Nephila well-positioned heading into 2024: Noble, Markel

Nephila Capital is well-positioned heading into 2024, as having now resolved some legacy side pocket reserves, the catastrophe risk focused investment manager can focus on the market opportunity, according to Jeremy Noble, President of Insurance at Markel.

Speaking during Markel’s third-quarter earnings call today, Noble highlighted the work that has been undertaken at Nephila Capital, in terms of freeing up capital that had been trapped.

As we reported this morning, Nephila Capital unlocked some side pocketed capital recently and this caused an increase in insurance-linked securities (ILS) revenues reported by parent Markel.

Jeremey Noble said today, “Revenues within our fund management operations are up from last year, due to revenues recognised during the third-quarter of this year of $30 million, related to the release of capital that had been trapped inside profits.

“Our assets under management in Nephila of $6.8 billion is down from a year ago, due to the redemption of side pocket classes in the quarter, which outpaced profits generated from the funds year to date.”

Noble went on to say, on Nephila Capital’s insurance-linked securities (ILS) operations, “The current pricing environment for catastrophe-exposed property risk has created a very attractive return proposition for investors and the platform has produced profitable results for the year.

“Nephila is working very hard to capitalise on these market opportunities, focusing on price transparency and portfolio construction.

“This time, we feel very well positioned heading into 2024.”

Noble later discussed the property catastrophe market and the opportunity there for Markel.

This is an area the firm had pulled-back from, shifting most of its property reinsurance business under the Nephila platform in recent years.

Noble said, “I do believe the risk-adjusted returns in property had been very compelling this year and we’ve been taking advantage both in insurance as well as our Nephila operations.

“If the property pricing environment remains constructive, and I think it will, we can further take advantage of that across our platform in 2024 as well.”

He said that Markel now has the optionality to write property through its insurance business, as well as reinsurance through Nephila.

Going on to explain that 2023 has been “interesting” and that with the wind season almost through, it looks like a better year than the previous five or six, in catastrophe loss terms.

But he noted that, even when the risk-adjusted return proposition looked so much better in 2023, he still had questions over how the year would play-out.

“We would benefit if it did play out well, so we did grow and took advantage of the rate and pricing environment and then it was a question of what will it look like going into 2024? Will the pricing environment be sustainable? Or would it sort of change after one year?

“It does look like we should have stable but firm and constructive market pricing environment. So we have the ability to deploy more capital there, should we choose to do so,” Noble said.