Lloyd’s of London Syndicate 2357, the first syndicate to enter the Lloyd’s reinsurance market backed by an insurance-linked securities player in Nephila Capital, has increased its gross written premiums by 136% to $33.3m for the 2014 year of account.
That’s a big increase from the $14m of gross premiums underwritten at Syndicate 2357 in 2013 and shows that ILS manager Nephila Capital continues to build its Lloyd’s platform steadily.
On an earned premiums, net of reinsurance, basis the syndicate reports $16.7m for 2014, up from $3.8m in 2013.
Syndicate 2357 at Lloyd’s is 100% backed by the world’s largest manager of insurance-linked securities and catastrophe reinsurance linked investments, Nephila Capital. The syndicate was launched in 2013 and began underwriting in the second half of the year, underwriting industry loss warranties written on a county basis, often known as CWIL (county-weighted industry loss).
This is a unique product to the Lloyd’s market enabling Nephila Capital to bring something new and backed by third-party capital to a market that had in the past refused to be drawn towards ILS and alternatives.
As a result of the increase in gross premiums written, naturally the profit generated by Syndicate 2357 has grown with it. In 2013 the syndicate reported profit of $2.5m. For 2014 the number is up more than 200% to $7.9m.
For 2014 the syndicate reported an increased combined ratio, which is solely based on expenses as no losses were seen during the year. The 2014 combined ratio came in at 54%, compared to 34% in 2013. The increase is due to the fact that the syndicate only began underwriting in the second half of 2013, so 2014 was the first full year of operation.
There has been no change to the available capacity for the 2015 year of account, standing at $72.5m which is the same as 2014.
Nephila Capital is demonstrating, through its participation at Lloyd’s, how ILS products and so-called alternative capital can become integrated within the Lloyd’s insurance and reinsurance market.
The Lloyd’s market gives Nephila a way to utilise its investors assets to underwrite business which perhaps may not have come its way through traditional ILS and collateralized reinsurance market renewal routes.
At the same time Lloyd’s benefits, as Nephila Capital brings a fresh product in its CWIL approach and a source of capital from outside of the market which will boost overall capacity at the market and perhaps if grown help to increase capital efficiency in the market.
We’d imagine Nephila Capital will take a slow and steady approach to growing activities at Lloyd’s, but as it becomes a more accepted part of the market it will open new opportunities going forwards for the ILS manager.