No change to risk appetite as third-party capital mix adjusts: Hiscox CEO
At Hiscox Group, as the mix of third-party capital adjusts with new inflows into insurance-linked securities (ILS) structures and continued planned outflows as money gets returned to investors, Hiscox CEO Aki Hussain said today that this won’t affect the firm’s underwriting risk appetite.
As we reported this morning, Hiscox ILS, the dedicated insurance-linked securities (ILS) management arm of the global re/insurer, raised $300 million of new inflow capital in the first-half of 2024, from new and existing investors, which flowed to its collateralized reinsurance sidecar and ILS funds.
Despite that, Hiscox ILS saw 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.
Hiscox CEO Hussain was asked about this during an analyst call today, whether the new investor mix, or new structures the Hiscox ILS team has launched, could drive any adjustments to risk appetite.
Hussain explained, “There is no change in risk appetite as a result of the changing mix in third-party capital.
“Our main focus has been for many years, property and retro, and it continues to be property and retro, with some additions.”
Earlier in the same analyst call, the CEO highlighted the strong performance of the Hiscox Re & ILS division.
“In Re & ILS, our colleagues have delivered a fantastic result, growing the net book by over 10% at a combined ratio of 77%. We’ve deployed additional capital into attractive property and retro markets, and the portfolio is well positioned to deliver strong returns in a mean loss environment,” Hussain said.
He added, “As you know, in Re & ILS, we have an established third-party capital management strategy. It’s been in place for well over a decade, comprising quota share partners, ILS funds, more recently, a cat bond fund and sidecars.
“In the first half of this year, we’ve attracted $300 million of new money into the funds. This will go a long way towards offsetting the planned returns of capital in this year.”
Hussain also said that, “The third party capital management strategy not only gives us scale in our reinsurance business, it’s also a key source of fee based income, which this year has increased from $28 million to $44 million and as you can see, is a key contributor to our overall reinsurance profits.”
On that fee income, Hussain was asked whether there is any change expected with the launch of new ILS structures, or as different investors come into the Hiscox ILS asset pool.
Hussain explained that, “In terms of fee income, the fee income that we receive from ILS funds, or indeed, quota share partners, the exact quantum or basis-points is different, but the structure is very similar
“There is not a significant difference between what we would receive, regardless whether it’s quota share or ILS for equivalent performance.”
Also read: Hiscox ILS raised $300m for sidecar & funds through H1, but AUM slips to $1.4bn.
