While the value chain may change over time, the role we play quantifying risk and efficiently accumulating capital will always be needed, because it is essential to social well-being and economic prosperity.

 

 

Dear Shareholders,

RenaissanceRe was formed in 1993 to address an identified market need, with differentiated capabilities in underwriting, service, responsiveness, and a unique ability to match capital to risk. We started with a handful of underwriters in one office and an idea to transform the property catastrophe market.

Fast forward 25 years, we have grown and changed in many ways. We now write business from six offices over three continents. Although a recognized leader in property catastrophe since our founding, we have moved successfully into casualty and specialty, with approximately 50% of our gross premiums written now coming from this business. In many ways, however, we are still very much unchanged. We continue to differentiate ourselves on the same capabilities that we always have: technical knowledge, service, responsiveness, innovation, and an industry leading ability to match attractive risk to efficient capital.

This letter has two parts. Part I covers our performance in 2017, and the qualities and efforts that helped us achieve those results. Part II is more forward looking, and concentrates on the social value proposition of reinsurance.

I. Our Performance in 2017

Understanding and managing volatility is critical in the reinsurance business because, when catastrophic losses occur, our customers need to know we will be there to promptly pay their claims. In 2017, the insurance industry experienced record-breaking insured losses, which could exceed $140 billion. Our customers, however, had the benefit of our strong enterprise risk management, ratings and capital to ease their minds. I am very proud of the leadership our team demonstrated against this backdrop, paying our customers’ claims rapidly, executing our gross-to-net strategy, and being a first call market for new business. This leadership, coupled with our distinctive value proposition and consistent strategy, allowed us to grow substantially in 2017. I remain confident that in 2018, these advantages will allow us to continue to grow our business while always remaining focused on maximizing shareholder value.

 

Financial Performance

In 2017, we reported a net loss attributable to RenaissanceRe common shareholders of $244.8 million and an operating loss attributable to RenaissanceRe common shareholders of $332.3 million. Our book value per common share decreased by 8.0% and our tangible book value per common share plus change in accumulated dividends decreased by 7.2%. For the full year, our return on average common equity was negative 5.7% and our operating return on average common equity was negative 7.7%.

In 2017, we repurchased about $190 million of our common shares prior to the catastrophe losses in the third quarter. Over the past three years, we consistently demonstrated good stewardship of our shareholders’ capital, returning over $900 million in share buybacks and common share dividends and paying over $2 billion in claims during the same time period.

We also continued to see the benefit of our long-term strategic decision to increase both underwriting and operating leverage. The choices we made, such as diversifying into casualty business, acquiring Platinum, aggressively implementing our gross-to-net strategy and developing RenaissanceRe Syndicate 1458 at Lloyd’s allowed us to grow gross premiums written by 80% over the last 5 years, while only increasing shareholders’ equity by 25% during the same period and keeping operating and corporate expenses essentially flat.

Superior Customer Relationships

I have often said that our value proposition extends beyond price.

Our business requires us to provide a differentiated offering to customers. I believe that value was demonstrated again during the second half of 2017. We experienced three hurricanes — Harvey, Irma and Maria — along with the Mexico City Earthquake and the wildfires in California. As each of these major hurricanes developed, our underwriters, along with our team of scientists at WeatherPredict, closely monitored the storms, their potential for strengthening, and the most likely track they would take. Throughout this process, we reached out to our customers and brokers most likely to be affected.

After each major loss event, we made good on our promise to rapidly pay claims, which helps our customers and assists in the recovery process. The speed and skill of our people and systems in responding to these losses are testament to our focus on developing superior customer relationships and decades of experience in helping clients and communities manage through natural catastrophes.

Superior Risk Management

I am proud that we have built a portfolio able to withstand the challenges and maximize the opportunities presented by the 2017 markets. Tested by record-breaking natural catastrophes, our gross-to-net strategy performed well in 2017 as our integrated system allowed us to access the most efficient capital available, whether our own, third-party or retrocessional. For the large loss events, we ceded over two-thirds of our gross losses to the retrocessional market, shared them with third parties or offset them with reinstatement premiums.

This year’s loss experience reminds us that ours is a volatile business. Vendor models alone are no substitute for good underwriting. That is why we combine commercially available models and third-party expertise with our own proprietary research and expectations about the frequency of losses and other factors to inform our independent view of risk. This approach helps us aspire to be the world’s best underwriter, which we believe results in superior shareholder value.

Ultimately, our shareholders and managed partner capital bear the financial burden of paying losses. So, I believe it will be helpful if I share with you how we evaluate our performance after a large event. First, we think of losses in two broad categories — risks that we knowingly accepted and those that we did not. Looking at the losses of 2017, earthquakes, wildfires, and hurricanes are the types of risk that we knowingly took. Then, after an occurrence, we analyze each account to determine if we were paid appropriately for each risk we assumed, which I believe we were.

 

As an owner, how should you think about losses? This is a difficult question because much of the risk we take will only experience losses once every 25 to 50 years on average. So thinking about loss over a short period of time such as one year, similar to other industries, does not necessarily make sense. One needs to think about our performance over a longer time period encompassing multiple loss cycles. To put this in perspective, when we model risk, we generally do so over a 40,000-year period.

Using models, we have a disciplined process to estimate over long periods how often certain events should occur. Taking many of these risks and combining them in a single portfolio gives us the ability to manage them and hopefully reduce the one-year and one-event volatility associated with these risks.

There are some differences between property and casualty business, however. For property, we know everything we can know at the time we write a deal. History and experience play little role. Our casualty business (including specialty), however, differs in that it exhibits much lower volatility, with a narrower dispersion between good and bad years, and much more frequent feedback. In casualty we can glean relevant information from both how the deal developed before we wrote it, and also from how the losses develop against expected reserves after we wrote it. This is a very different skill from underwriting property catastrophe, and I am proud of the talent and tools we have developed to become a leader in the casualty business, just as we are in property.

We derive multiple benefits from writing casualty business. Our value proposition to our customers is enhanced because we can provide them a greater range of protection and help them manage their volatility more broadly.

On the risk side, writing casualty benefits our portfolio in two ways. First, due to its diversifying nature, casualty business allows us to use our capital more efficiently, as we have been able to write this business without needing to add significant capital. Of course, over time the reserve pool associated with this risk will grow and become a driver of capital, but not just

yet. Second, casualty business brings float, which is money paid to us up front as premium that we hold for several years before returning it in the form of loss payments. However, much of the earnings from this business is only realized over time. This is beneficial because this asset leverage will eventually be a meaningful earner and should reduce volatility over the long term. With property, which does not benefit from significant float due to its short tail nature, investment income is not a significant driver of returns.

Superior Capital Management

We enjoyed a number of successes in 2017 with respect to capital management. For example, we raised in excess of $1 billion in our various managed vehicles, including $250 million of equity capital raised into DaVinci and $700 million in Upsilon. This capital raise from existing and new investors allowed us to replenish all of the capital lost in the third quarter catastrophe events and gave us and our customers confidence to trade forward the rest of the year.

