Hiscox suffers further ILS investor outflows in Q2, sees more ahead

Hiscox suffered $219 million in net outflows from its ILS programmes in the first half of 2022 and believes further outflows are likely in the coming periods, despite a rise to record high valuations for its ILS vehicles.

The $219 million H1 tally reported by Hiscox implies $70.6 million in outflows in the second quarter alone, calculations against6 Q1 disclosure suggest.

“Third-party capital investment appetite remains subdued,” management said, calling the trend “to be expected … at this point in the cycle” given how the hard market is built on a capital shortfall and that investors have broadly expanded options in the current higher interest rate environment.

Hiscox warns on “likelihood that we will continue to experience ILS outflows as that sector rebalances.”

ILS assets under management fell to $1.7 billion, down from $1.8 billion end-Q1 and $1.9 billion end-2022.

It’s not only investor exits. Hiscox claimed new partners on board at the January and mid-year renewals for the quota share capital strategy, “demonstrating our ability to access different mechanisms of third-party capital.”

Hiscox put up its own funds to substitute for third party capital at its reinsurance and ILS division to maintain premium growth of 1.3% for the division in the first half.

That may pay off for the group, if not for third party investors. Hiscox ILS funds are performing “at inception-to-date highs” as a result of “rate improvements, heightened interest earnings, and modest loss activity in the first half of the year.”

“The Hiscox ILS offering remains attractive and well positioned to support new flows of capital into this segment when the market trends reverse,” management claimed.

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