Markel ILS unit Nephila suffers 7.7% further cut to AuM, forcing write-down

Markel's key insurance-linked securities (ILS) vehicle Nephila suffered a 7.7% or ca $600 million  decline in assets under management (AuM) in the fourth quarter of 2022 to $7.2 billion, with Markel blaming continued investor jitters.

The endless string of high catastrophe years are to blame for investor reticence to allocate to ILS, Markel's president of insurance Jeremy Noble told the company’s Q4 investor call.

"We remain confident long-term," Noble said, citing "significant rate increases" achieved for Markel’s ceding units at 1.1 and expectations for continued hard rates moving forward.

The 7.7% decline in Q4 follows an 8.2% drop in Q3 which Markel management was already quick to blame on Hurricane Ian, which struck the Florida coast only days before the close of the quarter.

With the Q4 decline, AuM at Nephila is now down 18% for the whole of 2022.

Management did not publish the full quarterly report showing the sum of premiums ceded to the unit.

The size of the reduction in managed assets ultimately forced Markel to make an $80 million partial impairment of goodwill against the unit's valuation.

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