Nephila costs elevated on MGA platform build & new fund launches: Whitt

Nephila Capital is experiencing elevated costs as the insurance and reinsurance linked investment manager builds-out and grows its managing general agency (MGA) platforms and readies for the launch of new ILS fund vehicles, Markel Co-CEO Richie Whitt has explained.

As we explained yesterday, Nephila Capital’s assets under management (AuM) fell slightly to $9.5 billion at the end of the first-quarter, with the reduction in assets also a driver of lower insurance-linked securities (ILS) operating revenues reported by Markel Corporation.

Speaking during Markel’s earnings call yesterday, Whitt acknowledged this saying that a key driver was earning “lower investment management fees related to having lower assets under management versus the same period a year ago.”

But expense is the other, as Nephila and Markel continue to invest in building out its MGA related platform for ILS origination and risk sourcing, while also readying new ILS investment fund strategies to bring to market.

Whitt explained that Nephila’s “Earnings also continued to be impacted by cost associated with building and supporting the growth of Nephila’s two MGA platforms.”

At the same time he said that Nephila Capital is “preparing for the launch of additional fund investment vehicles.”

As we’ve reported over the years, Nephila already has an established US MGA Velocity Risk Underwriting, which continues to expand and is sourcing an increasing amount of primary, catastrophe exposed property risk for the ILS managers funds and investors.

At the same time the company is also continuing to build out its Lloyd’s managing agency, Nephila Syndicate Management Ltd.

Nephila has also been working on the launch of a new specialty lines syndicate at Lloyd’s, syndicate 2358, which as we explained has been slightly delayed.

While also targeting launch of an ESG focused ILS fund strategy, plus continuing to expand its flagship Lloyd’s syndicate business.

All of these initiatives, of course, come with costs attached. But as the Nephila platform expands, the company creates an increasingly efficient structure for originating, packaging and transferring insurance and reinsurance related risks to its ILS fund structures, to the benefit of its investor-base.

“Nephila continues to build and identify new areas of opportunity to deploy capital and launch new investment opportunities,” Whitt said.