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RenaissanceRe warns on wildfires, third-party capital could be exposed

3 November 2017

Bermudian reinsurance firm and third-party reinsurance capital manager RenaissanceRe put out a warning that it expects the California wildfires to result in a financial impact to the firm that will be “significant and could be material” which could suggest some of its third-party capital vehicles may also be exposed.

california-wildfire-losses-insuranceRenaissanceRe manages third-party money in vehicles ranging from its reinsurer DaVinciRe, to its Upsilon RFO collateralized reinsurance and retrocession strategy, its Medici Fund property catastrophe risk investment vehicle and its Fibonaci Re collateralized reinsurance SPI.

If the California wildfires are either a significant or a material financial impact to RenRe’s fourth quarter results, it is safe to assume that some level of support will come from certain third-party capital or ILS vehicles under the company’s management.

The California wildfires are now estimated to have caused anywhere up to $8 billion in industry losses, making them the most significant wildfire loss event in history.

Such a significant event is bound to have some impact on ILS and collateralized reinsurance positions, so with RenRe warning of a potential significant financial impact it seems safe to assume that some of its losses could add further attrition to ILS and third-party capital positions.

Additionally, RenRe could make retrocession recoveries due to the wildfires, we’d assume, which could also put collateralized capacity at risk.

RenaissanceRe said that its assessment of the impacts of the California wildfires is still at a very preliminary stage, with its assumptions based on the initial industry insured loss estimates, an analysis of its market share, risk modeling, a review of in-force contracts and also uncertainties relating to its ability to make reinsurance recoveries.

It will be some time before the wildfire losses will spill down into reinsurance and ILS markets, but the impacts of these events to reinsurers like RenaissanceRe should become clearer in Q4 results.

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