Nephila Syndicate 2357, the first Lloyd’s of London syndicate backed by an insurance-linked securities (ILS) manager, was among the top performers of all Lloyd’s syndicates in 2015, according to ratings agency Standard & Poor’s (S&P).
In a recent report, S&P explores the performance of Lloyd’s syndicates that operated in both 2014 and 2015, revealing that the bigger, more experienced syndicates, managed to better navigate the softening re/insurance landscape. While those focused on catastrophe risks also outperformed, albeit largely due to another benign year of major losses.
Nephila Capital, the world’s largest manager of catastrophe and weather insurance and reinsurance linked assets, with current assets under management (AuM) of $9 billion+, launched its Lloyd’s Syndicate 2357 in 2013, and the venture has performed well since its inception.
Nephila Syndicate 2357, which is managed by Asta Managing Agency Ltd., reported the third lowest combined ratio of Lloyd’s syndicates in 2015, of 31%, and a net profit of $16.7 million, which S&P notes were aided by the benign catastrophe loss year.
During 2013, the syndicates first year operations (although it only began writing business in the second half of the year), it reported a combined ratio of 34% and profit just shy of $2.55 million.
One year later, at the end of its first full year of operations, Nephila Syndicate 2357 reported a profit increase of more than 200% to $7.9 million, and a combined ratio of 54%. While a steep decline in its combined ratio when compared with 2013, this is due to the fact that it only began underwriting half way through 2013.
Profit of $16.7 million for 2015 represents an increase of roughly 110% when compared with the previous year, and the syndicate’s continued solid performance is further evidenced by the improvement of its combined ratio to 31%, better than the 34% reported during its first six months of operations.
In each year since its establishment, Nephila’s Lloyd’s syndicate has increased its gross written premiums (GWP) and net profit, while improving its combined ratio during 2015, all of which makes it not too surprising that S&P highlights the venture as a top performer at Lloyd’s.
“Experience and size within the Lloyd’s market matters, but given the range of expertise Lloyd’s various syndicates represent, even the top performers prefer to pick and choose among the underwriting opportunities it offers,” said S&P.
Of course Nephila’s syndicate at Lloyd’s is one of those which benefited from the low level of major catastrophe losses through 2015, helping it to a lower combined ratio.
The impressive track record of the syndicate and persistent growth in GWP suggests that the Lloyd’s market has become more and more comfortable with this unique product, which sees Nephila increasingly integrate ILS products and alternative reinsurance capital within the specialist Lloyd’s of London market.
Furthermore, with Lloyd’s keen to become a centre for ILS business in the near future and the already successful Syndicate 2357 showing the benefits of working with ILS capital, it’s possible more and more syndicates backed by ILS funds/managers will look to enter the Lloyd’s marketplace.
– Nephila focused on more direct route to original re/insurance risk.
– Nephila Capital sees opportunities to grow asset base.
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