Markel’s ILS unit Nephila will face AuM flow and earnings pressures

Reinsurance, ILS, Third-Party Capital, Risk Transfer, Asset Management, Markel, Nephila, Hurricane Ian, Bermuda

Markel is likely to see further erosion of assets under management at its insurance-linked securities (ILS) management unit Nephila, officials have indicated.

“The significant Ian losses and investor fatigue around recent cat activity will continue to adversely impact assets under management,” Markel’s co-CEO Richie Whitt told his company’s Q3 investor call.

Nephila suffered an 8.2% decline in assets under management to $7.8 billion to end-Q3, a loss management put chiefly to the impact of Hurricane Ian, the group’s Q3 report had indicated.

Markel claimed gross losses and loss adjustment expenses of $850 million within its programme services and other fronting operations attributed to Hurricane Ian, all ceded to Nephila reinsurers. Counted to AuM, the losses had been balanced by prior inflows in Q3.

Losses on hurricane Ian proved “consistent with Nephila’s own expectations for an event of this magnitude,” Whitt told the call.

The outlook for earnings from the ILS manager in Q4 remains highly uncertain, Whitt acknowledged. Q4 would normally involve both fundraising and the possibility of releasing trapped capital, both opening the door for fee earnings, he indicated.

Hurricane Ian will rather drive “quite a bit of focus on making sure your reserves are correct,” Whitt said.

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