Nephila property cat business in profit, targets climate & specialty growth: Markel’s Noble

Insurance-linked securities (ILS) investment manager Nephila Capital is targeting growth and expansion into the climate and specialty risks sides of its business, but property catastrophe risk remains the biggest revenue driver at this time, Markel’s Jeremy Noble said today.

Speaking during the Markel fourth-quarter 2022 earnings call, Jeremy Noble, President of Insurance operations at the group, explained that the firm is confident in the ongoing opportunity with Nephila.

Noble also noted that Nephila is positive on the now higher reinsurance rate environment, through which it anticipates delivering higher returns to investors.

“We remain confident that Nephila will produce more favourable results over the long term,” Noble explained.

Saying that, “Pricing in the property catastrophe market is strong, and Nephila achieved significant rate increases at the 1/1 renewals and expects to continue to capitalise on improving pricing as the year progresses, which will lead to an improved outlook for investor returns.”

Moving on to where Nephila’s focus could be for 2023, in terms of expansion, Noble highlighted the more non-core areas of the business as particular opportunities.

“Our team at Nephila continues to identify new areas of opportunity to deploy capital to address the evolving areas of risk management needs, including the expansion of our climate and specialty product offerings,” he explained.

Nephila launched its specialty ILS focused Lloyd’s syndicate 2358 for the start of 2022, so it only has one-year of underwriting under its belt.

Meanwhile, the Nephila Climate business, where weather, climate and other related risks are invested in, has been growing steadily over the last year and remains a core focus strategy for the Nephila team, it seems.

While leveraging the entire Markel platform to facilitate expansion at Nephila, now it’s more deeply embedded there, is an ongoing goal as well.

Noble said that, “We also continue to look for opportunities to achieve synergies amongst our various insurance platforms, underwriting, program services and ILS, to provide customised insurance solutions, best matching capital and risk to meet the needs of our customers.”

While the target may be to grow the climate and specialty underwriting and investment books at Nephila, Markel’s Noble highlighted that still the profit-driver for the ILS business at the firm remains property catastrophe reinsurance at this time.

“Broadly speaking,”he explained, “Our fund management operations are slightly profitable on the property cat side, offset by being slightly unprofitable where we’re investing in the climate and specialty space.”

In 2023, given the significant property cat rates seen and the opportunity there to generate higher revenues at Nephila, given its leading role as a property catastrophe reinsurance writer, this year could be the perfect opportunity to expand the climate and specialty sides, with the knowledge the returns in the property cat space are likely to be the best the long-standing ILS manager has seen in around two decades.