RenRe’s O’Donnell: Early clear message at 1.1 helped preserve cedant relationships

In a challenging 1 January renewal for buyers, RenaissanceRe’s early and clear messaging as well as its position as a lead quoting market helped the firm maintain relationships with cedants and achieve its pricing objectives independently across property, casualty and specialty, according to president and CEO Kevin O’Donnell.

In the build-up to the renewal the broking community had been vocal about the lateness with which some reinsurers were putting out quotes and engaging with buyers.

That left cedants unclear as to the appetite of market participants, contributing to a late renewal process.

It also led to talk of damage to relationships between buyers and sellers of reinsurance.

Talking to The Insurer TV, O’Donnell said that as well as achieving the reinsurer’s objectives in a property treaty renewal that had seen a step change in pricing and terms, RenRe had seen strong growth in specialty and casualty – with the exception of D&O where it shrank significantly.

And the executive said the outcome was in part shaped by the Bermudian’s approach to the renewal.

“From a relationships standpoint, I think the number one thing we’ve heard from clients or brokers is relationships are damaged where markets didn’t show … [where] they’re unclear about what capacity was available and at what price [that] capacity would be available.

“From a RenRe perspective, we went out early with very clear messages and we were – as expected – a lead quoting market. They didn’t always like the message that we delivered, but it was clear, and it was highly defined with regard to price and structure,” said O’Donnell.

The approach led to a positive renewal outcome for RenRe and left it feeling good about the relationships it has going forward, he continued.

Asked about concerns that the industry could damage its future viability from a buyer’s perspective if a tougher stance leads insurers to retain significantly more, the executive said reinsurance mustn’t become a non-risk transfer product.

But he said that where the industry finds itself after the 1 January renewal is at a “more sustained and responsible level”.

The impact of inflation in property cat, for example, meant some of the bottom layers previously purchased were potentially too low for risk transfer to the reinsurance market and should instead be managed by insurers.

“I would say a lot of the reinsurance that was purchased is more protecting of the balance sheet, so the income statement layers that were in the market are the ones that have been reduced. And I think what will happen is primary companies will use price to manage their income and to reduce volatility there rather than reinsurance,” he suggested.

The RenRe CEO said reinsurance remains a very efficient part of the capital stack for insurers.

The leverage reinsurers can build into their balance sheets inures to the benefit of the buyer, providing them with “highly efficient capital with professional managers of volatility”, he suggested.

“So, I believe in reinsurance, I believe it has a very strong value proposition within the capital stack of primary companies. But in transition years like this, it’s sometimes more difficult for primary companies to see that value,” said O’Donnell.

The Insurer TV talks to Kevin O’Donnell

Listen to the second part of our Leading Voices interview with RenaissanceRe president and CEO Kevin O’Donnell for a far-reaching conversation on:

  • Growing its casualty and specialty portfolio at 1.1
  • What was achieved on pricing, terms and conditions at the key renewal
  • Reserving approach at RenRe as well as industry price v loss costs
  • The anomaly of pandemic years in relation to social inflation
  • Using a hybrid model to solve customer problems with the most efficient capital