Nephila’s hedging & portfolio actions in best interests of investors: Noble, Markel

Hedging and portfolio management actions undertaken by Nephila Capital, the insurance-linked securities (ILS) operation of Markel, are in the best interests of investors in the face of a potentially active hurricane season, Jeremy Noble, President of Insurance at Markel explained today.

As we reported this morning, during the second-quarter of this year Markel began to front ceded reinsurance contracts for the Nephila Capital business for the first time.

This was largely in industry-loss warranty (ILW) form, as the ILS investment manager took action to better protect its portfolios of risk and provide more downside cover for its investor base.

This process saw Nephila’s reinsurance entities retroceding risk back to Markel which was then fully ceded out to third-party reinsurers and the gross written premiums ceded by Nephila under this protection and ILW hedging program reached $168 million for the first-half of 2024, Markel had reported.

Speaking during the Markel second-quarter 2024 earnings call, Jeremy Noble highlighted these actions as beneficial for the Nephila investors.

He said that, “Within our Nephila operations, the team has been hard at work constructing attractive portfolios and responding to the heightened levels of natural catastrophe losses anticipated this year.”

Going on to explain that, “We have both hedged risk for current capacity deployed and reduced overall premium writings, which will modestly lower operating revenues in the short term.”

While writings might be reduced, in overall premium terms, it’s important to remember that an increasing proportion of Nephila Capital’s underwriting business is now fronted by and flows through entities owned by its parent Markel.

We suspect this means the overall group can recognise efficiencies and effectively leverage the profitability of that business to a degree.

The quarterly results showed that, for the first-half of this year, gross premiums written by Markel’s program services and other fronting platforms on behalf of Nephila Capital entities reached $1.1 billion, up significantly on H1 2023’s $534.3 million

On the hedging and portfolio actions taken, Noble is positive, saying, “These actions are in the long term best interest of our investors and we remain excited about the future prospects of our business.”