Hiscox strengthens its capital position with Enstar LPT
Hiscox has completed a loss portfolio transfer with Enstar Group that RBC Capital Markets said will buy it time to focus on more profitable business and remove uncertainty from future reserve volatility.
Enstar Syndicate 2008 reinsured a diversified portfolio of legacy insurance business underwritten by Hiscox Syndicate 3624, including the majority of Hiscox USA’s surplus lines broker business.
Hiscox has ceded net insurance reserves of approximately $520 million at December 31, 2020, relating to 2019 and prior-year business.
RBC said the deal will benefit Hiscox’s capital position, adding around 10 basis points to its group Bermuda solvency capital ratio, which stood at 190 percent at the end of 2020. It will result in a profit and loss charge of $26 million in 2021, RBC said.
“We view the deal as a sensible one for management to have pursued, as it will allow the company more time to focus on the more profitable front book in the current market and removes some uncertainty from reserve volatility going forward,” RBC explained in a note. “We have not been concerned about Hiscox’s capital position since the equity raise in 2020. However, the capital benefit from the deal is welcome, and in theory will allow the company to reinvest into stronger markets.”
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