2013 begins with sidecars back in vogue

It seems that sidecars are back in vogue in the Bermuda market, with Alterra, Argo, Lancashire, RenaissanceRe and Validus all launching or ramping up sidecars in recent weeks.

RenaissanceRe started the year with the launch of Upsilon II, a sidecar that took advantage of the renewals to extend $185 million of additional worldwide aggregate retro capacity to the market. RenaissanceRe indicated that the full limit of collateralised reinsurance had been taken up in January.

Addressing the positive take-up achieved by Upsilon II, Neil Currie, CEO of RenaissanceRe told Bermuda Re: “we are always looking for ways to better serve our clients and, during renewals discussions, we heard a need in the market for additional retro capacity. While there was adequate capacity for certain types of risk, other forms of coverage had been less available. We responded to client and market demand for the aggregate retro product and we chose to participate in that market and provide capacity through Upsilon Re II.”

Asked how attractive retro business is at present and how complementary a component Upsilon Re II is likely to be to RenaissanceRe’s existing reinsurance portfolio, Currie said: “we created Upsilon Re II to respond to a specific client and market need which, in this case, was aggregate retrocessional coverage.  With Upsilon Re II, we continue RenaissanceRe’s track record of designing a capital structure that successfully addresses our clients’ risk challenges while providing adequate estimated returns to third-party investors. We think of Upsilon Re II as a standalone vehicle that is uniquely structured to be most efficient for the risk it is covering, rather than a complement to our reinsurance portfolio.”