Hiscox Re & ILS property cat growth to slow, cessions to third-party capital may increase: CFO

Hiscox CFO Paul Cooper said this morning during an analyst call that while growth into property catastrophe reinsurance may slow for the group in 2026, given the rate environment, the company may elect to cede more to third-party capital as it continues to be able to attract investors.

Commenting on the outlook for the Hiscox Re & ILS business, Cooper explained, “If I look at reinsurance, we have a significant property cat component and although we’ve said rates have come off 5% year to date, that market remains attractive,

“I think it’s more a question that, from a property cat perspective in the last five years, we’ve doubled the net premiums we’ve written as we’ve lent hard into that hard market.

“So I don’t expect, under the sort of current conditions, to grow our property cat exposures significantly into 2026, on the basis of the current rating cycle now or the rating conditions. Clearly, we’ve got a couple of months to go before 1/1.”

He went on to explain that, for Hiscox, the gross to net strategy it adopts helps it to better manage the reinsurance cycle.

This extends to the insurance-linked securities strategies managed by the Hiscox ILS division, as well as quota share arrangements such as sidecars. While these activities also enable Hiscox to capture fee income as well.

Cooper said, “You’re right to highlight that our business and our ability to attract third-party capital is strong, not only from an ILS perspective where we report the AUM, but also from a quota share reinsurance perspective.

“What we have done in more softer market conditions is really ramped up the level of cession and retained far less. I think the mix was more a 20% retention in the depths of the soft market, versus a harder market where we were around 50%.

“So I think the benefit of that model really enables us to capture fee income, both on a fixed volume perspective, but also from a profit commission perspective. If you look at the fee income that Re & ILS generated last year in what were very good conditions, it was around $120 million, so that is a decent contribution to the bottom line.”

He further stated that the management team at the Hiscox Re & ILS division see the market as still perhaps the fifth best market in the last twenty years and while pricing is softening the market is remaining disciplined.

“The market remains attractive. Terms and Conditions have remained firm, from what we’ve seen. I think there’s a really strong, by the market and the market commentary I’ve seen, a strong desire to hold firm on those conditions and not concede in terms of attachment points or loosening up the the overall conditions,” Cooper stated.

Cooper further explained that this also extends to the London Market division of Hiscox, while the firm’s diversified model means it can also find other attractive opportunities outside of property cat, with specialty a focus.

Also read: Hiscox ILS AUM dips to $1.3bn on planned returns of capital.