Aki Hussain, Chief Executive Officer (CEO) of insurer Hiscox, expects continued outflows from the firm’s insurance-linked securities (ILS) business in 2024, but with new money starting to come in and with Hiscox set to supplement the business with its own capital, the expectation is for net portfolio growth this year.
Speaking recently following the release of Hiscox’s full year 2023 financial results, CEO Hussain discussed the performance and outlook for the Hiscox Re & ILS segment, which grew 23% net in 2023 as the firm allocates more capital to the business.
“I expect, if market conditions persist and January 2024 was very good, it was a good renewal period, I expect our net book to grow. So, we have the ability and we’ve created the flexibility for that to occur,” said Hussain.
As we wrote earlier, it was an active end of the year for Hiscox in the ILS space, with fresh capital raised for the January renewals and the launch of a new collateralised reinsurance sidecar and its first catastrophe bond fund. At the same time, the business performed well in 2023, with a near doubling of fee income on 2022 as the firm highlights “substantial profit commissions”.
In terms of the outlook for the ILS fund in 2024, the CEO underlined the different ways the company is able to manage the third-party capital base within its Re & ILS business.
“So, we’ve had a traditional quota share strategy for well over a decade, we’ve had an ILS fund strategy that we deployed about a decade ago, and then latterly we have a cat bond fund, which we launched earlier this year, and then we have other vehicles as well. So, for instance, we launched a sidecar for a very specific investment strategy.
“So, we have a multitude available to us. And what we saw in 2023 is that whilst we saw outflows from our ILS fund, the overall third-party capacity actually remained broadly flat, just a different mix,” said Hussain.
For 2024, Hussain expects that there will be continued outflows from ILS, but added that the firm is also starting to see some new money coming in, although currently nothing material.
“So, we expect to see some outflows but maybe balanced with some inflows. But in terms of total third-party capacity, we expect that to remain broadly flat, maybe slightly up. But we will be supplementing our Re & ILS business with our own capital.
“So, we do expect the net portfolio to grow, if market conditions persist, and for the moment, they look very good,” said Hussain.
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