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Speaking during a second-quarter earnings call today, Kevin O’Donnell, CEO of Bermuda based underwriter and third-party reinsurance capital manager RenaissanceRe, said that he doesn’t see issues with capital wanting to enter the sector regardless of return.
RenaissanceRe is one of the largest managers of third-party reinsurance capital from institutional investors through its range of joint-venture vehicles and ILS funds.
So the company likely sees and interacts with a significant proportion of the investors looking to come into the reinsurance and ILS asset class, making O’Donnell’s comments worth noting.
Asked whether RenRe is seeing discipline among capital providers looking to enter reinsurance, particularly those in the catastrophe bond segment, O’Donnell’s comments suggest discipline is being maintained.
“I would say it’s been disciplined,” the RenRe CEO explained.
Continuing, “You know, capital is always interested and always comes into it. I think formations of new companies continues to be limited. Cat bonds is an attractive area for people, probably a little less attractive than it was a year ago. But that market remains disciplined.”
On the conversations RenRe is having with investors about its own third-party capital and ILS strategies, O’Donnell implied investors are approaching the ILS asset class with the right perspective.
“Our discussions with investors coming in are very return-focused. They have a good understanding of the market,” O’Donnell said.
Concluding that, “I don’t see some of the issues that we’ve seen before, with an influx of capital wanting to be in the class regardless of return, really being part of the of the dialogue at this point.”
Which are encouraging comments to hear and reflect the conversations we’ve been having with investors in 2025, which tend to be increasingly technical and focused on the fundamentals of the asset class, as well as its return-potential.
The comments read across to the RenRe CEO’s explanation of market conditions as well.
In property catastrophe reinsurance, O’Donnell said during the call today that he doesn’t believe reinsurance is heading for an increasingly soft market situation.
“There are price changes, but I think the real focus should be rate adequacy. Rates went up 50% in 2023 and over the last two quarters, we’re talking about rate changes in the 10 ish percentage change, obviously less for us because of our portfolio construction and access to business,” O’Donnell said.
“So we believe that the market will continue to trade, both on terms and conditions and rates, at the levels that were reset in 2023. You know, as with any financial market, there’ll be times where buyers have a bit more to push on price, and there’s times where sellers have a bit more to push on price. But we don’t see a downward trend to rate inadequacy in the near term, we continue to believe that rates will trade at highly adequate levels. Whether they’re up or down a little bit, is something the market will decide as we move forward.”
Capital disciplined. Investor conversations return-focused: RenaissanceRe CEO was published by: www.Artemis.bm
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