At the end of 2017, we advanced two important transactions that affirm our innovative reputation in the reinsurance business. First, we entered into a joint venture in the life reinsurance space with Reinsurance Group of America (RGA) called Langhorne Re, which secured $780 million of equity capital commitments, including a minority investment by us. We are privileged to have RGA as a partner and believe that our combined strengths will serve Langhorne Re’s customers well. Third party capital is particularly suited for this type of risk, and we are delighted to bring our partnership skills and third party skills to this new pool of risks.

Second, we entered into an agreement to invest in Catalina Holdings (Bermuda) Ltd. (Catalina), a property and casualty runoff (re)insurance company. Our investment in Catalina should enhance the suite of solutions we can offer to our clients over time, while providing us the opportunity to team up on future transactions.

 

II. Social Value Proposition of Reinsurance

In the past, I have written about the critical role that capital plays in the reinsurance business. This year, I thought it would be helpful to extend this analysis to the importance of capital to society overall and our part as a reinsurer in mediating the process of capital accumulation. I’ll explore how this relates to our efforts to close the insurance protection gap, our place in the insurance value chain, and the role of insuretech and information asymmetry.

As previously mentioned, RenaissanceRe brings a distinctive value proposition to our customers. There is another, equally important facet to this value proposition — the value we offer society, or what we think of as our “social value proposition”. Insurance is the transfer of an unknown future loss for a known present premium. In order to accept this risk, insurers must be able to accurately quantify potential losses and efficiently accumulate the appropriate amount of capital, not too much and not too little, in order to pay those losses. It is difficult to overstate how crucial the proper functioning of this mechanism is to the development of a flourishing economy.

Using natural catastrophe risk as an example (although this analysis applies to most types of insurance), societies have three choices for how they can prepare for potential future losses. First, they can decrease the size of the loss through mitigation. Second, they can use ex-ante risk financing, including savings and insurance, to pre-fund future losses. Finally, they can rely on ex-post funding after a disaster, including loans, government bailouts, charity, or unintended self-insurance. Societies need sufficient capital to rebuild and recover after large natural disasters. Consequently, each society must make trade-offs between building better (mitigation), accumulating capital (saving) or waiting for a disaster to happen and then paying for it (borrowing).

In fact, there are ideal trade-offs between these three choices, which economists refer to as Pareto optimal, that maximize economic prosperity over the long term for a given allocation of resources. Too little mitigation, for example, would result in unacceptably high loss of life and property. Too much mitigation, on the other hand, would be unreasonably expensive and result in decreased economic prosperity.

Similarly, too little savings would result in insufficient resources to rebuild after a disaster, which would cause economic dislocation. Too much savings, however, would mean less capital is available for other social goods. Finally, there will always be uninsured loss, but borrowing after the fact to pay for natural disasters (which is what governments often do) results in permanent economic harm.

To provide an example, a homeowner should mitigate their house until it becomes cheaper to buy homeowner’s insurance, at which point they should buy insurance until it is more efficient to rely on borrowing. Insurance and reinsurance mediate this trade-off between mitigation, saving and borrowing. Reinsurance is ultimately a means for society to quantify the potential impact of and accumulate sufficient capital for losses from future natural catastrophes, and is in fact the most efficient mechanism for doing so, achieving a Pareto optimal level of savings at the least economic cost due to its superior ability to diversify risk.

Insurance Protection Gap

In 2017, we saw many examples of the importance of preparing for natural catastrophes, and the consequences of failing to have sufficient resources after a large disaster. This difference between economic losses and insurance recoveries is known as the insurance protection gap and may approach $200 billion in 2017. We have seen this protection gap many times in recent years, for example in the low take-up rate for flood and earthquake insurance in the United States. Looking internationally, however, and especially at developing countries, the insurance protection gap can be even greater, with uninsured losses in countries such as Haiti running as high as 98% of economic losses over the last decade.

 

At RenaissanceRe, we help close the insurance protection gap for natural catastrophe risk in many ways. We bring our ability to diversify risk and efficiently accumulate capital — our social value proposition — to public/private partnerships to help make risk transfer more affordable, and to ensure that capital is available to help families and businesses after a disaster.

For example, we have organized a series of Risk Mitigation Leadership Forums, focused on promoting improved understanding of, preparation for and recovery from natural disasters and other severe risks, hosting over 4,000 attendees. Relatedly, we are proud to be partnered with the Lloyd’s Disaster Risk Facility, which develops new solutions to help developing economies reduce underinsurance and improve their resilience against the economic impact of natural catastrophes. We are also a member of the Insurance Development Forum, a public/private partnership combining the insurance industry with international organizations such as the United Nations and the World Bank. Our efforts are contributing to an improved global understanding and quantification of disaster risk in developing countries, to support and enable decisions on its mitigation, adaption and transfer.

Our place in the insurance value chain

RenaissanceRe’s social value proposition means we occupy a critical link on the insurance value chain. While the value chain may change over time, the role we play quantifying risk and efficiently accumulating capital will always be needed, because it is essential to social well-being and economic prosperity.

Of course, insurance companies need to diversify risk and accumulate capital, but these are only two of the multitude of tasks they regularly perform. These tasks, however, are at the core of what reinsurers exist to do. Insurance companies are focused on many activities related to issuing a large number of small policies to consumers and businesses in one of the most highly regulated and closely scrutinized industries in the world. Consequently, it is often a competitive advantage for an insurer to concentrate on a limited number of lines of business in a restricted geographic area, and to be more focused on driving operating efficiencies. For example,

there are many insurers who only write residential policies in Florida. Unfortunately, this narrow scope limits their ability to both effectively quantify and diversify their risk.

Fortunately, quantifying and diversifying risk is the competitive advantage of reinsurers. Our value proposition derives from the fact we are more efficient than any other mechanism at accumulating the optimal level of capital to pay for natural catastrophe losses, while doing so in a way that maximizes economic prosperity over the long term. So while the insurance value chain will evolve over time, the need for the link we currently occupy will always exist, and we should always have a competitive advantage in fulfilling it.

Our market is always changing, and competitors on the insurance value chain come and go. As we become more differentiated, however, I believe our value proposition expands. Being aligned with our investors and partners has always been an important aspect of this value proposition. It is no different with our customers. They want to work with long-term reinsurance partners who bring them a broad range of property and casualty coverages, consistent exposure-based pricing, strong ratings and large line sizes. Our value proposition encompasses all these needs, but in an increasingly unique way that is strongly aligned with the customer, helping them to grow their business as opposed to competing against them for it.

Insuretech and Information Asymmetry

I am very excited by the possibilities evolving technology brings to our industry. In many ways, we were the first insuretech reinsurer, as we revolutionized how property catastrophe reinsurance was underwritten almost 25 years ago by harnessing newly available computational power to run the stochastic simulations necessary to model risk and construct portfolios. Since then, we have always been on the cutting edge of using technology to better quantify risk and efficiently allocate capital.

Going forward, maximizing shareholder value requires that we continually innovate. I addressed this topic more broadly in my letter last year, where I discussed the “Four Vectors of Influence”, and especially the need for increased efficiency

 

 

and the transformative role of technology. One reason I am so excited is that I believe technology will eventually enable us to work directly with accumulators of risk — large, sophisticated organizations that will seek more efficient risk transfer products. So while I believe that technology will continue to make us better at what we do, just as it did 25 years ago, I do not believe it will replace what we do nor diminish the importance of our value proposition.

