Hiscox Group has grown its overall business by more than 7% in 2019 so far, as the insurance and reinsurance company takes advantage of higher rates and looks forward to what it believes will be a third year of firming prices in the London market.
Hiscox has experienced growth across its entire business in 2019, with gross written premiums rising 7.3% in constant currency to almost $3.213 billion.
Hiscox’s primary retail insurance business experienced 7% growth, the London market underwriting business saw its premiums rising 9.7%, while the reinsurance and insurance-linked securities (ILS) side under Hiscox Re & ILS was up 6.1% for the year so far.
The company is taking advantage of better rates, with rates up 9% across the Hiscox London Market portfolio with the year-to-date and further hardening expected into 2020 as well.
In London and the key Lloyd’s market, Hiscox believes that the price momentum is set to continue into 2020, making it the third consecutive year of rate firming, which the company says is down to the performance management initiatives of Lloyd’s that are driving more persistent market discipline.
In London the most significant rate increases have been seen across US public company D&O, cargo, general liability, marine hull and major property.
In the reinsurance and ILS business Hiscox said rates are up roughly 6% across the portfolio, although a lot of this movement has only been confined to loss-affected accounts.
However, the retrocession market is leading to some chances to deploy more capital, as “reduced capacity continues to drive material rate hardening and we are being opportunistic,” Hiscox explained.
In addition, Hiscox has seen material increases in California wildfire liability rates following recent years of losses. While more broadly in catastrophe business, Hiscox says that rates have stabilised.
The Hiscox Retail business saw rates remain broadly flat, with pockets of positive momentum. The United States saw rates up between 2-5% as the market begins to respond to social inflation, Hiscox said. This is occurring in some casualty lines, but the firm believes it will take a while to filter down fully to the small business insurance market.
In cyber underwriting Hiscox sees rate pressure still, due to an abundance of capacity and no significant increase in claims.
Commenting on the first-nine months of 2019, Bronek Masojada, Chief Executive Officer, said, “The third quarter has been an active period for claims, with the market experiencing significant catastrophe losses from storms in the US, the Caribbean and Japan. Paying claims is what we are here for, and we have reserved $165 million for claims from Hurricane Dorian and Typhoons Faxai and Hagibis. We expect an additional impact from lower fees and profit commissions.
“It is pleasing to see good growth across all of our segments, with Hiscox London Market leading the way as conditions continue to improve. In Hiscox Retail, growth is accelerating following the decisive action we have taken in the US and UK, and Europe is delivering strong double-digit growth. We are on track to meet our full year growth guidance for the retail segment.
“Pricing momentum in the London market and reinsurance continues to be positive. In Hiscox Retail, rates in the UK and Europe remain broadly flat across the portfolio. In the US, there are early signs that the market is responding to adverse claims trends in casualty business, where we are taking an increasingly cautious approach to reserving.
“Yet again the balance between our retail and big-ticket businesses has given Hiscox resilience in the face of challenging events. From these challenges comes opportunity.”
In terms of catastrophe losses, Hiscox has reserved for recent losses hurricane Dorian, typhoon Faxai and also typhoon Hagibis at the high-end of industry loss estimates.
Hiscox pegged hurricane Dorian as an $8 billion market loss, typhoon Faxai at $10 billion and more recent typhoon Hagibis as a $15 billion industry loss event.
The company said that the $165 million reserved for these three catastrophe events is “materially in excess of the Group’s catastrophe budget for the second half.”
As well as this, fees and profit commissions earned are expected to be around $25 million lower at the year-end due to elevated catastrophe impacts.
The company said that its Hiscox Re & ILS division is expected to shoulder most of the claims from the Japanese typhoons, while its London market division will take Dorian.
Hiscox also noted the “significant degree of uncertainty around the industry losses, particularly for Typhoon Hagibis where widespread flooding took place.”
But added, “The estimate is within the Group’s modelled range of claims for events of this nature, which were updated following the experience of the market last year.”
In addition, Hiscox said it is exposed to the ongoing California wildfires, although uncertain at this stage how large a loss those could cause.
US casualty business is also driving more losses this year, with increased claims activity and as a result Hiscox has firmed up some reserves for private company D&O underwritten by Hiscox USA and taking a cautious approach to reserving and loss picks in this area now.
Despite all of the losses faced across the business, Hiscox expects a full year combined ratio for Hiscox Retail in the range of 97-99% and continues to target a Group combined ratio of 90-95% over the medium term. The company hasn’t provided any estimates on combined ratios for 2019 across the London market or reinsurance businesses.
At Lloyd’s and in the London market business, Hiscox now sees rates up by in aggregate 20% on a compound basis since the market lows of 2017, thanks largely to performance management initiatives across the marketplace.
The company sees its London portfolio as in good shape and says that Hiscox London Market is “well positioned to make the most of opportunities as they arise.”
In the Hiscox Re & ILS business, the firm says that more “Widespread rate improvement is still hampered by the fluidity of reinsurance capacity available from traditional and alternative sources.”
Rate increases are strongest where losses have been most felt, such as retrocession and California wildfire liability, but Hiscox warns that, “In many areas however, rate is currently insufficient to warrant increased participation.”
“In this environment, it pays to be disciplined and nimble. Hiscox Re & ILS will grow cautiously where opportunities present and contract where the rewards do not match the risk,” the company explained.
