Nephila assets slip to $8.6bn, but program cat premiums soar

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Assets under management at Markel’s flagship insurance-linked securities (ILS) operation Nephila Capital declined slightly during the first-quarter of 2022, ending the period at $8.6 billion.

markel-nephila-capital-logosThat’s down $200 million from the end of 2021, but as we explained earlier today Markel felt a significant contribution from the value created by Nephila as the sale of the ILS managers managing general agent (MGA) platforms values those businesses at an impressive $384 million.

Nephila Capital’s ILS assets under management is down considerably from a few years ago, but the decline has slowed and with the sale of the MGA operations, Nephila can now concentrate on its core ILS fund management activities.

At the same time, the Nephila business still benefits from risk origination via other Markel entities, such as the State National program fronting arrangements and the fact Markel has retained a relatively significant minority stake in MGA Velocity Risk Underwriters.

Operating revenues in the Nephila ILS operations during the first-quarter of 2021 were seen as consistent with the prior year by Markel, although total revenues sourced from unconsolidated entities managed by Nephila fell to $22.4 million for Q1 2022, down from $28.6 million a year earlier, Markel reported.

Positively though, Markel has continued to channel increasing volumes of catastrophe exposed property business through the reinsurance vehicles owned by its insurance-linked securities (ILS) manager Nephila Capital.

The company said that gross premiums written through these programs focused on catastrophe exposed property risk with Nephila reinsurers were $315.6 million for the first-quarter of 2022, up significantly from the $117.3 million written a year earlier.

Interestingly though, while these program related premiums flowed through Nephila vehicles have been rising strongly, as of the end of March 2022 reinsurance recoverables on Markel’s balance sheets from Nephila reinsurers were $642.3 million, down from $751.0 million at the end of 2021, suggesting an unwinding of some contracts released some of this, as the recoverables had been steadily building.

Now more pure-play focused on managing ILS funds, Nephila is positioned to double-down on its position in the Markel stable, while not having a overhead of its MGA operations any more.

As a result, it will be interesting to see where the assets under management go from here.

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