Markel’s flagship insurance-linked securities (ILS) investment manager Nephila Capital continues to benefit from “significant premiums” delivered via MGA Velocity Risk, even after its sale was completed, Markel’s Co-CEO Richie Whitt said recently.
Markel sold two managing general agent (MGA) platforms that its ILS investment manager Nephila Capital had created and had ownership stakes in.
These MGA sales unlocked significant value for Markel, related to its acquisition of Nephila, some of which became evident in the results this week, when Markel revealed a $107.3 million gain on the disposition of the majority of managing general agent Velocity Risk Underwriters to funds managed by Oaktree Capital Management, L.P.
Markel, via Nephila, retained a minority interest in Velocity the two companies intended to keep working together, with MGA Velocity originating and underwriting coastal and catastrophe exposed property insurance risks that can be ceded to reinsurance underwriting vehicles owned by Nephila, as the manager sources risks in an efficient manner for its ILS fund strategies and their investors.
In comments made during the Markel second-quarter earnings call recently, Co-CEO Richie Whitt highlighted that premiums continue to flow through this partnership that Velocity and Nephila have developed.
Commenting on Markel’s ILS operations, Whitt said, “Operating revenues for the year were down versus the prior year, due primarily to the disposition of Nephila’s Velocity MGA operations in February of this year.
“As a reminder, we recognized a gain of $107 million in the first quarter this year associated with this transaction.
“Post the sale, Velocity continues to partner with and produce significant premiums in support of the Nephila fund management operations, and we retain a minority interest in Velocity,” Whitt said.
So Velocity Risk continues to be a significant source of underwriting risk for Nephila, while Nephila continues to be a major provider of reinsurance to back its originated nat cat exposed property insurance portfolios.
This relationship will likely remain key for both parties, as the platform Nephila developed now has the opportunity to expand more broadly outside of the pure catastrophe exposed property risk Nephila had sought, meaning Velocity can build-out is business with the backing of its new investors, while still keeping its core catastrophe risk focused relationship with Nephila intact.