Another area where insuretech has the potential to improve our business is in reducing information asymmetry. Put simply, this is when the insured knows more about a risk than the insurer. Information asymmetry leads to imbalances in supply and demand, making insurance more expensive and increasing the size of the insurance protection gap. Big data, sensors, drones, smartphones, high-speed internet and other technologies will all play a role in reducing the amount of information asymmetry. Reinsurers should benefit the most from this technology, as we bear the ultimate risk in many cases and therefore derive the most utility from better understanding it.

I am equally excited about the potential for artificial intelligence, and the role algorithms will play in gleaning useful information from the mountain of big data available. There will be many possibilities to more directly assess risk rather than relying on proxies. A good example of this is insurers will be able to charge a driver based on their actual driving behavior, such as acceleration and deceleration rates. Being rated based on your skill at an activity due to observation of your actual behavior, likely by an app on your smart phone, will be imminently fairer than relying on readily available but potentially unrelated proxies, such as credit scores. While such data may correlate with driving behavior, it also may penalize some of the most fragile in our economy.

Expanding our Footprint

We expanded our footprint again in 2017, opening a new office in Zurich, Switzerland, a major hub for reinsurance. I have spoken before about the value of having a flexible platform, and our office in Switzerland further enhances our ability to transact with customers where and how they desire in a manner consistent with our focused growth philosophy.

Board Evolution

In 2017, we were proud to welcome Duncan P. Hennes and Dr. Valerie Rahmani to our Board of Directors. We also celebrated the accomplishments of outgoing members Ralph B. Levy and William F. Hagerty IV for their many years of distinguished service.

Ralph’s leadership and advice during his 10 years as a director helped RenaissanceRe to navigate through market cycles, important regulatory developments and organizational changes. Bill’s wise counsel during his tenure was invaluable during a pivotal period for the Company. We thank them for their contributions to RenaissanceRe’s success and look forward to working with Duncan and Val.

In Closing

Heading into our 25th year, I am confident in our strategy and optimistic about our prospects. For the industry, 2017 was a challenging year. But with challenges come opportunities. I believe our strong execution in the aftermath of the catastrophes coupled with our distinctive value proposition and well-capitalized balance sheets will enable us to continue to succeed in 2018.

Sincerely,

 

Kevin J. O’Donnell

President and Chief Executive Officer

 

RenaissanceRe’s mission is to produce superior returns over time by being a trusted, long-term partner to our customers for assessing and managing risk, delivering responsive solutions, and keeping our promises. The importance of this mission to our customers and investors, and to the communities we serve resonates with extra clarity in high catastrophe years such as 2017. This year’s letter to you from our President and Chief Executive Officer, Kevin O’Donnell, highlights RenaissanceRe’s successful efforts to navigate the challenges and explore the new opportunities that periods like this present.

Periods of elevated industry loss also pose challenges for our Board of Directors as we fulfill our oversight obligations to review, test and support management’s efforts to execute its strategy and manage risk in the context of large catastrophes. The RenaissanceRe Board sees its fiduciary oversight in even a record setting loss year as part of a continuum from the past and extending into the future. Kevin’s letter and many of his prior communications to you summarize how management’s investments and preparation in prior years readied RenaissanceRe for 2017. These plans include the execution of our gross-to-net strategy as a component of the Company’s commitment to efficient and prudent portfolio construction, and investments in and the deployment of new and enhanced models and risk management tools. In low loss years these efforts may have lower visibility, but management’s commitment to risk management across market and natural disaster cycles, and the Board’s oversight of those processes, are a constant at RenaissanceRe.

Concurrently with its efforts to address 2017’s challenges, the Company executed on exciting plans to build for the future, launching innovative new products and structures like our Langhorne Re joint venture, diversifying the coverages and services we offer clients worldwide and thereby expanding and strengthening our global platforms. Our Board believes these investments position RenaissanceRe exceptionally well to succeed amidst the challenges and potential changes in our industry, and continue to reflect a necessary balance between consistency and change at what we believe to be the best franchise in reinsurance. We are confident our strategy is well designed to produce both superior financial results and operational outcomes of which you will be proud.

It was also a year of change for our Board. In my 2017 letter I asked you join me in saluting the distinguished service of Ralph B. Levy, my predecessor as Non-Executive Chair. Later in the year we were honored to recognize the appointment

and confirmation of our fellow director William F. Hagerty IV to the position of U.S. Ambassador to Japan. Bill made important contributions to the Board and the Company. We appreciate his public service and continue to wish him all the best in this important role.

As their successors, we were delighted to announce the appointment of Duncan P. Hennes and Dr. Valerie Rahmani as independent directors. Duncan’s distinguished career in financial services includes CEO and other C-suite positions at leading global firms and a history of helping companies navigate changes in markets, technology and customer preferences. Dr. Rahmani, most recently Chief Executive Officer of a privately held cybersecurity company, has more than 30 years of experience in the technology industry, including more than 25 years at a global technology giant across multiple global business segments. Duncan’s and Val’s wisdom, experience, judgment and collegiality have already made important contributions to our Board deliberations. Our commitment to reviewing our Board’s composition, experiences, and skills against RenaissanceRe’s strategic needs and external trends will continue, ensuring our collective ability to fulfill our oversight role effectively.

Finally, I would like to thank the shareholders and stakeholders who participated over the past year in our continual engagement process. We appreciate your investment in RenaissanceRe, and management’s engagement with you is prioritized by the Board. Your engagement supports our ongoing efforts to attract, retain and appropriately incent what our Board believes to be the best team in our industry, and to continue to build the confidence and support of our clients and investors.

Kevin’s letter demonstrates how RenaissanceRe’s unique capabilities position it both to succeed in high loss periods and to grow optimistically into an exciting future. We are proud to support the global RenaissancRe team and to oversee this exceptional franchise on your behalf.

Sincerely,

James L. Gibbons

Non-Executive Chair

 

x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

For the fiscal year ended December 31, 2017

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

For the transition period from to

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, as defined in Rule 12b-2 of the Act. Large accelerated filer x, Accelerated filer o, Non-accelerated filer o, Smaller reporting company o, Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

The aggregate market value of Common Shares held by nonaffiliates of the registrant at June 30, 2017 was $5,498.0 million based on the closing sale price of the Common Shares on the New York Stock Exchange on that date.

The number of Common Shares, par value US $1.00 per share, outstanding at February 2, 2018 was 40,023,789.

Portions of the registrant’s definitive proxy statement for the 2018 Annual General Meeting of Shareholders are incorporated by reference into Part III of this report.

RENAISSANCERE HOLDINGS LTD.

NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the year ended December 31, 2017 (this “Form 10-K”) of RenaissanceRe Holdings Ltd. (“RenaissanceRe”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us. In particular, statements using words such as “may”, “should”, “estimate”, “expect”, “anticipate”, “intend”, “believe”, “predict”, “potential”, or words of similar import generally involve forward-looking statements. For example, we may include certain forward-looking statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” with regard to trends in results, prices, volumes, operations, investment results, margins, combined ratios, fees, reserves, market conditions, risk management and exchange rates. This Form 10-K also contains forward-looking statements with respect to our business and industry, such as those relating to our strategy and management objectives, market standing and product volumes, competition and new entrants in our industry, industry capital, insured losses from loss events, government initiatives and regulatory matters affecting the reinsurance and insurance industries.

