Nephila Capital ILS fund management revenues rise 23% in Q2, 30% for first-half 2026

Nephila Capital’s insurance-linked securities (ILS) fund management revenues reported within parent Markel’s results have risen strongly by 23% in the second-quarter of 2026 and now by 30% for the first-half of the year.

The effects of the softened reinsurance market are evident again in Markel’s results reporting on the ILS business though, as the company said fronted property catastrophe reinsurance premiums for the Nephila Capital linked programs declined, which the company noted was driven by rate decreases.

After the first-quarter of this year, Nephila Capital’s insurance-linked securities fund management revenues had risen by an impressive 59% year-on-year, to reach $40.5 million for Q1 2026.

For the second-quarter, ILS fund management revenues generated by Nephila Capital reached $37.7 million, a 23% increase on Q2 2025’s $29.1 million.

For the first-half of 2026, ILS fund management revenues rose to $78.1 million, a 30% increase over H1 2025’s ILS fund revenues of $54.6 million earned by the Nephila Capital business.

The higher ILS fund management revenues reflect both the stature of Nephila Capital in the market, having increased its premium volumes backed by its third-party investor capital, as well as the fact property catastrophe rates remain attractive in many parts of the market.

But, the softening in reinsurance has now begun to show, as Nephila Capital’s premium volumes assumed via fronted programs operated through parent Markal’s business infrastructure fell in the second-quarter.

Recall that, the insurance and reinsurance premium base underwritten by the Nephila Capital reinsurance and ILS entities had been increasing strongly over-time, as the ILS manager has been able to write more business without dramatically increasing its managed capital base, thanks to the way it leverages the infrastructure it has created and the synergies it has within the Markel Group.

In full-year 2025, Markel fronted 42% more in gross premiums for Nephila entities and ILS structures, as the manager expanded its stature further in the reinsurance market.

Nephila Capital’s third-party investor assets under management reached $7.7 billion at the start of 2026.

As we’ve explained before, the ILS manager can originate far more in premiums per-dollar of assets managed these days, thanks to the efficiency of the risk origination infrastructure it utilises and the way that can lever up its capital base.

Market conditions are a factor though, particular as pricing softens and for the first-quarter of 2026 gross premiums written through Markel’s fronted programs and ceded to Nephila’s reinsurance structures declined to $267.4 million, from $389.3 million in Q1 2025.

For Q2 this decline has continued, with Markel reporting that $769.4 million of premium was ceded to Nephila’s reinsurers, down from $1.3 billion in Q2 2025.

For the first-half of 2026, premiums ceded to Nephila reinsurance entities through these property catastrophe focused programs were $1 billion, down considerably from $1.7 billion in H1 2025.

Markel cited these “lower premiums on our property catastrophe programs with Nephila period-over-period,” while also further explaining that a decline in its overall fronted program premiums was “driven by lower premiums on our property catastrophe programs with Nephila driven by rate decreases.”

So the softening of global property catastrophe reinsurance rates continues to drive this lower gross premium volume for the Nephila Capital reinsurers in 2026, a natural effect of the market environment although this isn’t sufficient details to be able to read-across to how it affects the return potential, of course.

With major natural catastrophe losses still running at a relatively low level, it’s likely the Nephila funds continue to deliver attractive performance for their investor base, while the increasing fee income against a well-managed asset base shows performance fee income is likely flowing through, to the benefit of Nephila and Markel.

The reinsurance recoverable that Markel reports on its balance sheet as due from Nephila Capital’s reinsurance entities continued to decline in the second-quarter of the year, which reflects the effect of commutations made and losses being accounted for and realised from the past, as we saw begin to take effect in 2025.

The reinsurance recoverables due to Markel from Nephila reinsurers had fallen to $267.6 million by March 31st 2026, but has now fallen a little further to $241.9 million.

Also of note, it seems hedging activity at Nephila in industry-loss warranty (ILW) form may be lower in 2026.

Markel reported that fronted ceded reinsurance contracts that protect the Nephila reinsurers and are ceded to third-parties, primarily in ILW format, were only $15.5 million and $18 million for the second-quarter and half-year respectively.

That’s down on $60.5 million and $74.2 million ceded for these larger ILW arrangements to protect the ILS manager’s reinsurers in the prior year.

Of course, while the retrocession arrangements for Nephila are reported at lower ceded premium levels, as well as perhaps a little less hedging being put in place the softer rate environment will also make these arrangements cheaper and reduce the premium total at the same time.

Nephila Capital again demonstrated how the ILS investment management business benefits Markel, with the parent reporting 3% organic revenue growth “driven by higher management fees for our insurance-linked securities investment management services,” as a factor in helping to offset a quarterly decrease in operating revenues.

The fee income generated by the ILS investment business run by Nephila Capital continues to benefit the parent greatly, boosting earnings and bringing a source of income that is now from diversified business, as Markel itself had exited property catastrophe risks in the past.

View information on dedicated ILS fund managers, as well as reinsurers offering ILS style investment opportunities, in our Insurance-Linked Securities Investment Managers & Funds Directory.