Hiscox Re ILS funds grow assets to $1.6bn

Hiscox Re Insurance Linked Strategies Ltd. (Hiscox Re ILS), the manager of third-party reinsurance investment funds at re/insurer Hiscox, has grown its assets under management again to reach $1.6 billion, as the ILS business helped Hiscox also grow its catastrophe premiums.

Hiscox Re ILS’ assets under management hit $1.35 billion as of July 2017 and then grew again to $1.5 billion by the beginning of 2018.

AuM growth has then been slower it appears through the first-half of 2018, taking the Hiscox Re ILS assets to $1.6 billion at the end of June 2018.

The company said that its Hiscox Re & ILS segment, made up of its reinsurance businesses in London, Paris and Bermuda and the insurance linked security (ILS) activity, had grown its overall premiums by 28.5% to $655.6 million (2017: $510 million), or 25.4% in constant currency with catastrophe risks a big contribution to the growth.

Growth was “Driven by risk and specialist lines, the additional catastrophe risk we have taken and the business we write on behalf of our ILS and quota share partners,” Hiscox said.

“We continue to see strong demand for our ILS funds,” the company explained in its results today.

Hiscox had experienced rate improvements during the start of the year, but this has now begun to slow and the Chairman, Robert Childs, said today, “We started the year well, capitalising on the improved conditions in Hiscox London Market and Hiscox Re & ILS, as we led the way in achieving necessary rate increases. We are seeing momentum behind rate increases begin to slow and we expect our rate of premium growth to decline correspondingly.”

With this slowing of rate increases also leading to the beginning of a slowing of growth, this likely also explains the slowdown in assets growth at Hiscox Re ILS, as the managers will be careful not to raise more capital than can be easily deployed.

However, Childs explained that rates Hiscox saw were still adequate at the mid-year renewals, saying, “Conditions have improved year-on-year and currently rates are at levels where our own and third-party capital can be put to good use.”

“We have focused on areas where rate improvement has been most significant such as US property catastrophe risk and risk excess. We will retain our underwriting discipline, particularly if rates flatten further,” Childs explained.

“Our strategy of sharing the most volatile catastrophe-exposed risks with our quota share and ILS partners, in line with their risk appetite, protects us in heavy catastrophe years such as 2017, where we significantly outperformed the market and delivered an underwriting profit in reinsurance,” he added.

Importantly, following the major catastrophes and hurricanes of 2017, Hiscox is experiencing improvements in reserve positions, rather than deterioration.

This hasn’t been the case across the entire ILS fund market, but Hiscox’s funds are very diversified, thanks to its strategy of taking small shares in positions Hiscox’s reinsurance team underwrites and this may have helped the funds be less concentrated on the areas where the major industry losses occurred.

Childs explained, “In Hiscox Re ILS, our funds and vehicles have performed well relative to the market and in aggregate we continue to see positive reserve development.”