PART I

We aspire to be the world’s best underwriter by matching well-structured risks with efficient sources of capital and our mission is to produce superior returns for our shareholders over the long term. We seek to accomplish these goals by being a trusted, long-term partner to our customers for assessing and managing risk, delivering responsive and innovative solutions, leveraging our core capabilities of risk assessment and information management, investing in these core capabilities in order to serve our customers across the cycles that have historically characterized our markets and keeping our promises. Our strategy focuses on superior risk selection, superior customer relationships and superior capital management. We provide value to our customers and joint venture partners in the form of financial security, innovative products, and responsive service. We are known as a leader in paying valid claims promptly. We principally measure our financial success through long-term growth in tangible book value per common share plus the change in accumulated dividends, which we believe is the most appropriate measure of our financial performance and in respect of which we believe we have delivered superior performance over time.

Superior Customer Relationships. We seek to be a trusted long-term partner to our customers for assessing and managing risk and delivering responsive solutions. We believe our modeling and technical expertise, our risk management products and our track record of keeping our promises have made us a provider of first choice in many lines of business to our customers worldwide. We seek to offer stable, predictable and consistent risk-based pricing and a prompt turnaround on claims.

Superior Risk Selection. We seek to build a portfolio of risks that produces an attractive risk-adjusted return on utilized capital. We develop a perspective of each risk using both our underwriters’ expertise and sophisticated risk selection techniques, including computer models and databases such as Renaissance Exposure Management System (“REMS©”). We pursue a disciplined approach to underwriting and seek to select only those risks that we believe will produce a portfolio with an attractive return, subject to prudent risk constraints. We manage our portfolio of risks dynamically, both within sub-portfolios and across the Company.

Superior Capital Management. We seek to write as much attractively priced business as is available to us and then manage our capital accordingly. We generally seek to raise capital when we forecast increased demand in the market, at times by accessing capital through joint ventures or other structures, and seek to return capital to our shareholders or joint venture investors when the demand for our coverages appears to decline and when we believe a return of capital would be beneficial to our shareholders or joint venture investors. In using joint ventures, we aim to leverage our access to business and our underwriting capabilities on an efficient capital base, develop fee income, generate profit commissions, diversify our

portfolio and provide attractive risk-adjusted returns to our capital providers. We routinely evaluate and review potential joint venture opportunities and strategic investments.

Our reportable segments are defined as follows: (1) Property, which is comprised of catastrophe and other property reinsurance and insurance written on behalf of our operating subsidiaries and certain joint ventures managed by our ventures unit, and (2) Casualty and Specialty, which is comprised of casualty and specialty reinsurance and insurance written on behalf of our operating subsidiaries and certain joint ventures managed by our ventures unit. In addition to our two reportable segments, we have an Other category, which primarily includes our strategic investments, investments unit, corporate expenses, capital servicing costs, noncontrolling interests, certain expenses related to the acquisition of Platinum and the remnants of our former Bermuda-based insurance operations.

For the year ended December 31, 2017, our Property and Casualty and Specialty segments accounted for 51.5% and 48.5%, respectively, of our gross premiums written. Operating results relating to our segments are included in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The following table shows gross premiums written allocated between our segments:

The following table shows gross premiums written allocated between excess of loss, proportional and delegated authority for each of our segments:

The following table shows gross premiums written in our Property segment allocated by class of business:

We write casualty and specialty reinsurance and insurance covering primarily targeted classes of business where we believe we have a sound basis for underwriting and pricing the risk we assume. Principally all of the business is reinsurance, however our book of insurance business has been increasing in recent periods, and may continue to do so. The following table shows gross premiums written in our Casualty and Specialty segment allocated by class of business:

Our Other category primarily includes the results of: (1) our share of strategic investments in certain markets we believe offer attractive risk-adjusted returns or where we believe our investment adds value, and where, rather than assuming exclusive management responsibilities ourselves, we partner with other market participants; (2) our investment unit which manages and invests the funds generated by our consolidated operations; (3) corporate expenses, certain expenses related to the acquisition of Platinum, capital servicing costs and noncontrolling interests; and (4) the remnants of our former Bermuda-based insurance operations.

Our exposures are generally diversified across geographic zones, but are also a function of market conditions and opportunities. Our largest exposure has historically been to the U.S. and Caribbean market, which represented 56.4% of our gross premiums written for the year ended December 31, 2017. A significant amount of our U.S. and Caribbean premium provides coverage against windstorms (mainly U.S. Atlantic hurricanes), earthquakes and other natural and man-made catastrophes.

The following table sets forth the amounts and percentages of our gross premiums written allocated to the territory of coverage exposure:

VENTURES

DaVinci was established in 2001 and principally writes property catastrophe reinsurance and certain low frequency, high severity specialty reinsurance lines of business on a global basis. In general, we seek to construct for DaVinci a portfolio with risk characteristics similar to those of Renaissance Reinsurance’s property catastrophe reinsurance portfolio, and from time to time, certain lines of specialty reinsurance written by Renaissance Reinsurance such as terrorism and workers’ compensation. In accordance with DaVinci’s underwriting guidelines, it can only participate in business also underwritten by Renaissance Reinsurance. We maintain majority voting control of DaVinci’s holding company, DaVinciRe, and accordingly, consolidate the results of DaVinciRe into our consolidated results of operations and financial position. The underwriting results of DaVinciRe are principally included in our Property segment. We seek to manage DaVinci’s capital efficiently over time in light of the market opportunities and needs we perceive and believe we are able to serve. Our noncontrolling economic ownership in DaVinciRe was 22.1% at December 31, 2017 (2016 - 24.0%).

Medici is an exempted fund, incorporated under the laws of Bermuda. Medici’s objective is to invest substantially all of its assets in various insurance-based investment instruments that have returns primarily correlated to property catastrophe risk. Third-party investors subscribe for the majority of the participating, non-voting common shares of Medici. We maintain majority voting control of Medici’s parent, RenaissanceRe Fund Holdings Ltd. (“Fund Holdings”), therefore the results of Medici and Fund Holdings are consolidated in our financial statements. Our economic ownership in Medici was 26.8% at December 31, 2017 (2016 - 36.5%).

considered a variable interest entity (“VIE”) as it has insufficient equity capital to finance its activities without additional financial support and we are the primary beneficiary. As a result, we consolidate Upsilon RFO and all significant inter-company transactions have been eliminated. Other than our equity investment, we have not provided any financial or other support to Upsilon RFO that we were not contractually required to provide.

Effective November 13, 2014, we incorporated Upsilon Fund, an exempted Bermuda limited segregated accounts company. Upsilon Fund was formed to provide a fund structure through which third party investors can invest in property reinsurance risk managed by us. As a segregated accounts company, Upsilon Fund is permitted to establish segregated accounts to invest in and hold identified pools of assets and liabilities. Each pool of assets and liabilities in each segregated account is ring-fenced from any claims from the creditors of Upsilon Fund’s general account and from the creditors of other segregated accounts within Upsilon Fund. Third party investors purchase redeemable, non-voting preference shares linked to specific segregated accounts of Upsilon Fund and own 100% of these shares. Upsilon Fund is managed by RenaissanceRe Fund Management Ltd. in return for a management fee and performance based incentive fee. We have not provided any financial or other support to Upsilon Fund that we were not contractually required to provide. Currently, Upsilon Fund is invested in Upsilon RFO and Medici.

