Winter storm Uri’s impacts in the first-quarter of 2021 was a step backwards for the insurance-linked securities (ILS) market and the sectors biggest dedicated investment manager Nephila Capital, according to Markel Corporation Co-CEO Richie Whitt.
With winter storm Uri coming on the heels of a year in which the pandemic impacted the ILS market and after a number of years of elevated catastrophe losses, it has resulted in some frustration at Markel.
Co-CEO Richie Whitt explained during the firms recent Q1 earnings call that “I can tell you, we’ve been frustrated. We feel like we make two steps forward and then there’s a step backwards, Uri in the first quarter.”
“We have losses and then that reduces AuM, which in turn reduces fees,” Whitt continued, referring back to the dip reported in Nephila related income during Q1 2021.
But Whitt remains positive on the insurance-linked securities (ILS) business, despite the frustrations over timing of these four more challenging years for the ILS market.
“It’s been a tough four years in the ILS business, with the cats, but we can’t make excuses. We have to figure out a way to get our business moving forward.
“Certainly we project the ILS business moving forward through the rest of the year and certainly want to move forward in ’22 and onward.
“But, we got work to do and, there’s just no other way to say it, we’ve got work to do, to get where we want to be in ILS,” Whitt explained.
Whitt went on to say that hopefully part of moving the ILS business forwards is a return to more normal catastrophe years, but also highlighted that the most important factor in achieving longer-term ILS profitability is going to be in “getting the right price for the exposure.”
As a result, Whitt said that he and others, “believe prices need to continue to go up for cat risk.”