Speaking today during the Markel second-quarter earnings call, Jeremy Noble, President of Insurance explained that the team at insurance-linked securities (ILS) fund manager Nephila Capital are working hard to make the most of the attractive reinsurance pricing environment.
As we reported this morning, while overall ILS revenues earned by Markel dropped for the quarter, because of the sale of the Nephila MGA’s, there are signs of better results coming through and higher returns being earned for the third-party investors backing the Nephila ILS funds.
Nephila’s assets under management AUM was stable at $7.2 billion at the end of the first-half, but we suspect the deployable amount of this has likely risen year-on-year, as is being seen at other ILS fund managers.
During the earnings call, Noble acknowledged the continued drag of lower AUM at Nephila Capital compared to a few years ago, but also noted the return to profit.
“While our current results in Nephila reflect the lower levels of AUM being experienced, results for the second-quarter generated a pre-tax operating profit,” he explained.
Going on to highlight the improved environment, by saying, “The current pricing environment for catastrophe exposed property risk, has created an attractive return proposition for investors.”
Adding that Nephila is working to capture this for its investor clients, by adding, “Our team is working very hard to capitalise on these market opportunities, focusing on price transparency and portfolio construction.”
Another area of growth at Markel has been in its program fronting business under the State National brand, and Noble highlighted a connection to Nephila in those results as well.
Discussing that fronting business he said, “We’re up modestly year to date. Also, within that total fronting space is some of the fronting we do associated with our Nephila operations, when we offer a rated-balance sheet.
“So, we’ve seen some opportunistic growth in that space, because of the the attractiveness of the property catastrophe environment more broadly.”