Effective November 7, 2016, Fibonacci Re, a Bermuda-domiciled SPI, was formed to provide collateralized capacity to Renaissance Reinsurance and its affiliates. Fibonacci Re raised capital from third party investors and us via a private placement of participating notes that are listed on the Bermuda Stock Exchange. This arrangement enables Renaissance Reinsurance to support its clients with additional property catastrophe reinsurance capacity and we believe it provides attractive risk-adjusted returns to our capital partners. We concluded that Fibonacci Re meets the definition of a VIE as it does not have sufficient equity capital to finance its activities. Therefore, we evaluated our relationship with Fibonacci Re and concluded we are not the primary beneficiary of Fibonacci Re as we do not have power over the activities that most significantly impact the economic performance of Fibonacci. As a result, we do not consolidate the financial position and results of operations of Fibonacci. Other than our investment in the participating notes of Fibonacci Re, we have not provided financial or other support to Fibonacci Re that we were not contractually required to provide.

Limited, Axis Capital Holdings Limited, Chubb Limited, Everest Re Group, Ltd., Fidelis Insurance Holdings Limited (“Fidelis”), Hamilton Re Ltd. (“Hamilton Re”), PartnerRe Ltd., Sompo International (formerly known as Endurance Specialty Holdings Ltd.), Third Point Reinsurance Ltd. (“Third Point”), Validus Holdings, Ltd. and XL Group Ltd., as well as a growing number of private, unrated reinsurers offering predominately collateralized reinsurance. We also compete with certain Lloyd’s syndicates active in the London market, as well as with a number of other industry participants, such as American International Group, Inc., Berkshire Hathaway Inc., Hannover Rückversicherung AG (“Hannover Re”), Ironshore Inc., Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (“Munich Re”) and Swiss Re Ltd.

Reserve Risk. Reserve risk is a subcomponent of assumed risk. We define reserve risk as the risks related to our reserve for net claims and claim expenses, including the amount, both absolute and relative, of our outstanding reserve for net claims and claim expenses, and the impact of economic, social, legal and regulatory matters. Our reserve for net claims and claim expenses is subject to significant uncertainty and has the potential to develop adversely in future periods. While reserve risk may increase in both absolute terms and relative to its overall consideration in our ERM framework, we employ robust resources, procedures and technology to identify, understand, quantify and manage this risk. Our reserving methodologies and sensitivities for each respective line of business described in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Summary of Critical Accounting Estimates, Claims and Claim Expense Reserves.”

Controls and Compliance Committee.  We believe that a key component of our current operational risk management platform is our Controls and Compliance Committee. The Controls and Compliance Committee is comprised of our Chief Financial Officer, Group General Counsel and Chief Compliance

Ongoing Development and Enhancement.  We seek to reflect and categorize risks we monitor in part through quantitative risk distributions, even where we believe that such quantitative analysis is not as robust or well developed as our tools and models for measuring and evaluating other risks, such as catastrophe and market risks. We also seek to improve the methods by which we measure risks and believe effective risk management is a continual process that requires ongoing improvement and development. We seek from time to time to identify effective new practices or additional developments both from within our industry and from other sectors. We believe that our ongoing efforts to embed ERM throughout our organization help us produce and maintain a competitive advantage and achieve our corporate goals.

We believe the most significant accounting judgment made by management is our estimate of claims and claim expense reserves. Claims and claim expense reserves represent estimates, including actuarial and statistical projections at a given point in time, of the ultimate settlement and administration costs for unpaid claims and claim expenses arising from the insurance and reinsurance contracts we sell. We establish our claims and claim expense reserves by taking claims reported to us by insureds and ceding companies, but which have not yet been paid (“case reserves”), adding estimates for the anticipated cost of claims incurred but not yet reported to us, or incurred but not enough reported to us (collectively referred to as “IBNR”) and, if deemed necessary, adding costs for additional case reserves which represent our estimates for claims related to specific contracts previously reported to us which we believe may not be adequately estimated by the client as of that date, or adequately covered in the application of IBNR.

Our reserving techniques, assumptions and processes differ among our Property and Casualty and Specialty segments. Refer to “Note 8. Reserve for Claims and Claim Expenses in our Notes to the Consolidated Financial Statements” for more information on the risks we insure and reinsure, the reserving techniques, assumptions and processes we follow to estimate our claims and claim expense reserves, prior year development of the reserve for claims and claim expenses, analysis of our incurred and paid claims development and claims duration information for each of our Property and Casualty and Specialty

For additional information regarding our investment portfolio, refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, Investments” and “Note 5. Investments in our Notes to the Consolidated Financial Statements”.

We believe that our modeling and technical expertise, the risk management products we provide to our customers, and our reputation for paying claims promptly has enabled us to become a provider of first choice in many lines of business to our customers worldwide. We market our products primarily through reinsurance brokers and we focus our marketing efforts on targeted brokers and partners. We believe that our existing portfolio of business is a valuable asset and, therefore, we attempt to continually strengthen relationships with our existing brokers and customers. We believe that by maintaining close relationships with brokers, we are able to obtain access to a broad range of potential reinsureds. We target prospects that are capable of supplying detailed and accurate underwriting data and that potentially add further diversification to our book of business.

Our portfolio of business continues to be characterized by relatively large transactions with ceding companies with whom we do business, although no current relationship exceeds 10% of our gross premiums written. Accordingly, our gross premiums written are subject to significant fluctuations depending on our success in maintaining or expanding our relationships with these customers. We believe that our willingness and ability to design customized programs and to provide bespoke risk management products has helped us to develop long-term relationships with brokers and customers.

Our brokers assess client needs and also perform data collection, contract preparation and other administrative tasks, enabling us to market our products cost effectively by maintaining a smaller staff. In recent years, our distribution has become increasingly reliant on a small and relatively decreasing number of broker relationships reflecting consolidation in the broker sector. We expect this concentration to continue and perhaps increase. In 2017, three brokerage firms accounted for 76.4% of our gross premiums written.

The following table shows the number of brokers for which we issued authorization for coverage on programs, the number of program submissions received and the number and percent of authorizations issued, allocated between our Property and Casualty and Specialty segments:

At February 2, 2018, we employed 384 people worldwide (February 17, 2017 - 376, February 18, 2016 - 376). None of our employees are subject to collective bargaining agreements and we are not aware of any current efforts to implement such agreements at any of our subsidiaries.

from such an incident. Despite these efforts, computer viruses, hackers, employee misuse or misconduct and other internal or external hazards could expose our data systems to security breaches, cyber-attacks or other disruptions.

General Purpose Financial Statements. All Class 3A, Class 3B and Class 4 insurers must prepare financial statements in respect of their insurance business in accordance with GAAP, IFRS or other acceptable accounting standards, which are published on the BMA website.

