Specialist insurer and reinsurer Hiscox has announced that net insurance contract written premiums (ICWP) increased by 7.4% to $1.42 billion in Q1 2023, as the carrier highlights an attractive rate environment across all business segments.
In its Q1 2023 trading statement, Hiscox highlights a favourable rate environment, with particularly attractive rates in reinsurance which in turn supports rate strengthening in primary property insurance.
Starting with the Hiscox Re & ILS segment, where ICWP increased from $389.2 million to $418.1 million, although on a net basis ICWP jumped by 37.6%, as the Group increased its appetite for catastrophe risk “to take full advantage of the highly attractive rate and underwriting environment.”
Hiscox attributes the difference in net ICWP to ICWP to the market-wide subdued ILS capital appetite.
During the first quarter, Hiscox Re & ILS benefited from an average risk-adjusted rate increase of 41%. The business has achieved cumulative risk-adjusted rate increases of 116% since 2017.
The firm notes a “seismic shift” within the reinsurance sector, driven by capacity reduction in traditional and ILS markets, an inflationary environment, and recent heightened catastrophe losses.
At 1/1, the reinsurance business benefited from what Hiscox describes as the best market conditions in a decade, where it achieved risk-adjusted rate increases of 45% in property and 26% in specialty, with rate improvement in all lines of business.
“The favourable market conditions have created the opportunity to refine the profile of business we are writing, through moving up the layers in towers at the same time as increasing net limits, and reducing exposure to aggregate covers where experience has been highly attritional,” says the firm.
At the April Japanese renewals, rate increases were approximately 20% after already undergoing material re-rating following wind loss activity in 2018 and 2019.
“Our existing market share coming into this renewal season was in line with our targets, as a result the positive rate environment in Japan was used primarily as an opportunity to move up the reinsurance programmes, further away from attritional layers, rather than increasing exposure, and consequently we have seen minimal premium growth, but continued growth in expected profitability,” explains the firm.
Looking forwards, Hiscox remains optimistic about the reinsurance rate environment and expects the hard market conditions to persist throughout 2023 and into next year.
In terms of premiums, Hiscox Re & ILS premium earned equally over the course of the year. However, consistent with the company’s expectations of a general trend in the ILS sector, Q1 saw net outflows of $148.4 million from its ILS funds reflecting reduced appetite from third-party capital providers across the sector, with ILS assets under management coming down to $1.8 billion.
“While it was an active first quarter in terms of large loss activity for the reinsurance market, our natural catastrophe losses were in line with our expectations and budget,” notes the firm.
In terms of claims, Hiscox doesn’t provide a figure but states that the earthquakes in Turkey and Syria, severe convective storms in the US, and floods and cyclones in New Zealand were the main drivers, but adds that the total net loss reserved for these events “are in line with our expectations.”
The Group’s ultimate loss from all risks in the Ukraine and Russia remains unchanged at $48 million, net of reinsurance.
Turning to Hiscox London Market, and ICWP increased by 8.6% to $320.8 million in Q1 2023, underpinned by the attractive and improving underwriting environment, and double digit top line growth in major property, marine and terrorism books.
The segment benefitted from an average risk-adjusted rate increase of 10%, as the hard reinsurance market is driving improving rate momentum in both property and specialty. Overall, since 2017, the London Market portfolio has achieved cumulative rate increases of 86%.
At Hiscox Retail, ICWP increased by 1.7% to $681.3 million, which Hiscox attributes to continued double digit growth in the European division, temporary slower growth in the US and in the UK.
On the asset side of the balance sheet, Hiscox has reported an investment result of $98.1 million for Q1 2023, compared with a loss of $119.4 million a year earlier. The carrier says that it is starting to see improved investment returns on its bond portfolio with the bond reinvestment yield at 5.1% on 31 March 2023.
Aki Hussain, Chief Executive Officer (CEO), commented: “We are seeing positive momentum across the Group. For our Retail businesses, growth momentum in the UK and US is accelerating in line with expectations, and Europe continues to deliver strong double digit increases. Hiscox London Market and Hiscox Re & ILS continue to thrive in very favourable market conditions, growing top line and materially increasing net retained premium, as we deploy our own capital to make the most of the opportunity. This combined with a much improved investment result, means the outlook for the half year is positive.”
