Renaissance Re Hops Back Into Sidecar, Soaks-Up Florida Catastrophes

Bermuda-based Renaissance Re renewed its longstanding sidecar structure with the formation of Timicuan Reinsurance III Ltd., the company announced Friday.

The new sidecar will reinsure the Florida homeowners market with both Renaissance — and it’s is associated reinsurer DaVinci Reinsurance Ltd. — ceding hurricane risks for carriers during the 2012 storm season.
Both Renaissance and DaVinci will kick in $55 million to capitalize the vehicle, with the sidecar being managed by
Renaissance Underwriting Managers, Ltd.

“We are pleased to announce the formation of Tim Re III and continue our track record of working with the capital markets to provide additional reinsurance capacity,” said Renaissance CEO Neill Currie in a statement. “Through this endeavor, we are able both to serve our customers’ needs and design a facility that allows investors to invest efficiently in the Florida reinsurance market.”

Reinsurance sidecars have experience a resurgence over the past 18 months after laying fallow as traditional capacity ate up market share. Losses in Australia, Japan, and New Zealand in 2011 created enough of a market “dislocation” to open the door for sidecars and traditional hedge fund investors freed up capital to committee to the sector.

For example, four new sidecars were created in the first half of 2011 adding an additional $680 million in capacity, according to Aon Benfield Securities.

“The lack of sidecar activity over the past few years and the subsequent resurgence was not happenstance; the sidecar market was operating just as intended,” Aon Benfield said in its 2011 Insurance Linked Securities report. “Sidecars are designed to allow investors and sponsors to take advantage of temporary dislocations in the market.”


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