EU approves RenRe’s acquisition of AIG’s Validus Re and AlphaCat

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RenaissanceRe’s acquisition of the treaty reinsurance operations of AIG, which include Validus Re, the Talbot reinsurance book, and the AlphaCat Managers ILS fund management unit, has been approved under EU Merger Regulation by the European Commission.

It’s one of the last hurdles in the acquisition process for RenaissanceRe (RenRe), as it looks to build out its reinsurance operations and third-party capital platform considerably with the deal.

The deal to acquire AIG’s Validus Re, AlphaCat Managers and Talbot reinsurance book was announced back in May, with RenRe and AIG reaching a deal that is seen to deliver benefits to both parties.

As part of the deal, AIG is set to make what was called a “substantial” investment in RenRe’s DaVinciRe and Fontana, third-party capital vehicles.

It later transpired that this would amount to as much as $500 million, while RenRe also said it would raise additional third-party capital to support Validus Re portfolio integration.

As we later reported, AIG RenRe said it would share as much as 50% of the Validus risk it assumes through the acquisition with the third-party investors in its joint-venture and ILS structures.

On the other side of the deal, AIG said it will come out of the sale of its Validus reinsurance business and the AlphaCat Managers insurance-linked securities (ILS) platform to RenaissanceRe, with a significantly reduced amount of natural catastrophe volatility.

Now, the European Commission has said today that it has “approved, under the EU Merger Regulation, the acquisition of sole control of the treaty reinsurance business of American International Group, Inc. (‘AIG’), of the US, by RenaissanceRe Holdings Ltd. (‘RenRe’), of Bermuda.”

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Adding that, “The Commission concluded that the proposed acquisition would raise no competition concerns, given the limited horizontal overlaps and vertical relationships resulting from the proposed transaction. The transaction was examined under the simplified merger review procedure.”

The EC approval under EU Merger law provides RenaissanceRe one of the clearances it will have been looking for to get the acquisition closed on schedule, which was slated for during the fourth-quarter.

As we recently reported, RenaissanceRe saw its third-party investor capital assets under management (AUM), dedicated to its property and casualty reinsurance business, rise by $250 million during the second-quarter of the year, to reach a new high of $6.85 billion.

The acquisition of AIG’s treaty reinsurance business will see that total increase, not least due to the investments set to be made by AIG into its ILS structures, but also through the assumption of the AlphaCat Managers ILS investment management business as well.

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