Hiscox Re to increase capacity on back of balanced book

Hiscox Re’s strategy of balancing its internationally traded, catastrophe exposed big ticket insurance and reinsurance lines with low volatility retail business is built exactly for times like this—when rates are likely to harden, according to Andrew Dolphin, chair of international business at Hiscox Re.

He said the strategy, which Hiscox Re has maintained for more than 20 years, puts the company in the unique position of being able to grow its reinsurance and big ticket insurance book in line with opportunities—yet it is also under less pressure to maintain its top line when market conditions deteriorate.

“Depending on pricing, we are prepared to grow our European property reinsurance portfolio; however, much of the European business we see requires a significant rate increase to look attractive,” he added.

This follows an announcement made on October 11 by Hiscox that it plans to increase its 2018 capacity for Syndicate 33 at Lloyd’s by £450 million ($594 million) to £1.6 billion ($2.1 billion), subject to Lloyd’s approval.

The increase in capacity is driven by an expected improvement in market conditions and a desire to have sufficient capacity available to participate in a widespread market turn, said the firm.

Dolphin said that while many of Hiscox’s clients at Baden-Baden have not been directly impacted by the losses caused by hurricanes Harvey, Irma, Maria and Nate, they will be curious about their implications on the global reinsurance marketplace and, ultimately, what it means for them.

“There remains uncertainty around how much capital has been destroyed and locked up by the events, for both traditional and ILS capacity,” he said, and this would make the upcoming European renewals an interesting one.

“European rates have softened to their lowest level since windstorm Lothar in 1999, to levels that are, in many instances, paying below the modelled expected loss,” he said.

“The January 1 renewals will be an interesting bellwether for the year ahead, but they won’t tell the whole story as losses develop and capital positions become clearer the longer we wait.

“We still expect to see rate hardening at January 1 with a first step made towards more sustainable pricing levels,” he concluded.

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