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Given there have been some losses to insurance-linked securities (ILS), Jeremy Noble, President of Insurance at Markel, speaking during the company’s earnings call for Q3’24, provided some context in regards to the upside potential for segment income for the firm’s ILS operation, Nephila Capital, in 2025.
“I think we see increased earnings coming through the platform this year compared to a year ago, and were it not for kind of the elevated climate signal and some of the hedging strategy, deploying less capital and writing less premium, we would have seen higher levels of revenue and higher levels of earnings,” he explained.
“So, we’ll kind of see what 2025 brings as far as our indication of the climate, and with regard to what the pricing environment is. But, all sides would point to, it should be a pretty constructive environment for us, relative to Nephila in 2025,” Noble added.
Moving forward, Noble also discussed how Nephila performed during the quarter given the recent activity from hurricane Helene, as well as whether there is any potential for upside in performance fees going forwards.
“With regards to the potential around earning performance fees, it really depends on the investor and their selection and the structure. So, it’s not like every fund in every offering in every structure has that potential,” he explained.
“In fact, what we’ve seen is that much of the new products that we’re deploying are fee based on gross written premium, and that’s part of where we see the results coming through in the other fronting space. And this may have been more driven off the actual fee income, profits and earnings recognised in the year versus performance fees,” he continued.
Adding: “As far as how the funds performance this year are holding up, it’s doing actually quite well, despite the elevated level of activity. And that really, I think, highlights the quality of the portfolio construction the Nephila team took and how we manage those portfolios toward those returns, and obviously the constructiveness of the pricing environment relative to deals that we wrote and supported.
“There will be the possibility, absent any further events, of recognising a modest amount of performance fees,. That will be less, because it was not a clean year than it would have been had it been a clean year, and also obviously because of some of the hedging strategies we deployed given the elevated climate signal.”
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English (US) ·