Swiss Re Insurance-Linked Fund Management

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Hiscox Re & ILS grows book in “hard fought” market, expects flat renewals


The Hiscox Re & ILS business, which is made up of the reinsurance underwriting and insurance-linked securities (ILS) management at global specialist re/insurer Hiscox Group, underwrote significantly more premiums during the first-quarter of the year, but noted that it had to fight hard for it.

Hiscox noted in its Q1 management statement this morning that it “took advantage of the hardening market at the important 1 January renewals” which resulted in increased reinsurance premiums underwritten at Hiscox Re & ILS, with $363.1 million of gross premium written, an increase of 42% on constant currency terms, or 34.8% at dollar rates.

Group CEO Bronek Masojada commented on the results, “After a costly year for catastrophes in 2017, our London Market and reinsurance businesses mobilised quickly to grasp the opportunity and grew strongly.”

Reviewing the rate increases experienced, Hiscox said that its London market business saw the biggest improvement in catastrophe exposed lines, with rates in major property up 20% in aggregate, and US household and commercial property binders up as much as 10%, while some casualty lines that are under stress have also seen rating growth.

In reinsurance Hiscox noted that price declines have stopped and positive momentum continued at the renewals, with the US portfolio seeing prices up 9% on average. However rates at 1st April were generally flat, the company said.

However, Hiscox has noted that the renewals were “hard fought” as competition remains very high and Masojada noted that, “Sadly, discipline and good sense is receding in the market, so for the rest of the year growth in big-ticket business will be more measured.”

Looking ahead, Hiscox does not expect the rate improvements in reinsurance to continue at the mid-year renewals, saying “We see little prospect of rate improvement as an abundance of capacity from traditional and alternative sources remains a feature of the market.”

But, like others, Hiscox took advantage of the availability of some better pricing in the first-quarter of the year to create a much larger book of reinsurance business for 2018, although much of that premium growth has been ceded through to third-parties through the ILS management business and quota share partners.

“Growth in US property catastrophe and excess of loss business, where rate improvement has been most significant, has been hard fought. We will maintain our disciplined approach and grow where returns are attractive. We have seen increasing demand for our suite of risk excess of loss products, where we have been market leaders for some time,” the company said.

“Our material line size and ILS capability continue to differentiate us, enabling us to compete for larger accounts in a highly competitive market and service clients whose risk appetites differ materially from our own,” Hiscox continued.

The Hiscox Re Insurance Linked Strategies Ltd. (Hiscox Re ILS), the manager of third-party reinsurance capital funds at Hiscox, has been the beneficiary of a good deal of the growth experienced at Hiscox in reinsurance, which suggests the manager will be hoping its portfolio for 2018 has been underwritten on better pricing terms, which could bode well for investors.

Taking advantage of the availability of better rates in January may prove positive for some ILS managers, as mid-year rate increases look set to be considerably more subdued.

Assets under management in the Hiscox ILS funds now exceeds $1.5 billion, the company said.

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