Nephila Capital is well positioned heading into 2024 because after resolving some legacy secondary reserves, the catastrophe risk-focused investment manager can focus on market opportunities, according to Jeremy Noble, president of insurance at Markel.
Speaking on Markel’s third quarter earnings conference call today, Noble highlighted the work that has been undertaken at Nephila Capital, in terms of releasing capital that had been trapped.
As we reported this morning, Nephila Capital recently released pocketed capital which resulted in an increase in insurance-linked securities (ILS) revenue reported by parent company Markel.
Jeremey Noble said today: “Revenue from our fund management operations is up from last year, driven by revenue recognized in the third quarter of this year of $30 million, related to the release of capital that had been trapped in profits.
“Our assets under management at Nephila of $6.8 billion are down from last year, driven by the redemption of side pocket classes during the quarter, which exceeded the profits generated by the funds since the beginning of the year.”
Noble went on to say, regarding Nephila Capital’s insurance-linked securities (ILS) operations: “The current catastrophe-prone real estate risk pricing environment has created a very attractive yield proposition for investors and the platform produced profitable results for the year.
“Nephila is working very hard to capitalize on these market opportunities, focusing on pricing transparency and portfolio construction.
“This time we feel very well positioned as we approach 2024.”
Noble then discussed the property catastrophe market and the opportunities there for Markel.
This is an area from which the company has retreated, moving the bulk of its property reinsurance business under the Nephila platform in recent years.
Noble said: “I think the risk-adjusted returns in real estate have been very attractive this year and we have benefited from that both in insurance and in our Nephila operations.
“If the real estate price environment remains constructive, and I believe it will, we will also be able to benefit more from this on our platform in 2024.”
He said Markel now had the ability to underwrite property through its insurance business, as well as reinsurance through Nephila.
He goes on to explain that 2023 has been “interesting” and with the wind season almost over, it looks to be a better year than the previous five or six, in terms of disaster losses.
But he noted that while the risk-adjusted return proposition looked much better in 2023, he still had questions about how the year would play out.
“We would benefit from that if it went well, so we grew and took advantage of the rate and pricing environment, and then the question was what would that look like by 2024? Will the pricing environment be sustainable? Or would this change after a year?
“It looks like we should have a stable but firm and constructive market price environment. So we have the opportunity to deploy more capital there, if we choose to do so,” Noble said.