RenRe targets property catastrophe growth as market 'in very attractive phase'
Kevin O'Donnell says 'right now we are getting paid more per unit of risk in our property catastrophe business and that is where we are choosing to deploy our capital'
Bermuda-based carrier likely to increases its exposure to hurricane wind risk this season amid strong demand for cover and continued attractive market conditions, chief executive says
RenaissanceRe is likely to increase its dollar exposure to north Atlantic hurricane risk after the mid-year renewals, the reinsurer’s chief executive has predicted.
Speaking to analysts following the publication of the company's first quarter results, Kevin O’Donnell said property catastrophe business is in a “very attractive phase”, with the positive outcome RenRe saw at the April renewals expected to continue at the June 1 renewals.
As a result, the Bermuda-based carrier is targeting growth in property catastrophe business, while reducing in other property lines such as US excess and surplus lines, O’Donnell said.
“We did it because right now we are getting paid more per unit of risk in our property catastrophe business and that is where we are choosing to deploy our capital,” he added.
RenRe’s property net written premiums increased nearly 15% in the first quarter, driven by 36% growth in property catastrophe net written premiums.
O’Donnell said the company was seeing “robust demand” for cover at the Florida-focused June 1 reinsurance renewals.
He added the company had already bound several mid-year contracts with large customers with rate increases and terms and conditions “consistent” with the trends seen at the January 1 renewals.
“Many of these deals were done on a non-concurrent basis where we enjoy favourable economics. In addition, we have not seen significant new supply and consequently expect favourable market conditions to persist,” he said.
But O’Donnell added RenRe continued to take a “cautious approach” to the Florida domestic market, which has faced severe challenges in recent months.
“Many of these companies are reducing risk and are financially constrained from purchasing more reinsurance,” he said. “We are watching this market closely and any changes to our view will depend on the rate environment.”
Questioned on RenRe’s expected exposure going into the hurricane season, O’Donell said the company would increase the absolute dollar exposure but this was likely to be a smaller percentage of shareholder equity.
“We’ll have gone a little bit more risk-on on an absolute dollar basis, but [this will be] relatively less from a shareholder exposure basis,” he said.
Earlier, RenRe reported operating profit more than doubled in the first quarter of the year to $360m as underwriting income soared 85% and investment income more than tripled.
First-quarter underwriting income climbed to $369.9m from $200.3m, driven by lower catastrophe losses of $79m. As a result, the group’s combined ratio improved 8.5 points to 78%.
RenRe’s property segment was a key contributor to the improved underwriting results, with the segment’s underwriting profit rising to $298.7m from $184.8m.