The Full Perspective: Covid retro trapping and PartnerRe-Covea’s make-up deal

This week Adam McNestrie and Fiona Robertson discuss the impact Covid-19 trapped capital is having on the retro market and the surprise investment partnership between Covea and PartnerRe.

Key points on the retro-trapping debate

  • Disputes over coverage and retro cedants’ ability to trap capital on the basis that the pandemic is an “ongoing event” are fomenting tension in the retro market in the run-up to 1.1, threatening further dislocation and rate hardening that could drive the January renewals.
  • The ultimate issue speaks to how well collateralised covers respond to catastrophe events where the development tail is longer than expected, but our editors had differing takes on what this means for the ILS business model as it evolves in response to the challenges of back-to-back loss years. 

Key points on the Covea-PartnerRe deal:

  • The unexpected rapprochement comes three months after the pair’s takeover deal fell apart. The partnership will give Covea some of the advantages it was seeking from greater exposure to diversifying reinsurance business, if not at the same level it would have seen from acquiring PartnerRe. 
  • On the underwriting side, the partnership capital from Covea is likely welcome for PartnerRe as the reinsurer faces a tightening retro market. The reinsurer has set up some sidecars but has not yet built a third-party business of scale, but it will now have up to EUR750mn over time to support its portfolio of property cat and other short-tail business.

Click below to watch the video, or here to listen to it as a podcast. 

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