Bermuda-headquartered, London-listed insurance and reinsurance group Hiscox demonstrates the importance of capital efficiency and effectively managing capital within a re/insurance business today, as it adds a new role of Group Head of Capital Management.
For insurers and reinsurers navigating a softened reinsurance market, with that softening spreading to commercial P&C primary insurance lines, while alternative sources of capital increasingly enter the sector and need to be managed, capital efficiency is becoming key.
With reinsurance pricing across many lines approaching the technical underwriting level, where cost-of-capital and capital efficiency really matters, re/insurance groups like Hiscox are placing an increasing focus on managing third-party capital alongside their own balance-sheet capital.
This raises the task of effectively managing the re/insurers capital base and efficiencies, allowing the firm to take full advantage of lower-cost capital from capital markets and insurance-linked investors, while still building its shareholder equity and balance-sheet leverage.
Today, Hiscox has announced the creation of the new role of Group Head of Capital Management and the appointment of Craig Martindale to that role. Martindale, a qualified actuary, has been with Hiscox since 2009.
Martindale joined Hiscox as part of the group capital modelling team, during which time he spearheaded the development of a capital model to calculate regulatory capital under Solvency II for the re/insurer. He has also recently played a part in the firm’s underwriting risk and reinsurance team, where he had key input to its underwriting and reinsurance purchase decisions. Before Hiscox, Martindale spent four years at Deloitte in their general insurance actuarial consulting team and four years at Hewitt Associates as an institutional investment consultant.
Martindale’s background and experience fits the role well. It’s vital that re/insurers have a capital management strategy in place to help them navigate regulatory change, balance their capital sources, identify the best use of reinsurance and retrocessional capacity as a capital tool and to spot opportunities to leverage third-party capital within their business.
Hiscox already has a growing third-party reinsurance capital management and ILS investment manager unit in Kiskadee, which recently upped its assets under management to around $400m. Re/insurers like Hiscox are expected to increasingly look to leverage third-party capital, as both managers of it within their underwriting and for their own risk transfer needs, hence an oversight of capital management within the business is vital.
Martindale will report to Chief Financial Officer, Stuart Bridges, and will be responsible for bringing together the capital models used across the business to provide one clear, consistent and accurate view of its capital management.
Bridges commented; “An increased focus on effective capital management made the creation of this role a natural next-step for our business. Craig has a deep understanding of Hiscox and extensive knowledge of our capital management processes, both of which are crucial in this new role.”
Understanding their cost-of-capital and being able to quickly identify efficiencies that can be made will be increasingly key for insurers and reinsurers. Hiscox looks to be trying to get one step ahead in the capital efficiency game with this hire.
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