Hiscox ILS assets fell to $1.5bn at Apr 1st, partially offset by sidecar & fund raises – Artemis.bm

Assets under management at Hiscox ILS, the dedicated insurance-linked securities (ILS) unit of the Hiscox Group, slipped to $1.5 billion at April 1st 2024, as planned outflows continued to facilitate investor liquidity, but this was offset by capital raised into the firm’s new reinsurance sidecar and other ILS funds.

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

Planned returns of capital have been going on as Hiscox ILS allows certain investors liquidity opportunities, while at the same time onboarding new investors and fresh capital, which has resulted in some churn in assets, but should gradually stabilise the business going forwards.

That work has continued through the start of the year, with Hiscox ILS’ assets under management falling by a further $100 million, from the $1.6 billion it had in place at January 1st, to $1.5 billion as of April 1st 2024.

In announcing the group results today, Hiscox said that its ILS assets had actually stood at $1.8 billion at December 31st 2023, then fallen to $1.6 billion at January 1st on the planned outflow of capital, before rising again to $1.7 billion at March 31st and then decreasing to $1.5 billion at April 1st, as the latest planned outflow occurred.

Managing capital entry and exit has been particularly challenging for many ILS managers in recent years, as the effects of the heavy catastrophe loss years continue to have ramifications. But as these efforts continue, stabilisation is returning to most ILS managers strategies and on a go-forward basis the platforms, like Hiscox ILS, are in much better shape and generating increasing interest from investors.

Hiscox noted the outflows were “partially offset by new capital through our side car and the ILS fund raising efforts.”

Across the Hiscox reinsurance and ILS business, that sits under Hiscox Re & ILS, insurance contract written premiums (ICWP) grew by 19.0% to $497.4 million in Q1, as it “continued to seize attractive market opportunities deploying additional capital and new quota share capacity,” the company explained.

Hiscox noted that the January reinsurance renewals were orderly and that over Q1 “rates increased marginally by 2% in the first quarter, bringing cumulative rate increases since 2018 to 94%.”

Slight falls in rates were experienced at the Japan renewals at April 1st though, but Hiscox said they “remain adequate.”

Looking ahead to the mid-year renewals, Hiscox noted that “demand for US catastrophe risk is likely to increase driven by ongoing inflationary pressures.”

The company also said that this is expected to be met by increased capacity in the market, which may moderate pressure on rates at the mid-year.

Further commenting, “Positive market conditions are anticipated to persist throughout 2024, and we will continue to deploy capital where we see attractive opportunities. Nonetheless, ICWP growth is expected to moderate as the year progresses due to the planned outflow from the ILS funds; by the end of 2024, net ICWP growth is likely to exceed moderated top line growth.”

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.

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