, he frequently stressed the importance of a strong corporate culture and excellence in customer service. ​

Mr Currie was succeeded in 2013 by Kevin O’Donnell, another executive who knows the company inside out, having joined as an underwriter in 1996. He led the $1.9 billion acquisition of fellow Bermudian reinsurer Platinum Underwriters Holdings Ltd in 2015, which considerably strengthened the firm’s presence in the United States and added further product diversification.

RenRe is a jewell in the crown of Bermuda’s reinsurance market. Its remarkable story over the last 25 years has lent credence to the island’s frequent claims to be a laboratory of insurance innovation. May its creative spark long continue.

This article was originally published in the September 2018 edition of the RG Business Magazine.

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