Swiss Re Insurance-Linked Fund Management

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Hiscox ILS AUM slips to $1.7bn, but funds perform at inception-to-date highs


Hiscox Group disclosed this morning that its Hiscox ILS insurance-linked securities (ILS) fund management unit experienced some further outflows in the last quarter, ending the half-year with total ILS assets of $1.7 billion.

Hiscox ILS logoBut that is only slightly down on the end of Q1 figure of $1.8 billion, as Hiscox put its own weight behind the strategies to be better able to take advantage of the attractive market opportunity.

Hiscox said that it experienced ILS net outflows of $219 million, as “third-party capital investment appetite remains subdued.”

But added that, “The reduction in ILS capital has been partially offset by increased allocation of own capital, thereby boosting net insurance contract written premiums (ICWP) growth at an attractive point in the cycle.”

The company continued, “Notwithstanding this, the ILS funds are performing at inception-to-date highs as a result of rate improvements, heightened interest earnings, and modest loss activity in the first half of the year.”

Overall, the reinsurance and ILS business under the Hiscox Re & ILS division benefited from the hard market conditions, and Hiscox noted that it has deployed incremental capital to grow exposure and improve the quality of the book.

Written premiums increased by 17.9% to $345.1 million in the half, which the company noted was driven by strong double-digit growth in its North American natural catastrophe, retrocession and marine books.

In addition, the company said that Hiscox Re & ILS saw average rate increases of 34%, with North American natural catastrophe (up 43%) and retrocession (up 42%).

The company added, “The powerful combination of exposure growth and the best-rated reinsurance market in a decade is expected to result in material increases in profits in a normal loss year. In addition, the favourable market conditions allowed a continuing trend of improvement to the quality of the book, where both participations on aggregate excess of loss deals, and exposure to secondary perils, have been reduced.”

Looking ahead, Hiscox noted that ILS market conditions may remain challenging for a time, but that it is still signing new partnerships.

“While there is a likelihood that we will continue to experience ILS outflows as that sector rebalances, our quota share capital strategy welcomed new partners at both 1 January and mid-year, demonstrating our ability to access different mechanisms of third-party capital,” the company said.

“The Hiscox ILS offering remains attractive and well positioned to support new flows of capital into this segment when the market trends reverse.”

Aki Hussain, Group Chief Executive Officer, Hiscox Ltd, commented, “Our business has delivered growth in revenues and profits in every business unit, as our proactive and disciplined underwriting and favourable market conditions come together. Our portfolio of businesses, our people and innovation to meet the changing needs of our customers position us well to continue delivering high-quality growth and earnings.”

View details of dedicated ILS fund managers and reinsurers offering ILS-style investment opportunities in our Insurance-Linked Securities Investment Managers & Funds Directory.

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