Insurance, reinsurance and third-party reinsurance and ILS capital management group Hiscox has continued to reduce its property catastrophe reinsurance book of business, as it seeks to navigate the challenging market with the help of new products.
Hiscox pulled back significantly in catastrophe premiums written at the mid-year results and in today’s Q3 results statement the firm revealed a further pull-back, particularly affecting its Bermuda based Hiscox Re unit. At the same time Hiscox has benefited, like so many other re/insurers, from a benign claims environment in Q3.
Bronek Masojada, CEO of Hiscox, commented; “Long term investment in our brand and in building our retail business has paid off as we continue to grow particularly in USA, London Market and Europe, while we sensibly reduce our catastrophe reinsurance book.”
The statement went on to explain; “We are experiencing the same environment as everyone else in reinsurance; our portfolio is down 15% in USA and down 10% in international business.”
Hiscox is also beginning to notice signs of pressure on pricing in insurance business, but for the moment says this is contained; “The contagion has only spread into insurance on big ticket property and energy lines. In other insurance lines, rates remain fairly flat with reasonable margins. We will walk away from business where rates and conditions are unhealthy.”
Hiscox notes that rates are largely flat in the casualty book it underwrites in London and in specialities such as energy risks. As you’d expect it is the property business that Hiscox underwrites in London that is the most impacted; “In property lines, the picture is mixed. Big ticket business remains challenged and renewals competitive, so we are exercising caution in this space.”
Reinsurance is where the pull-back is most evident and this continues the trend seen in earlier quarters where Hiscox reduced its catastrophe reinsurance premiums written considerably.
For the third-quarter Hiscox said; “Hiscox Re reduced premium income by 11.8% to US$543.0 million (2013: US$615.6 million), as the team continues its disciplined response to falling rates after increased competition and a benign period for catastrophes.”
However, the Hiscox Re team is utilising product innovation to bring something differentiating to market to help Hiscox secure premiums in a challenging market. Reinsurance products such as its RAP (Risk Aggregate Protection) and SECAT (Second Event Cat with Aggregate Trigger), both of which aim to provide a tailored approach to coverage which is more responsive to clients needs, are receiving a good response from the market, Hiscox said.
At the same time the Kiskadee insurance-linked securities (ILS) and collateralized reinsurance unit continues to make progress. Hiscox said; “We continue to make good progress with our Insurance Linked Securities (ILS) strategy.”
Hiscox continues to exercise discipline and leverage its diverse business, across insurance, reinsurance and ILS, in order to navigate the worst of the soft market environment. It has now pulled back significantly on catastrophe business in recent quarters, but at the same time is keeping itself relevant in that market with the help of these new products and the Kiskadee Investment Management third-party capital business.