RenaissanceRe has agreed to acquire the reinsurance platform of Japanese insurance company Tokio Marine for around $1.5bn in a cash-cum-stock deal.


Image: Tokio Marine to sell its reinsurance platform to RenaissanceRe. Photo: courtesy of rawpixel/Unsplash.

Under the transaction, the Bermuda-based RenaissanceRe will be acquiring Tokio Millennium Re and Tokio Millennium Re (UK), collectively called TMR, which are owned by Tokio Marine & Nichido Fire Insurance, a subsidiary of Tokio Marine.

TMR was established in 2000 by Tokio Marine to write overseas reinsurance risks. Along with the TMR (UK) unit, TMR has recently expanded the classes of business written into non-catastrophe exposed classes of business.

Tokio Marine said that the global reinsurance market has recently been through several changes including continuing soft market environment due to steady inflow of capital from outside the reinsurance industry, which has been impacting the return earned from the business, said the Japanese insurance company.

Tokio Marine also said that the sale of its reinsurance platform will enable it to focus on its core insurance businesses across the globe while consolidating its relationship with RenaissanceRe.

In this regard, the Japanese insurance company will offer the Bermudian firm a $500m adverse development cover that will protect the stated reserves of TMR at closing, including unearned premium reserves.

Apart from that, Tokio Marine and RenaissanceRe will sign a business cooperation agreement. The companies expect the agreement to improve their business relationship and enable cooperation on a portion of the global reinsurance purchases made by the Japanese insurance company and its affiliates.

RenaissanceRe president and CEO Kevin O’Donnell said: “This transaction will increase our scale, broaden our reach and extend our ability to apply our core strengths to a deeper customer base.

“Our unique ability to capitalize on large, one-of-a-kind opportunities underscores our global reinsurance leadership, including in Casualty and Specialty lines, and our ability to execute on our successful, highly differentiated strategy.”

The transaction is likely to be completed by the end of March 2019 subject to receipt of regulatory approvals in TMR/TMR (UK)’s main operating locations.

In another development, RenaissanceRe announced that US-based State Farm Mutual Automobile Insurance will invest $250m in it to acquire a 4.8% stake.