TransRe, the reinsurance underwriting arm of Alleghany Corporation, continued to reduce exposure to financial catastrophe in the second quarter of the year, reducing premiums by 17.2%.
Alleghany’s former governor called on the companies to reduce risk in November 2021 and said TransRe would reduce its ability to report safety risks unless the company was properly paid to put capital at risk.
This happened in January 2022, when TransRe announced that it had reduced its inventory for restocking by 25%.
The reason for this is that the returns do not seem to be sufficient for its standards, which it still appears to be until the end of the second quarter and the middle of the year 2022.
Joe Brandon, President and Chief Executive Officer of Alleghany, explained that the transformation of the special business units is ongoing at TransRe.
“Excluding TransRe’s major unit deal that was slated to be re-signed at the end of 2021, TransRe’s casualty and special written revenue grew by 14.6%, while its real estate business declined by 17.2% as it continues to rehabilitate its critical infrastructure,” Brandon said.
“Despite the ongoing global disaster losses, TransRe posted $88 million of underwriting profit with a 92.9% consolidated margin in the second quarter,” added Brandon.
But TransRe’s net income fell by 9.1% in the second quarter and 5.9% in the first half of 2022, driven by the non-renewal of a large portion of the total account and a decline in the property risk reinsurer business.
The catastrophic loss was $ 27 million for Q2 and $ 75 million for H1 of 2022, with the conflict between Russia and Ukraine driving the majority, at $ 44 million for the half, followed by $ 31 million from flooding in Australia.
TransRe expects to reduce significant natural disaster losses going forward, after reimbursing the risk premiums that have been written and maintained.
Of course, TransRe has the means to provide risk payments to third-party capital and is well known for its long-standing Pangea reinsurance sidecar series, as well as ownership stake in ILS fund manager Pillar Capital and part of ILS manager Integral as well. .
TransRe’s collateralized reinsurance sidecar Pangea has shrunk in recent years, but it remains a major means of the insurer sharing risk with its capital partners. TransRe Capital Partners’ stake may be the most important for the company as it recovers its cat book.
Pangea Re sidecar issued three notes in 2020 and 2021, while in 2022 almost new notes were given to investors and we suspect that the second part may have come to sell in the middle of the renewal year.
All of this presents options that could see TransRe continue to underwrite its long-running loss-making business, but with the goal of generating some kind of income, rather than risking its balance sheet.
In addition, TransRe also has bowline Re catastrophe bonds, which help it manage the catastrophe exposure in its book.
Recently, TransRe acquired its new subsidiary Bowline Re Ltd. (Series 2022-1) for $ 165 million to provide comprehensive risk protection, another catastrophic risk option is shared with the reinsurer.
As many reinsurers rush to book catastrophe risks, having access to third-party financing is becoming increasingly important, as investors in capital markets remain interested in securing well-managed natural risk positions.