Markel Corporation has full-confidence in the ability of its insurance-linked securities (ILS) specialist manager Nephila Capital to deliver results over the long-term and looks forward to realising more synergies with the ILS operation, according to Co-CEO Richie Whitt.
Speaking during Markel’s Q4 and full-year 2021 earnings call today, Richie Whitt highlighted the challenging year that its insurance-linked securities (ILS) operations had faced in 2021.
As we reported this morning, assets under management at Markel’s flagship insurance-linked securities (ILS) operation, Nephila Capital, declined by around $1 billion during the second-half of 2021, due to the effects of natural catastrophe losses and redemptions.
Despite the decline in assets under management, Nephila Capital actually drove higher annual ILS revenues for Markel on its own in 2021, as the prior year included some income from Markel’s other ILS units, now in run-off.
“For the year, revenue from the Nephila operations are up slightly due to continued growth in the MGA revenues produced at Velocity and Volante, partially offset by lower investment management fees, due to lower assets under management,” Co-CEO Whitt explained.
Whitt explained that it’s been a challenging few years for insurance-linked securities (ILS) strategies.
He said that, “The last five years of cat activity have been particularly difficult for the ILS market and of course for Nephila.”
But continued by making his support clear for the ILS strategy at Markel, by adding, “Despite these headwinds, we have full confidence in Nephila to produce solid results over the long-term.”
Importantly and as we noted in our article this morning, while facing challenges from catastrophe losses, Nephila has continued to focus on building out its business and origination platform, especially with initiatives such as the launch of Nephila’s new specialty lines focused Syndicate 2358 at Lloyd’s.
Commenting on this, Whitt said, “Nephila continues to identify new areas of opportunity to deploy capital and launch new investment opportunities.”
He also highlighted the potential for the ILS business to assist Markel elsewhere in its insurance and reinsurance business, which is an area of real opportunity for the company as it looks to embed the capital markets and ILS across its platforms.
“We continue to look for opportunities to achieve synergies among our various insurance platforms, underwriting program services, and ILS so that we can provide customised insurance solutions to match the right risk to the right capital,” Whitt explained.
Having a long-term view on insurance-linked securities (ILS) is key, as investors and those running ILS operations are all too aware after recent years.
So too, the ability to recognise efficiencies and synergies across the insurance platform at Markel, through the use of efficient institutional capital managed by Nephila, presents a significant source of future revenue potential for a company like Markel, so we expect to see the development of the platform and integration of ILS practices at the company continue.