Several tailwinds buoyed Hiscox ILS throughout 2021 and with investor interest and enthusiasm remaining healthy, there’s “plenty of causes for optimism and opportunity,” according to Dr. Ben Fox, Principal, Portfolio Manager at Hiscox ILS.
As at the end of June, global insurer and reinsurer Hiscox’s insurance-linked securities (ILS) and collateralised reinsurance underwriting unit, Hiscox ILS, saw its assets under management rise back to USD 1.5 billion.
Heading into the important January 2022 reinsurance renewals, the company appears well placed to take advantage of more favourable market conditions. And while certain issues such as climate change, secondary peril losses, and transparency remain, there’s reason to be positive.
This is according to Hiscox ILS’ Dr. Fox, who spoke recently with Artemis about his firm’s experience over the past year, and the dynamics of the ILS sector more broadly.
“I’d characterize 2021 as a year where we’ve experienced several tailwinds at Hiscox ILS,” said Dr. Fox.
“We saw continued investor enthusiasm for our product offerings, backed up by capital inflows, meaning we increased our deployable capital by ~25% at the mid-year renewals – a great demonstration of support in our platform.”
Despite the support, he explained that throughout this year Hiscox ILS hasn’t seen the levels of dislocation in areas of the retrocession and ILW property cat markets as in the previous year.
“That said, we’ve taken the opportunity of the loss experience of the past few years to tilt our portfolios towards those cedants and programs whose performance has surprised us to the upside, as well as making several updates to our proprietary views of risk based on recent lessons learnt, which I’m confident will stand our investors in good stead through the coming years,” said Dr. Fox.
The company has also benefited from numerous hires in 2021, having added Jan-Hendrik Hein to head up its business development and investor relation functions, alongside the addition of Vincent Prabis as Managing Principal, who brings a wealth of industry experience.
“Kathleen Reardon, CEO of Hiscox Re & ILS has been in situ since January and has brought a high level of passion, drive and enthusiasm for the business, and has been instrumental in helping us to continue delivering superior portfolios for our investors,” continued Dr. Fox.
Somewhat offsetting the tailwinds for Hiscox ILS, Dr. Fox told Artemis that headwinds throughout the year have come from the frequency and distribution of natural catastrophe events.
He noted how these events tested the resilience of the firm’s portfolios and resulted in investors asking challenging questions about the asset class more broadly.
“We know these conversations are happening across the ILS space and welcome the opportunity to speak with new investors on the strengths of the Hiscox ILS value proposition and performance of our investment strategies during a testing time for many,” said Dr. Fox.
Rising losses from floods, wildfires, and other weather and climate-related perils has, unsurprisingly, contributed to a desire for greater understanding and transparency from the investor base.
According to Dr. Fox, “it’s beholden on managers to do a better job of providing investors with enhanced transparency over what risks their capital is exposed to.”
“We’ve seen a number of ‘surprise’ losses across the market, and part of the issue can be a lack of communication of what is and what isn’t covered in an investment product. Secondary perils have been a specific area of concern in recent times, and we’ve recently been sharing with our investors how we identify, model, price, and manage these across our portfolios,” he said.
Overall, Hiscox ILS continues to see healthy interest from investors and recognises that recent loss years, while challenging, have provided valuable datapoints to compare manager performance.
“We’ve seen a strong focus on investors wanting to better understand the underlying research capabilities managers have at their disposal in order to better differentiate their offerings. At Hiscox ILS, our affiliation with the broader Hiscox Group affords our investors to best-in-class research resources that are simply not available through many of our peers.
“In summary, as we head into 2022 – into our 9th year of trading as a manager – we see plenty of causes for optimism and opportunity,” concluded Dr. Fox.