Rate increases boost growth at Hiscox in first nine months
Re/insurer Hiscox enjoyed solid growth across all its lines of business, including its reinsurance book, in the first nine months of 2018 driven by a mixture of increased rates and new business.
The company’s gross written premiums increased by 14.3 percent to $3 billion in the period, though Bronek Masojada, chief executive officer, did note that it had also been hit by an active period for claims in the third quarter both from large losses and catastrophes.
The has reserved net $125 million to cover claims and reduced profit commissions resulting from Hurricanes Florence and Michael, which made landfall on the US East Coast, and Typhoons Jebi and Trammi, which impacted Japan. It stressed the losses are within its modelled assumptions for these events.
Hiscox also said it had seen a number of larger individual claims in both its big-ticket and retail businesses, including a large marine loss of $13 million. Hiscox USA also experienced a higher frequency of D&O claims, and Hiscox UK & Ireland has seen an uptick in subsidence claims following a particularly dry summer, as well as a continuation of escape of water claims.
The group said that rates had improved in most lines of business. In Hiscox London Market, rates have increased across the portfolio by 5 percent year to date, with double-digit increases in major property and 5 percent in casualty lines.
It added that, more recently, it has seen increases in areas targeted by the Lloyd’s ‘Decile 10’ directive, which has forced the whole market to take action in unprofitable areas. Cargo business has seen “much-needed” rate improvement of more than 20 percent since August, it said, adding that overcapacity in cyber and terrorism continues to drive pricing pressure in those classes.
In Hiscox Re & ILS, rates in US catastrophe-exposed business are up mid-single-digits, while rates in the international book are down slightly, the company said. “Looking ahead to January and further into 2019 renewals, we expect the market to recognise material adverse development from the hurricanes of 2017 and the recent events in the US and Japan. To date we have seen the most significant rate improvement in our risk excess book, which is up almost 10 percent, and our wildfire book which is up 50 percent year to date.
Gross written premiums in this book of business enjoyed growth of 10 percent in constant currency to reach $782.4 million. It said the growth rate has reduced since the half year, as strong rate improvement experienced at the beginning of the year has begun to recede.
“The year on year growth rate has been impacted additionally by inwards reinstatement premiums written in the corresponding period in 2017, following the material catastrophe events in the third quarter last year. The year to date growth rate excluding reinstatements is 20% in constant currency,” the company said.
“Property catastrophe reinsurance has delivered the bulk of the growth, and our risk excess and specialty portfolio, where we see the best risk-adjusted returns, has also grown well. Our specialty book, which includes cyber, wildfire and financial lines business, is a key area of focus and we have secured positive rate improvement for ourselves and our third-party capital partners.”
The company also noted that its preparations for Brexit are well advanced. It is utilising the new Lloyd’s Brussels Subsidiary and its Part VII plans are on track. Its new European subsidiary, Hiscox SA, is fully operational and expected to start writing business from 1 January 2019, it said.
“Our plans have always assumed a worst-case scenario ‘hard Brexit’ and we are prepared, irrespective of the outcome of the government’s negotiations.”
It said the financial impact of re-organising the business in preparation for Brexit is $15 million across the group in 2018, and it will inject incremental capital of approximately €40 million in the new entity.
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