Statutory Financial Statements. Each Class 3A, Class 3B and Class 4 general business insurer is required to submit annual statutory financial statements as part of its statutory financial return no later than four months after the insurer’s financial year end (unless specifically extended). The GAAP or IFRS financial

statements are the basis on which statutory financial statements are prepared, subject to the application of certain prudential filters as outlined in the Insurance Accounts Rules 2016. The statutory financial statements contain statements both on a consolidated and unconsolidated basis. The unconsolidated information forms the basis for assessing the insurer’s liquidity position, minimum solvency margin and class of registration.

Capital and Solvency Return. Class 3A, 3B and 4 insurers are also required to file a capital and solvency return in respect of their general business, which includes, among other items, the EBS, a schedule of governance and risk management, a catastrophe risk return, a schedule of loss triangles or reconciliation of net loss reserves, a schedule of eligible capital and the Enhanced Capital Requirement (“ECR”) as calculated by the Bermuda Solvency and Capital Requirement (“BSCR”) model. The consolidated information within the statutory financial statements form the starting basis for the preparation of the EBS. The EBS is, in turn, used as the basis to calculate the insurer’s ECR.

Financial Condition Report. Class 3A, 3B and 4 insurers and insurance groups are required to prepare and publish a financial condition report (“FCR”), which was introduced to the regulatory regime in 2016 as part of the measures undertaken to achieve Solvency II equivalence. The FCR provides, among other things, details of measures governing the business operations, corporate governance framework and solvency and financial performance of the insurer/insurance group.

Minimum Solvency Margin. A general business insurer’s statutory assets must exceed its statutory liabilities by an amount, equal to or greater than the prescribed minimum solvency margin (“Minimum Solvency Margin”), which varies with the category of its registration. The Minimum Solvency Margin that must be maintained by a Class 4 insurer is the greater of (i) $100.0 million, (ii) 50% of net premiums written (with a credit for reinsurance ceded not exceeding 25% of gross premiums), (iii) 15% of net aggregate loss and loss expense provisions and other insurance reserves, or (iv) 25% of the ECR, which is established by reference to the BSCR model. The Minimum Solvency Margin for a Class 3A or Class 3B insurer is the greater of (i) $1.0 million, (ii) 20% of the first $6.0 million of net premiums written; if in excess of $6.0 million, the figure is $1.2 million plus 15% of net premiums written in excess of $6.0 million, (iii) 15% of net aggregate loss and loss expense provisions and other insurance reserves, or (iv) 25% of the insurer’s ECR.

Enhanced Capital Requirement. Each Class 3A, Class 3B and Class 4 insurer is required to maintain its capital at a level at least equal to its ECR which is established by reference to either the BSCR or an approved internal capital model. In either case, the ECR shall at all times equal or exceed the respective Class 3A, Class 3B and Class 4 insurer’s Minimum Solvency Margin and may be adjusted in circumstances where the BMA concludes that the insurer’s risk profile deviates significantly from the assumptions underlying its ECR or the insurer’s assessment of its risk management policies and practices used to calculate the ECR applicable to it. While not specifically referred to in the Insurance Act, the BMA has also established a target capital level (“TCL”) for each Class 3A, Class 3B and Class 4 insurer equal to 120% of the respective ECR. While a Class 3A, Class 3B and Class 4 insurer is not currently required to maintain its statutory capital and surplus at this level, the TCL serves as an early warning tool for the BMA and failure to maintain statutory capital at least equal to the TCL will likely result in increased BMA regulatory oversight.

Minimum Liquidity Ratio. An insurer engaged in general business is required to maintain the value of its relevant assets at not less than 75% of the amount of its relevant liabilities (“Minimum Liquidity Ratio”).

Eligible Capital. To enable the BMA to better assess the quality of an insurer’s capital resources, Class 3A, Class 3B and Class 4 insurers must maintain available capital in accordance with a “three tiered capital regime”. All capital instruments are classified as either basic or ancillary capital, which in turn are classified into one of three tiers (Tier 1, Tier 2 and Tier 3) based on their "loss absorbency" characteristics (the "Tiered Capital Requirements"). Eligibility limits are then applied to each tier in determining the amounts eligible to cover regulatory capital requirement levels. The highest capital is classified as Tier 1 capital and lesser quality capital is classified as either Tier 2 capital or Tier 3 capital. Under this regime, not more than certain specified percentages of Tier 1, Tier 2 and Tier 3 capital may be used to satisfy the Class 3A, 3B and 4 insurers' Minimum Solvency Margin and ECR requirements.

Restrictions on Dividends, Distributions and Reductions of Capital. Class 3A, Class 3B and Class 4 insurers are prohibited from declaring or paying any dividends if in breach of the required Minimum Solvency Margin or Minimum Liquidity Ratio (the “Relevant Margins”) or if the declaration or payment of such dividend would cause the insurer to fail to meet the Relevant Margins. Further, Class 3A, 3B and Class 4 insurers are

prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files (at least seven days before payment of such dividends) with the BMA an affidavit stating that it will continue to meet its Relevant Margins. Class 3A, Class 3B and Class 4 insurers must obtain the BMA’s prior approval for a reduction by 15% or more of the total statutory capital as set forth in its previous year’s financial statements. These restrictions on declaring or paying dividends and distributions under the Insurance Act are in addition to the solvency requirements under the Companies Act which apply to all Bermuda companies.

Fit and Proper Controllers. The BMA maintains supervision over the controllers (as defined herein) of all Bermuda registered insurers. For so long as shares of RenaissanceRe are listed on the NYSE or another recognized stock exchange, the Insurance Act requires that the BMA be notified in writing within 45 days of any person becoming, or ceasing to be, a controller. A controller includes the managing director and chief executive of the registered insurer or its parent company; a 10%, 20%, 33% or 50% shareholder controller; and any person in accordance with whose directions or instructions the directors of the registered insurer or of its parent company are accustomed to act. In addition, all Bermuda insurers are also required to give the BMA written notice of the fact that a person has become, or ceased to be, a controller or officer of the registered insurer within 45 days of becoming aware of such fact. An officer in relation to a registered insurer includes a director, secretary, chief executive or senior executive by whatever name called.

Material Change. All registered insurers are required to give the BMA 30 days’ notice of certain matters that are likely to be of material significance to the BMA in carrying out its supervisory function under the Insurance Act. The Insurance Act prescribes which matters require advance notice.

Insurance Code of Conduct. All Bermuda insurers are required to comply with the BMA’s Insurance Code of Conduct, which establishes duties, requirements and standards to be complied with to ensure each insurer implements sound corporate governance, risk management and internal controls. Failure to comply with these requirements will be a factor taken into account by the BMA in determining whether an insurer is conducting its business in a sound and prudent manner under the Insurance Act.

Special Purpose Insurer Reporting Requirements. Unlike other (re)insurers, SPIs are fully funded to meet their (re)insurance obligations; therefore the application and supervision processes are streamlined to facilitate the transparent structure. Further, the BMA has the discretion to modify such insurer’s accounting requirements under the Insurance Act. Like other (re)insurers, the principal representative of an SPI has a duty to inform the BMA in relation to solvency matters, where applicable. During 2016, new legislative requirements were introduced requiring SPIs to file annual statutory or modified financial returns via an electronic filing system. Under these requirements, SPIs are required to map GAAP financial statements to the electronic statutory forms and are required to provide information around ownership structure, assessment of risks, analyses of premium and details of segregated cells.

