Nephila Capital ILS revenues nearly double for Markel in Q1, AUM stable

Revenues earned through the Nephila Capital insurance-linked securities (ILS) investment management business by owner Markel almost doubled in the first-quarter of 2024, while Nephila Capital’s assets under management (AUM) were stable for the period.

The Nephila Capital business has stabilised over recent quarters, with the company dealing with its legacy reserves and eliminating trapped capital for its investors through an arrangement entered into with the help of an adverse development cover (ADC) from its parent, which has put it on stronger footing.

That also unlocked value for Markel, as we reported after its full-year results were announced and net insurance-linked securities (ILS) revenues rose for the company, while assets under management (AUM) at the ILS manager had also stabilised.

The AUM stabilisation has continued, with $6.8 billion at Nephila as of March 31st 2024, the same amount as at the end of last year.

But, perhaps more importantly for Markel, the revenues earned through Nephila’s ILS infrastructure and business increased year-on-year.

For the first-quarter of 2024, Markel has reported that revenues attributed to entities managed by Nephila Capital reached $19.2 million, a significant increase and almost doubling from the prior year quarter’s $9.8 million.

Markel attributed this to “changes in the mix of investment products within the funds.” However, the insurance-linked securities (ILS) segment at Markel did record an operating loss of $5.6 million for Q1 2024, slightly higher than the prior year, but the company does not provide any clarity as to the driver of this.

Also demonstrating the increasingly important role Nephila Capital plays at Markel, especially when it comes to writing property catastrophe reinsurance business, gross premiums written through Markel’s program services and other fronting platforms, such as State National, ceded to Nephila reinsurers on behalf of Nephila’s ILS funds reached $353.1 million for Q1 2024, up on the $236.9 million from the prior year.

There was a slight decline in reinsurance recoverable attributed to Nephila’s reinsurance vehicles, falling to $785.9 million of gross premiums at March 31st 2024 from $794.3 million at the end of last year, but this is not significant.

Markel cited “growth of our property catastrophe and specialty programs with the Nephila Reinsurers” as a driver of increased premiums within the firms program services business segment.

It’s clear that Nephila’s business has stabilised and the increased revenues will benefit Markel as a result.

As we reported earlier this week, Nephila has secured a $90 million catastrophe bond to provide industry-loss based retrocession for its Lloyd’s syndicate 2357.

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.