RenaissanceRe Holdings Ltd. announced Tuesday that it entered into an agreement with Munich Re to sell its U.S.-based weather and weather-related energy risk management unit, RenRe Energy Advisors Ltd. (REAL).
“Our decision to sell this unit reflects our commitment to a focused strategy of expanding our underwriting platforms in Bermuda, London, the U.S. and Asia,” said Kevin O’Donnell, CEO of RenaissanceRe Holdings Ltd., a global provider of reinsurance and insurance.
“Munich Re has been working with REAL for over three years as a risk capacity provider, and we are pleased to consummate this transaction with a valued long-term trading partner,” he added.
REAL’s team of experts have more than 16 years of experience in covering and trading weather risks, Munich Re said in a separate statement. Its clientele consists mainly of U.S. energy companies and other markets requiring coverage against fluctuations in income due to adverse weather conditions.
“With the acquisition of REAL, we are actively expanding our know-how and product range of weather risks and investing in a promising and profitable market,” explained Thomas Blunck, the Munich Re board member responsible for this segment.
The new unit will enhance Munich Re’s diversification in the field of weather derivatives, since it covers additional regions and sectors.
Fluctuating and difficult-to-predict weather conditions are significant economic risks for many business sectors. Munich Re’s experts have monitored global weather trends and loss developments for nearly 40 years, giving the company a particularly high level of expertise in assessing and modeling such risks. In conjunction with REAL, Munich Re will be able to cover not only traditional energy companies but also investors in renewable energies.
The transaction is expected to close in the fourth quarter of 2013 and is subject to regulatory approvals and customary closing conditions.
Sources:RenaissanceRe Holdings Ltd., Munich Re