RenRe adds to Florida capacity with $70 million Timicuan Re II launch

Jun 1, 2009

Alongside traditional reinsurance capacity entering the Florida market at the 1.6 renewal, Bermudian reinsurer RenaissanceRe has relaunched its Timicuan Re sidecar with $10mn seed capacity and $60mn of third party equity investment, despite difficult market conditions for the vehicles.

Timicuan Re II – which will cover a quota share of the firm’s Florida hurricane exposure – will write business for the 2009 US wind season, which began today (1 June).

Aon Benfield Securities was lead placement agent for the new Bermuda vehicle, with Willis Capital Markets and GC Securities acting as placement agents.

Tim Re II succeeded in securing capital market investment despite “difficult conditions”, according to RenRe CEO Neill Currie, who added that the firm was pleased to have “worked with investors to deliver additional reinsurance capacity to the Florida market”.

Despite rising (re)insurance rates in Florida – with Guy Carpenter estimating 15 percent increases in the state at 1/6 (see article 2) – the industry is struggling to persuade investors to support new 2009 sidecars because of the latter’s demand for high yields.

Market sources agree that equity investors are now seeking potential returns in excess of 30 percent from sidecars, creating a shortfall that is not easily filled without leverage, despite this year’s rate increases.

Although a number of sidecars have been mooted for 2009, few are now expected to roll-off the production line this summer.

Leading insurance-linked securities (ILS) investor Nephila Capital and a subsidiary of Allianz Risk Transfer (ART) formed a new short-term investment vehicle that will mirror a sidecar by writing a portion of 2009 cat reinsurance exposures via Nephila’s regular funds.

The unnamed sidecar has $100mn of capital and will be managed by Nautical Management Ltd – a 2007 joint venture between ART and Nephila which provides management services to dedicated catastrophe reinsurers.

However, The Insurance Insider understands that Montpelier Re’s proposed relaunch of its Blue Ocean Re vehicle and Endurance’s mooted $200mn Solstice sidecar are now unlikely to be in place by the main US renewal season. Hannover Re is also not believed to be renewing its Globe Re transaction which has a portfolio of Florida risks.

Faring better, however, is Flagstone’s industry loss warranty vehicle Mont Fort II which is thought to having reloaded at around 50 percent of its previous capacity, while Hannover Re’s sidecar-style facultative venture, Fac Pool Re is also understood to be gaining traction.

Sidear investments are not a new venture for Ren Re, which continues to support its capital market affiliates DaVinci Re and Top Layer Re. Tim Re II replaces the original Timicuan vehicle, which was wound down in January 2007 as Florida state legislation severely reduced the amount of Florida capacity in the private market.

In August 2008, RenRe terminated its retrocessional sidecar Starbound Reinsurance II Ltd. Starbound II had capacity of $375mn and was funded by a $102.5mn equity issue, and $239mn from the issue of senior secured and unsecured term debt. RenRe took a $10mn share of the equity issue.