Hiscox ILS raised $300m for sidecar & funds through H1, but AUM slips to $1.4bn

Hiscox ILS, the dedicated insurance-linked securities (ILS) management arm of the global re/insurer, has successfully raised gross inflows amounting to $300 million in the first-half of 2024, with capital from new and existing investors flowing to its collateralized reinsurance sidecar and ILS funds.

Despite this though, Hiscox ILS has also seen its overall ILS assets under management fall back slightly, to $1.4 billion by July 1st, which is down from $1.5 billion at April 1st, as planned investor redemptions roughly equalled the newly raised capital it seems.

But maintaining ILS assets at this level will continue to deliver significant benefits to the Hiscox business, which is already being evidenced in the level of fee income reported for the first-half of 2024.

Hiscox said that fee income rose by 57.7% to $44.3 million for H1 2024, up from H1 2023’s $28.1 million.

The company said this was driven by higher performance fees, that reflected a strong underwriting performance for the reinsurance book.

Hiscox ILS’ asset under management rose to $1.7 billion at June 30th, driven by gross capital inflows of $300 million into the firm’s sidecar and ILS funds.

This came from a mix of new and existing investors in the first six months of the year, but a planned return of capital to investors at July 1st has seen the ILS AUM fall back to $1.4 billion again.

This relative stability is positive though, as Hiscox ILS has been successfully releasing trapped capital and honouring redemptions over the last year or so.

As a result, we suspect that at this time the Hiscox ILS unit will stand in a much stronger position, with more deployable ILS capital than a year ago and more capital able to actively earn a return for its investors and fee income for the parent company.

The Hiscox ILS team has had a busy 2024, havingbegun the year with a newly-launched collateralized reinsurance sidecar vehicle and the launch of its first catastrophe bond fund, as well as a $140 million capital raise for the January renewals.

That success has continued with additional capital raises, while facilitating liquidity events for investors as reported first in May and again now for the mid-year.

In his statement this morning, CEO of Hiscox Aki Hussain commented on the reinsurance rate environment, saying, “The market has remained disciplined at mid-year renewals, with attachment points and terms and conditions broadly holding firm. While market capacity has increased, this has been largely offset by growth in demand from cedants.

“As anticipated, there have been some rate reductions in the upper layers of structures and on higher-quality business, however, these were from generationally high levels. Overall, rate is flat for the first six months of the year with the market remaining attractive, after cumulative rate increases of 90% since 2018.”

Hussain also noted how the Hiscox ILS assets and fee income assists the company, “The third-party capital strategy we have executed in Re & ILS over many years adds scale to the business, enabling more meaningful relationships with our cedants, and allowing Hiscox to manage net retentions within volatility parameters consistent with our ambitions, and also creates a fee-based income stream for risk origination and subsequent profit commissions.”

The Hiscox Re & ILS division delivered a strong first-half profit before tax of $86.5 million for H1 2024, up from $55.1 million a year ago.

Hussain also said, “In Re & ILS, we wrote over three-quarters of this year’s reinsurance premiums in the first half, with a greater share of these premiums to be earned in the second half in line with the risk profile of the business.

“For the full year we expect to continue to see strong net growth in line with the first half, which will exceed top-line growth as we continue to anticipate ILS fund outflows.

“We face into the US wind season well capitalised and with a high-quality portfolio written at attractive rates.”

Overall, the Hiscox Re & ILS business grew premiums 10.5% in the first-half, deploying “additional capital early to successfully capture the attractive market conditions.”

Most of that growth was in January, while at subsequent renewals that growth rate reduced, “as additional quota share capacity and own capital deployed were offset by a reduction in ILS capital,” the company explained.

View information on dedicated ILS fund managers, as well as reinsurers offering ILS style investment opportunities, in our Insurance-Linked Securities Investment Managers & Funds Directory.