Reinsurance News

Hiscox sees 9M GWP rise 6.4% to $3.5bn off strong rate momentum

2nd November 2021 - Author: Charlie Wood

International specialist insurer Hiscox has reported gross premiums written for the first nine months of 2021 of $3,462.9 million, a 6.4% increase driven by strong rate momentum across business segments.

Hiscox logoHiscox London Market achieved aggregate rate increases of 13% across the portfolio, with cyber growing at a significant double digit rate.

In other lines, such as D&O, general liability and major property, rates remain double digit albeit momentum is slowing.

In Hiscox Re & ILS rates were up 8% on average. Despite an abundance of capital and continued interest in the sector, European floods in July and Hurricane Ida’s landfall in August proved a reminder of loss costs borne by property catastrophe reinsurers.

In Hiscox Re & ILS, gross premiums written increased by 5.6% to $806.5 million, up from $763.6 million in the prior year quarter.

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Excluding reinstatement premiums, mainly as a result of the Winter Storm Uri, Hurricane Ida and European floods, premiums fell 2.5%.

However, net premiums written grew by 46% as Hiscox retained more risk on the balance sheet to take advantage of the favourable rating environment and reassessed our mix of quota share and excess of loss reinsurance.

Portfolio rate increases and good growth in Hiscox’s North America property book partially off-set underwriting action taken in specialty lines of wildfire and a reduction in retrocession opportunity.

The underwriting result for Hiscox Re & ILS business was affected by the elevated natural catastrophe losses in 2021, including the previously reported $33 million net loss from Winter Storm Uri, $50 million net loss from Hurricane Ida and $20 million net loss from European floods, all including reinstatement premiums.

Non-property catastrophe experience and prior year reserve development remains favourable leading to a robust result at the end of the third quarter.

With the reinsurance account now largely written for 2021, attention turns to the upcoming January renewals and Hiscox expects necessary further rate hardening as the market responds to its fifth year of elevated natural catastrophe losses.

In regards to COVID-19 related Business Interruption claims, Hiscox has made final or interim payments to 5,153 insured claimants, a 60% increase on 30 July 2021, and expects to maintain this momentum in the fourth quarter.

Whilst claims frequency is higher than estimated, the severity is reportedly lower, resulting in business interruption claims in aggregate continuing to settle within the actuarial best estimate.

Given the claims settlement patterns and reinsurance recoveries the group’s net Covid-19 loss estimate remains prudent and unchanged at $475 million for 2020 and $17 million for new lockdowns in 2021.

The UK business interruption book has now been fully renewed with the appropriate pandemic exclusion terms. We have maintained continuous and transparent dialogue with our reinsurance panel throughout this period and the reinsurance recoveries are now being made.

The Group has reserved $110 million net including reinstatement premiums for Hurricane Ida, based on an insured market loss of $35 billion.

Ida is the sixth costliest US landfalling Hurricane in history and the majority of Hiscox’s exposure is in big-ticket lines: $52 million net in London Market, $50 million net in Re & ILS, with Retail incurring a modest net loss of $8 million.

In addition, the group reserved $40 million net including reinstatement premiums for European floods based on an insured market loss of $9 billion.

Non-catastrophe experience across the Group remains positive, with claims frequency in many lines lower than expected.

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