Nephila’s $500m stamp target for syndicate 2357 looks easily in reach

Nephila Capital looks to be well on-track to reach its ambitious full-year stamp capacity target of $500 million for its Lloyd’s syndicate 2357, as premiums ceded from fronted U.S. catastrophe exposed property risk are already building.

Nephila Capital, the largest investment manager of catastrophe and weather insurance or reinsurance linked assets, has increasingly positioned the Syndicate 2357 vehicle at Lloyd’s of London as a central piece of its global risk and capital management infrastructure.

Back in 2016 Nephila was targeting stamp capacity of $160.9 million, increasing the stamp for 2017 to $308.3 million, and then for 2018 increasing it again to $418.5 million.

Having steadily built up the amount of premiums ceded to and through the syndicate, Nephila began 2019 with an ambitious target again, lifting its stamp capacity to $500 million for the year.

The syndicate tends to be used for some of the fronted business Nephila accesses through its work with State National, as well as business sourced through the managers own MGA Velocity Risk. In addition syndicate 2357 underwrites reinsurance as well.

In 2018, the risk sourced through Nephila’s managing general agent (MGA) relationships and its own MGA Velocity, which likely includes some of the risks sources via State National related fronting, reached almost $294.2 million of premiums.

The reinsurance underwritten by the syndicate reached $312.85 million of premium for 2018.

For 2019, with an increased stamp capacity to fill, Nephila’s syndicate already appears well on its way.

Parent company Markel Corporation reported in its recent results that Nephila has already seen $234.2 million of premium ceded into the syndicate from its work with State National alone in the first-half. $141.2 million were ceded to the syndicate from the Nephila program with State National in Q2 alone.

Given this is not the entirety of the business that flows into and through Syndicate 2357 from Nephila’s broad reinsurance and ILS activities, it seems clear that the syndicate will easily meet its stamp target and could even beat the just over $607 million of gross premiums that Nephila’s syndicate underwrote in full-year 2018.

With Nephila Capital also having launched its own managing agency for the Lloyd’s of London operations, Nephila Syndicate Management Ltd., its use of Lloyd’s as an underwriting route to market that it can deploy capital through for its investors was always likely to become an increasing focus for the firm.

Of course, what’s important to Nephila here is having options, in terms of underwriting platforms it can use, the security and leverage an operation at Lloyd’s provides, as well as the contribution it makes to the ILS managers worldwide risk transfer and capital management infrastructure.