Insurance Manager Reporting Requirements. During 2016, the BMA undertook to enhance its oversight of insurance managers as part of the development of Bermuda’s insurance regulatory framework. As part of this, the BMA introduced the Insurance Manager Code of Conduct and required insurance managers to file specific details via an Insurance Manager’s Return. The Insurance Manager’s Return requires, among other things, details around directors and officers of the insurance manager, the services provided by the entity, and details of the insurers managed by the insurance manager.

Group Supervision. Pursuant to the Insurance Act, the BMA acts as the group supervisor of the RenaissanceRe group of companies (the “RenaissanceRe Group”) and it has designated Renaissance Reinsurance to be the “designated insurer” in respect of the RenaissanceRe Group. The designated insurer is required to ensure that the RenaissanceRe Group complies with the provisions of the Insurance Act pertaining to groups and all related group solvency and group supervision rules (together, the “Group Rules”). Under the Group Rules, the RenaissanceRe Group is required to annually prepare and submit to the BMA group GAAP financial statements, group statutory financial statements, a group capital and solvency return (including an EBS) and an FCR. An insurance group must ensure that the value of the insurance group's assets exceeds the amount of the insurance group's liabilities by the aggregate of: (i) the individual Minimum Solvency Margin of each qualifying member of the group controlled by the parent company; and (ii) the parent company’s percentage shareholding in the member multiplied by the member’s Minimum Solvency Margin, where the parent company exercises significant influence over a member of the group but does not control the member (the "Group Minimum Solvency Margin"). A member is a qualified member of the insurance group if it is subject to solvency requirements in the jurisdiction in which it is

registered. Every insurance group is also required to submit an annual group actuarial opinion when filing its group capital and solvency return. The group is required to appoint an individual approved by the BMA to be the group actuary. The group actuary must provide an opinion on the RenaissanceRe Group’s technical provisions as recorded in the RenaissanceRe Group statutory EBS. Insurance groups are required to maintain available economic statutory capital and surplus to an amount that is equal to or exceeds the value of its group ECR, which is calculated at the end of its relevant year by reference to the BSCR model of the group (the “Group BSCR”) or an approved internal capital model provided that the group ECR shall at all times be an amount equal to or exceeding the Group Minimum Solvency Margin. The BMA expects insurance groups to operate at or above a group TCL, which exceeds the group ECR. The TCL for insurance groups is set at 120% of its group ECR. In addition, under the Tiered Capital Requirements described above, not more than certain specified percentages of Tier 1, Tier 2 and Tier 3 capital may be used by an insurance group to satisfy the Group's Minimum Solvency Margin and group ECR requirements. Further, our Board of Directors has established solvency self assessment procedures for the RenaissanceRe Group that factor in all foreseeable material risks; Renaissance Reinsurance must ensure that the RenaissanceRe Group’s assets exceed the amount of the RenaissanceRe Group’s liabilities by the aggregate minimum margin of solvency of each qualifying member; and our Board of Directors has established and implements corporate governance policies and procedures designed to ensure they support the overall organizational strategy of the RenaissanceRe Group. In addition, the RenaissanceRe Group is required to prepare and submit to the BMA a quarterly financial return comprising unaudited consolidated group financial statements, a schedule of intra-group transactions and a schedule of risk concentrations.

Income Taxes. Currently, neither we nor our shareholders are required to pay Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax in respect of our shares.  We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, if Bermuda enacts legislation imposing any tax on profits, income, capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not be applicable to us, our operations or our shares, debentures or other obligations until March 31, 2035, except insofar as such tax applies to persons ordinarily resident in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda.

Admitted Company Regulation. Renaissance Reinsurance U.S. is a Maryland-domiciled insurer licensed in 26 states and the District of Columbia and qualified or certified as a reinsurer in an additional 24 states. As a U.S. licensed and authorized insurer, Renaissance Reinsurance U.S. is subject to considerable regulation and supervision by state insurance regulators. The extent of regulation varies but generally has its source in statutes that delegate regulatory, supervisory and administrative authority to a department of insurance in each state. Among other things, state insurance departments regulate insurer solvency, authorized investments, loss and loss adjustment expense and unearned premium reserves, and deposits of securities for the benefit of policyholders. State insurance departments also conduct periodic examinations of the affairs of authorized insurance companies and require the filing of annual and other reports relating to the financial condition of companies and other matters. The Maryland Insurance Administration, as Renaissance Reinsurance U.S.’s domestic regulator, is the primary financial regulator of Renaissance Reinsurance U.S. We are pursuing growth in many of lines of business written by Renaissance Reinsurance U.S., which may increase the impact of U.S. regulation on our business as a whole.

Holding Company Regulation. We are subject to the insurance holding company laws of Maryland, the domestic state of Renaissance Reinsurance U.S. These laws generally require Renaissance Reinsurance U.S. to file certain reports concerning its capital structure, ownership, financial condition and general

business operations with the Maryland Insurance Administration. Generally, all affiliate transactions involving Renaissance Reinsurance U.S. must be fair and, if material or of specified types, require prior notice and approval or non-disapproval by the Maryland Insurance Administration. Further, Maryland law places limitations on the amounts of dividends or distributions payable by Renaissance Reinsurance U.S. Payment of ordinary dividends by Renaissance Reinsurance U.S. requires notice to the Maryland Insurance Administration. Declaration of an extraordinary dividend, which must be paid out of earned surplus, generally requires thirty days’ prior notice to and approval or non-disapproval of the Maryland Insurance Administration. An extraordinary dividend includes any dividend whose fair market value together with that of other dividends or distributions made within the preceding twelve months exceeds the lesser of (1) ten percent of the insurer’s surplus as regards policyholders as of December 31 of the preceding year or (2) the insurer’s net investment income, excluding realized capital gains (as determined under statutory accounting principles), for the twelve month period ending December 31 of the preceding year and pro rata distributions of any class of the insurer’s own securities, plus any amounts of net investment income (subject to the foregoing exclusions), in the three calendar years prior to the preceding year which have not been distributed.

Effective for 2014, Maryland adopted enterprise risk management and reporting obligations applicable to insurance holding company systems that are meant to protect the licensed companies from enterprise risk. These obligations include requiring an annual enterprise risk report by the ultimate controlling person identifying the material risks within the insurance holding company system that could pose enterprise risk to the U.S. licensed companies. We timely filed our enterprise risk reports with the Maryland Insurance Administration for 2016 and 2017.

Reinsurance Regulation. The insurance laws of each U.S. state regulate the sale of reinsurance to licensed ceding insurers by non-admitted alien reinsurers acting from locations outside the state. With some exceptions, the sale of insurance within a jurisdiction where the insurer is not admitted to do business is prohibited. Our Bermuda-domiciled insurance operations and joint ventures (principally Renaissance Reinsurance, DaVinci, Top Layer Re, RenaissanceRe Specialty U.S. and Upsilon RFO) are all admitted to transact insurance business in Bermuda and do not maintain an office or solicit, advertise, settle claims or conduct other insurance activities in any other jurisdiction where the conduct of such activities would require that any company be so admitted.

ceding insurers to take credit for reinsurance ceded to non-admitted, non-U.S. (alien) reinsurers if the reinsurance contract contains certain minimum provisions and if the reinsurance obligations of the non-U.S. reinsurer are appropriately collateralized. Qualifying collateral may be established by an alien reinsurer exclusively for a single U.S. ceding company. Alternatively, an alien reinsurer that is accredited by a state may establish a multi-beneficiary trust with qualifying assets equal to its reinsurance obligations to all U.S. ceding insurers, plus a trusteed surplus amount. Renaissance Reinsurance and DaVinci are each an accredited reinsurer in New York and Florida and have established multi-beneficiary trusts with a qualifying financial institution in New York for the benefit of their U.S. cedants.

