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Upsilon retro vehicle grew again for RenaissanceRe in Q3

28 November 2017

Bermuda reinsurance firm RenaissanceRe continued to grow the size of its third-party investor capital backed retrocessional reinsurance vehicle Upsilon through the mid-year renewals and into the third-quarter, reporting that the total assets of Upsilon RFO had jumped to $453.8 million, on a U.S. GAAP accounted basis.

That’s up from just under $400 million at the end of the first-quarter of 2017 and a big increase from the $193.0 million of assets reported at Upsilon at the end of 2016.

Interestingly, RenaissanceRe had reportedly grown the Upsilon RFO strategy as it had seen improvements in the retro market in particular, with market conditions viewed more favourably to deploy more capacity in 2017.

Of course the Upsilon collateralized reinsurance and retrocession funds will likely have faced some considerable losses after the Q3 catastrophes, so the figure of $453.8 million no doubt includes capital that will now be trapped while losses are evaluated and paid.

RenRe had previously said that it raised capital for its Upsilon RFO vehicle in Q3, issuing $46.5 million of non-voting preference shares to investors, $17.7 million of which was taken by the reinsurer and the rest third-parties, leaving RenRe’s participation in the risks assumed by Upsilon RFO at 16%.

It’s safe to assume that RenaissanceRe will be looking to increase the size of Upsilon for the 2018 underwriting year, given the expectation that rates will rise in the retrocession space in particular.

While the vehicle will be dealing with its losses right now, Upsilon could move into 2018 perhaps having grown in size again, as RenRe takes advantage of market opportunities.

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