PEMBROKE, Bermuda (AM Best via COMTEX) — Bermuda reinsurer RenaissanceRe Holdings Ltd. has opened a new sidecar to provide $60 million in additional reinsurance capacity for the Florida homeowners market.

Investors capitalised Timicuan Reinsurance II Ltd. with $60 million in equity capital, including $10 million from RenRe itself. RenRe has agreed to cede a defined portion of its Florida hurricane risk portfolio to Tim Re II under a fully collateralised reinsurance agreement.

It could be the first new sidecar to be created since January 2008. Sidecars are limited purpose companies funded by investors, often hedge funds, to purchase insurance policies from an insurer. It's a way for an insurer to share risk, and if the policies have low claim rates, investors will make higher returns.

With the reinsurer offering its underwriting engine, sidecars also allow investors to enter the insurance market without having to directly take on underwriting.

About 20 sidecars carrying a combined $4.5 billion in initial capacity were launched in 2006 — in the wake of hurricanes Katrina, Rita and Wilma - according to AM Best's Review & Preview 2007. After the capacity crunch in the market subsided, there was less demand for the temporary vehicles.

Montpelier Re's sidecar Blue Ocean Re, formed at the end of 2005 to assume its Montpelier's retrocession book, did not take up new equity commitments that had been secured for 2007, according to Guy Carpenter & Co.

Validus Re did not renew the 75 percent collateralised quota share retrocession of marine and offshore energy reinsurance risks provided by its sidecar, Petrel Re, that was established in 2006. Instead, Validus Re placed the cover with an alternative carrier, Guy Carpenter noted in a report last October.

Just a few new sidecars were formed in 2007, including RenRe's Starbound Re II and Marsh Risk Innovations, a $400 million facility created by broker Marsh and insurer Ace Ltd. to provide capacity for the property catastrophe market.

When RenRe launched Starbound in June 2007, it said it brought $375 million in new reinsurance capacity for the Florida homeowners market.

Last year saw little sidecar movement. XL Re entered into a quota share reinsurance treaty with Cyrus Reinsurance II, which was capitalised with $136 million.

Renaissance Underwriting Managers Ltd. will be the administrative manager of Tim Re II. RenaissanceRe worked with lead placement agent Aon Benfield Securities in raising capital for Tim Re II. Willis Capital Markets & Advisory and GC Securities also acted as placement agents for Tim Re II.