NAIC Ratios. The NAIC has established 13 financial ratios to assist state insurance departments in their oversight of the financial condition of licensed property and casualty insurance companies operating in their respective states. The NAIC’s Insurance Regulatory Information System (“IRIS”) calculates these ratios based on information submitted by insurers on an annual basis and shares the information with the applicable state insurance departments. Each ratio has an established “usual range” of results and assists state insurance departments in executing their statutory mandate to oversee the financial condition of insurance companies. A ratio result falling outside the usual range of IRIS ratios is not considered a failing result; rather unusual values are viewed as part of the regulatory early monitoring system. Furthermore, in some years, it may not be unusual for financially sound companies to have several ratios with results outside the usual ranges. An insurance company may fall outside of the usual range for one or more ratios because of specific transactions that are themselves immaterial.

Federal Oversight and Other Government Intervention. Government intervention in the insurance and reinsurance markets in the U.S. continues to evolve. Although U.S. state regulation is currently the primary form of regulation of insurance and reinsurance, Congress has considered proposals in several areas that may impact the industry, including the creation of an optional federal charter, repeal of the insurance company antitrust exemption from the McCarran Ferguson Act, and tax law changes, including changes to increase the taxation of reinsurance premiums paid to off-shore affiliates with respect to U.S. risks and comprehensive business tax reform legislation including border adjustments. We are unable to predict what other proposals will be made or adopted or the effect, if any, that such proposals would have on our operations and financial condition.

recommending certain changes to the FSOC’s process for designating nonbank financial companies as systemically significant in order to make the designation process more rigorous, clear, and transparent. Any suggested changes ultimately adopted by the FSOC would be implemented by FSOC directly, rather than through legislation.

The Dodd-Frank Act authorizes Treasury and the Office of the U.S. Trade Representative (“USTR”) to enter into international agreements of mutual recognition regarding the prudential regulation of insurance or reinsurance (“covered agreements”). In January 2017, Treasury and the USTR negotiated a covered agreement with the EU regarding the prudential regulation of insurance and reinsurance (the “US-EU Covered Agreement”), which was signed in September 2017. Each party has begun the process of completing its internal requirements and procedures (such as amending or promulgating appropriate statutes and regulations) in order for the US-EU Covered Agreement to enter into force.

General.  The operations of RSML are subject to oversight by Lloyd’s, substantially effected through the Lloyd’s Franchise Board. RSML’s business plan for Syndicate 1458, including maximum underwriting capacity, requires annual approval by the Lloyd’s Franchise Board. The Lloyd’s Franchise Board may require changes to any business plan presented to it or additional capital to be provided to support the underwriting plan. Lloyd’s also imposes various charges and assessments on its members. If material changes in the business plan for Syndicate 1458 were required by the Lloyd’s Franchise Board, or if charges and assessments payable to Lloyd’s by RenaissanceRe CCL were to increase significantly, these events could have an adverse effect on the operations and financial results of RSML. We have deposited

Capital Requirements.  The underwriting capacity of a member of Lloyd’s must be supported by providing a deposit (referred to as “Funds at Lloyd’s”) in the form of cash, securities or letters of credit in an amount determined under the capital adequacy regime of the U.K.’s Prudential Regulation Authority (the “PRA”). The amount of such deposit is calculated for each member through the completion of an annual capital adequacy exercise. Under these requirements, Lloyd’s must demonstrate that each member has sufficient assets to meet its underwriting liabilities plus a required solvency margin.

Restrictions.  A Reinsurance to Close (“RITC”) generally is put in place after the third year of operations of a syndicate year of account. On successful conclusion of a RITC, any profit from the syndicate’s operations for that year of account can be remitted by the managing agent to the syndicate’s members. If the syndicate’s managing agency concludes that an appropriate RITC cannot be determined or negotiated on commercially acceptable terms in respect of a particular underwriting year, it must determine that the underwriting year remain open and be placed into run-off. During this period, there cannot be a release of the Funds at Lloyd’s of a member of that syndicate without the consent of Lloyd’s.

Intervention Powers.  The Council of Lloyd’s has wide discretionary powers to regulate members’ underwriting at Lloyd’s. It may, for instance, change the basis on which syndicate expenses are allocated or vary the Funds at Lloyd’s requirements or the investment criteria applicable to the provision of Funds at Lloyd’s. Exercising any of these powers might affect the return on the corporate member’s participation in a given underwriting year. If a member of Lloyd’s is unable to pay its debts to policyholders, the member may obtain financial assistance from the Lloyd’s Central Fund, which in many respects acts as an equivalent to a state guaranty fund in the U.S. If Lloyd’s determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd’s members. The Council of Lloyd’s has discretion to call or assess up to 3% of a member’s underwriting capacity in any one year as a Central Fund contribution.

Change of Control.  The PRA and the FCA currently regulate the acquisition of control of any Lloyd’s managing agent which is authorized under the FSMA. Any company or individual that, together with its or his associates, directly or indirectly acquires 10% or more of the shares in a Lloyd’s managing agent or its parent company, or is entitled to exercise or control the exercise of 10% or more of the voting power in such Lloyd’s managing agent or its parent company, would be considered to have acquired control for the purposes of the relevant legislation, as would a person who had significant influence over the management of such Lloyd’s managing agent or its parent company by virtue of their shareholding or voting power in either. A purchaser of 10% or more of RenaissanceRe’s common shares or voting power would therefore be considered to have acquired control of RSML. Under the FSMA, any person or entity proposing to acquire control over a Lloyd’s managing agent must give prior notification to the PRA and the FCA of their or the entity’s intention to do so. The PRA and FCA would then have 60 working days to consider the application to acquire control. Failure to make the relevant prior application could result in action being taken against RSML by the PRA or the FCA or both of them. Lloyd’s approval is also required before any person can acquire control (using the same definition as for the PRA and FCA) of a Lloyd’s managing agent or Lloyd’s corporate member.

Other Applicable Laws.  Lloyd’s worldwide insurance and reinsurance business is subject to various regulations, laws, treaties and other applicable policies of the EU, as well as of each nation, state and locality in which it operates. Material changes in governmental requirements and laws could have an adverse effect on Lloyd’s and market participants, including RSML and RenaissanceRe CCL.

registered with the Companies Registration Office in Ireland and is subject to the Companies Act 2014. The Central Bank of Ireland adopts a risk-based framework to the supervision of regulated firms. Firms are rated according to the impact their failure would have on financial systems, the Irish economy and on the citizens of Ireland. Renaissance Reinsurance of Europe is currently considered by the Central Bank of Ireland to be a ‘low impact’ firm. We do not currently consider the regulatory requirements of Renaissance Reinsurance of Europe and its U.K. branch to be material to us.