Bermuda-based RenaissanceRe Holdings Ltd. (RenRe) has created its first third-party reinsurance capital backed joint venture focused on casualty and specialty risk, Fontana Holdings L.P., which launches with $475 million of capital, most of which comes from institutional investors.
The institutional investors for this new, innovative joint venture contributed $325 million of Fontana’s launch capital, with the remaining $150 million coming from RenRe.
Fontana, which is regulated by the Bermuda Monetary Authority, is dedicated to writing casualty and specialty risk, and is expected to enhance shareholder value at RenRe with additional fee income.
Concurrent with its launch, Fontana assumed a whole account quota share of its parent’s global casualty and specialty book, including the credit portfolio.
RenRe highlighted the opportunity to raise further capital and increase the scale of the new joint venture reinsurance vehicle over time.
The company’s President and Chief Executive Officer (CEO), Kevin O’Donnell, commented, “Fontana builds on our long legacy of innovation in matching desirable risk with owned and partner capital. We are proud to invest alongside several highly respected institutional investors and believe that they will benefit from our deep expertise in underwriting Casualty and Specialty risks.
“We also believe that Fontana will enhance shareholder value by providing a steady source of fee income while enhancing our gross-to-net strategy.”
Christopher Parry, SVP, Global Head of Capital Partners, added, “Fontana represents the next step in the evolution of our Capital Partners strategy. As our first joint venture focused on Casualty and Specialty risk, Fontana extends the suite of insurance-linked securities and reinsurance strategies that we offer our third-party capital partners.”
Fontana certainly builds on the Bermudian reinsurer’s ILS capabilities, adding casualty and specialty to its property catastrophe focused offerings.
RenRe has long offered investment opportunities in catastrophe bonds, collateralized reinsurance and other insurance-linked securities (ILS) and has specific joint-ventures with large institutional investors, such as the rated reinsurer Vermee Re which is backed by Dutch pension investor PGGM.
This is RenRe’s first foray into casualty and specialty lines for its third-party capital partners, outside of smaller transactions.
We understand Fontana is designed to be a perpetual vehicle, but offers embedded liquidity for third-party investors and the strategy is based on tapping RenRe’s underwriting breadth of expertise, to derive returns for investors.
Using a quota share arrangement, like a sidecar, to underpin the sharing in RenaissanceRe’s underwriting performance, but in a vehicle designed to be perpetual and with liquidity embedded, counters a lot of the technical difficulties associated with ILS investments into longer-tailed casualty and specialty lines.