Specialist insurer Hiscox has announced gross premiums written (GPW) growth of 6.3% to $3.68 billion for the first nine months of 2022 supported by impressive growth within its Hiscox Re & ILS division. Although, this part of the business suffered net losses of $90 million in the period as a result of natural catastrophes, notably Hurricane Ian.
Hiscox highlights the continuation of strong rate momentum across all business segments, with premium growth remaining ahead of the firm’s claims inflation assumptions.
Supporting overall 9M 2022 GPW of $3.68 billion, the Hiscox Retail division saw premiums grow by 0.7%, year-on-year, to $1.78 billion, while Hiscox Re & ILS achieved GPW expansion of over 32% to roughly $1.1 billion, partially offset by a decline in GPW of 6.1% to $845.3 million in the Hiscox London Market segment.
“Rate momentum continues to be favourable across all Hiscox businesses, although the degree of rate strengthening varies across business units and lines of business,” says the firm.
The company reveals that Hiscox Re & ILS experienced an average risk-adjusted rate increase of 12.5% in 9M 2022, with the business achieving cumulative rate increases of 52% since 2017.
Hiscox London Market benefited from an average rate increase of 7% in the period, which the carrier says is ahead of expectations. Since 2017, the business has achieved cumulative rate increases of 72%.
In Hiscox Retail, which is the less cyclical part of the business, Hiscox says that rates are rising across all regions, with the strongest momentum being seen in Hiscox Europe with average rate increases of 8%, mostly as a result of cyber, commercial property and traditional professional indemnity.
On claims, the firm notes that nat cat losses in the quarter are consistent with expectations given the estimates of insured losses, with no changes made to the firm’s previously announced $48 million, net of reinsurance, loss estimate for the ongoing war in Ukraine.
For Hurricane Ian, Hiscox reserved $135 million, net of reinsurance including reinstatement premiums, which is based on an insured market loss of $55 billion. Of this exposure, $90 million falls within Hiscox Re & ILS and $40 million in London Market, with a modest $5 million of losses in the Retail portfolio.
With regards to Typhoon Nanmadol and Hurricane Fiona, Hiscox says that these events had no material impact on the group result, with losses expected to remain largely below the attachment points of its reinsurance coverages.
“The underwriting result in Hiscox Re & ILS has been affected by several natural catastrophe losses throughout the year, most notably Hurricane Ian, which resulted in an estimated net loss of $90 million for the division. Australian flood losses earlier in the year were broadly offset by favourable prior year developments,” notes Hiscox.
For 2022, Hiscox notes that the reinsurance book is largely written and so its attention is now on the January 1st, 2023, reinsurance renewals. The company is expecting further and potentially material rate hardening “as capital withdrawal combined with elevated demand, creates an exciting opportunity for the reinsurance market.”
The firm adds that, “In the event of material rate hardening we would expect to deploy more of our own capital and increase retained premiums.”
In terms of the ILS, or insurance-linked securities part of this segment, Hiscox notes that net inflows have been broadly stable in the quarter on the back of more than $500 million of inflows in H1 2022. However, given the impacts of Hurricane Ian and the fact investors in the ILS space are rebalancing portfolios, the firm says that future ILS inflows are somewhat uncertain.
All in all, Hiscox Re & ILS has generated more than $40 million of fee income from ILS and quota share partners year-to-date.
A look in more detail at the performance of Hiscox London Market in the period, reveals that the reduction in GPW is mainly a result of planned re-underwriting actions as the company looks to further reduce under-priced exposure in both the household and commercial binder books, and the impacts of Russia sanctions.
The firm explains that the $40 million hit from Hurricane Ian within Hiscox London Market would have been higher had it not lowered its exposure to under-priced Florida business in the preceding two years.
“The multi-year underwriting actions alongside better than expected non-catastrophe claims experience results in a robust outlook for the full year,” says Hiscox.
Regarding Hiscox Retail, which expanded on the back of excellent growth in Europe, the company says that the combined ratio remains on track to return to the 90% to 95% range in 2023, despite the challenging macroeconomic environment.
On investments, Hiscox reveals that the result for 9M 2022 was a loss of $293.9 million compared with a gain of $62.7 million a year earlier, mostly comprising unrealised losses on its bond portfolio which are expected to unwind as the bonds mature.
Group Chief Executive Officer (CEO), Aki Hussain, commented: “The Group has performed well in a complex underwriting environment. Our Retail business is on track, with platform migration going well and we look forward to an acceleration of growth in 2023. The performance of our big-ticket businesses remains robust after the impact of Hurricane Ian, and improving conditions are presenting new opportunities.”
