Hiscox reserves $232m for Covid-19 losses
Hiscox reserved $232 million for Covid-19 related claims in the first half of the year.
The Bermudian-based re/insurer, which posted a loss of $138.9 million for the first six months of the year, is one of eight insurer participants in a case brought to the British courts by regulator, the Financial Conduct Authority, designed to bring clarity to disputed business interruption insurance claims.
Robert Childs, the chairman of Hiscox, told The Royal Gazette yesterday that the company supported the court case process. The company’s denial of business interruption claims caused hundreds of clients to threaten legal action. Many other insurers have found themselves embroiled in similar disputes.
Mr Childs said: “I think we were probably the first out the door to say, ‘it’s not covered’, because that’s our style.
“I think now it’s become clear this is an industry issue, not just a Hiscox issue. There are eight companies involved in the case, but it’s going to affect a good proportion of the UK insurance market.
“We’ve made our case clear that we don’t think our policies apply. We’re not without empathy, we just don’t believe it’s covered. But we’re supportive of the process, because it should bring about a quick resolution.”
A September judgment is expected and Mr Childs understood that any appeal lodged would be dealt with speedily, by early next year.
Hiscox’s analysis suggests losses in the range of £10 million ($7.65 million) to £250 million ($191.2 million), net of reinsurance.
The company said it would not pay an interim dividend or make any share repurchases for the rest of 2020.
In May the company raised $375 million in equity capital, which “enables us to withstand severe downside scenarios and take advantage of growth opportunities”, Hiscox said.
Hiscox Re and ILS, which writes much of its business through the group’s Bermuda head office, posted a $15 million loss in the first half of the year, compared to a $14 million profit in the corresponding period in 2019.
Gross premiums written fell 21 per cent to $552.3 million as a “result of a reduced catastrophe bet in response to rate inadequacy and less deployable capital from third-party capital providers”.
However, Hiscox did se a 29 per cent increase in midyear renewal rates for Florida hurricane coverage.
While Hiscox’s ILS assets under management are about $1.5 billion, the company said only $1 billion of this is deployable because some of the capital is being withheld as reserves for prior-year loss event.
Mr Childs said many ILS funds had the same issue of “trapped capital” and that this was one of the drivers of rising reinsurance prices.
“There have been three straight years of losses in the catastrophe market,” Mr Childs said.
“So completely new, unscathed capital, might be more interested, but if you’ve been in the market for the past three years, then it has not been much fun.”
The group announced yesterday that Mike Krefta, the CEO of Hiscox Re and ILS, and the company’s top Bermudian-based executive, is to leave the company and the insurance sector.
Mr Childs said: “Mike’s been with us for a long time. He’s done in Bermuda what he said he was going to do. And I think he now wants some time for him and his wife to sort out their lives together in the UK.
“It doesn’t change our commitment to Bermuda, we’re as happy there as we ever were.”
Hiscox, one of the biggest underwriters at Lloyd’s said it had seen rates increase 13 per cent year to date in its London Market business and 11 per cent in its reinsurance business.
Mr Childs said some 95 per cent of Hiscox’s 3,400 employees had ben working remotely.
For some, especially those with young children at home, it had been a tough period, he added.
“We’ve done what we can to support our staff — it’s not only their physical wellbeing, it’s their mental wellbeing too,” Mr Childs said.
“It’s trying to work out a new way of working, and keeping communications up. I think we’d quite like to see people eventually going back to the offices.
“Working in the office is about being around the people you work with. That part of your social life is very important and I think people are starting to realise that.
“Our IT staff have been exemplary, they’ve kept us going.”
Hiscox also highlighted that it had given about $7 million to causes in support of those impacted by Covid-19 and partnerships to directly support small and medium-sized enterprises. These efforts included leading a group of island-based insurers to collectively raise more than $1 million for the Bermuda Hospitals Board. ?
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