Nephila Capital’s assets slip back to $7.2bn

Nephila Capital, one of the largest insurance-linked securities (ILS) fund management operations in the market, is reported by its parent Markel to have had $7.2 billion in assets under management as of March 31st 2023.

That appears to be a slight reduction in Nephila’s ILS assets since the beginning of the first-quarter of the year.

Markel Corporation, which counts Nephila Capital as its flagship ILS fund management operation, had previously reported that the ILS manager experienced an 8% decline in assets under management during the fourth-quarter of 2022, citing redemptions and a challenging capital raising environment, with the total falling to $7.2 billion.

Subsequent to that, in a disclosure to update our ILS investment manager directory (if you’re listed please keep us up-to-date), Nephila told Artemis that $200 million of new capital had been added, effective January 2023, taking its AuM to $7.4 billion.

Now, Markel has reported its first-quarter 2023 results, pegging Nephila’s ILS assets back at $7.2 billion again.

The pace of redemptions could be one driver of this, although it is also possible catastrophe losses from the elevated level of US severe weather in Q1 may also have driven some minor losses to certain positions Nephila’s ILS funds held.

However, while this looks like a possible slipping back of AUM, on a reported basis, quarter to quarter, the level is flat, under the reporting of parent Markel.

The reduced scale of Nephila’s ILS operations is evident in Markel’s disclosures after the first-quarter, with total revenues attributed to unconsolidated entities managed by Nephila reported at $9.8 million for Q1 2023, down from $22.4 million in the prior year period.

At the same time, Markel has reported that gross premiums written through its program services and other fronting platforms on behalf of Nephila Capital’s ILS strategies fell to $236.9 million in Q1 2023, from $315.6 million a year earlier.

Fewer premiums were also ceded through a quota share arrangement that Markel has in place with Nephila’s reinsurers, with $13.5 million ceded in Q1 2023, down slightly from $16.1 million in the prior year.

Having increased for a few quarters now, Markel reported that its reinsurance recoverables due from Nephila owned reinsurance vehicles fell slightly in the first-quarter of the year.

At the end of Q1 2023, these reinsurance recoverables, due via Nephila’s reinsurers to Markel, are reported at $1.3 billion, down slightly from the $1.4 billion reported for the end of 2022.

As Nephila’s ILS operations continue to settle at this rough level of assets under management, the reduced scale compared to a few years ago is evident and it’s likely income earned by Markel from the Nephila ILS operations will be depressed by this over the coming quarters.

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