Nephila Capital’s Syndicate 2357 at Lloyd’s, which is the flagship syndicate operated by the dedicated investment manager focused on the insurance-linked securities (ILS), weather and catastrophe reinsurance space, underwrote an impressive 41% more in gross premiums in 2024.
However, the underwriting of the syndicate was less profitable compared to the prior year, as a higher level of catastrophe losses dented performance somewhat.2023 was a very profitable year for the Nephila Capital syndicate, as 2357’s combined ratio came in at a very low 25.5% for the year, driving $311.6 million in profit for the entity.
For 2024, the combined ratio came in considerably higher, but at a still profitable level of 72.7%, resulting in annual profits of just over $159 million for the financial year.
Nephila Capital’s Syndicate 2357 is a core component of the ILS managers reinsurance market and investing infrastructure.
Through the syndicate, Nephila flows insurance and reinsurance premiums around the world in a more efficient manner, benefiting from Lloyd’s licensing, leverage and central fund, as well as access to business from that marketplace.
Syndicate 2357 demonstrates Nephila Capital’s desire to make best use of available regulated platforms to heighten the efficiency of reinsurance capital for its investors and ceding clients. As a result, the syndicate plays an important role in how the ILS manager cedes risk between its various underwriting structures and operations around the world.
In calendar year 2024, Nephila Syndicate 2357 underwrote just over $609.5 million, a significant increase from the $432.9 million written in the prior year.
As we’ve reported on Nephila’s activities, the ILS manager has been growing the base of premiums it supports with collateral and backs with its investment funds over the last few years, helped by assuming a growing premium pool via parent Markel’s program entities.
The premium growth for Nephila Syndicate 2357 largely came from the reinsurance line of business, which rose 44% to $564.8 million, up from $392.5 million in the prior year.
Marine, aviation, and transport premiums grew to just over $1 million, from a low $250k in 2023, while fire and other property damage related premiums reached almost $43.7 million, up from $40.2 million.
The growth in premiums written by Nephila Syndicate 2357 reflects growth in productive assets under management at the ILS manager in 2024, with trapped capital having been dealt with by a legacy arrangement with Markel and some new capital raised as well.
However, it’s important to note that Nephila Capital uses the syndicate to benefit from the efficiencies of the Lloyd’s market, so flows business via and through the syndicate when it makes sense to do so, as it has other underwriting platforms at its disposal, while business from the syndicate often gets reinsured back to entities in Bermuda as well. Hence it’s never easy to extrapolate from the syndicate reporting exactly what it means for Nephila as a whole, given the strategic way the ILS manager uses its Lloyd’s platform.
A higher loss ratio of 59.5% was the main driver of reduced profits for the syndicate in 2024, resulting in the 72.7% combined ratio for the year and resulting in the $159 million of profit, a near-halving of 2023’s $311.6 million profit. Hurricanes Helene and Milton were the main catastrophe events that elevated the loss ratio last year for the syndicate.
Nephila’s projection for capacity for the 2025 year of account for Syndicate 2357 is $437.5 million, which is slightly lower than the projection for 2024 of $449.6 million.
However, given changes in exchange rate over that time, the actually difference in projected stamp capacity for the coming year is comparable and of course, with leverage to be achieved, this would enable the syndicate to write similar levels of premium, we suspect.
In fact, it’s worth noting that the projected 2024 stamp capacity was down on 2023’s $516 million target anyway, despite which Nephila Syndicate still increased its gross premiums written by the 41% in volume, so don’t read too much into stamp projections.
It’s worth also noting that investment income earned by Syndicate 2357 rose to $36.8 million for 2024, up from $26.9 million in 2023, which reflects the growing assets of the entity which now stand just above $1.5 billion, $840.5 million of which are investment assets and this figure keeps growing over time.
Finally, as is the way with Lloyd’s syndicates, the return on stamp capacity gets finalised over time and the figures for 2357 for the 2022 year of account have risen further.
A year ago, when still open, the 2022 year of account was reported to have a return on stamp capacity of 38%, but that has now risen to an impressive 54.4%.
While the still open 2023 year of account is currently reported to have a return on capacity of 41.2%, which again we’d expect to rise when the next reports come out in a year’s time.
Return on capacity is likely to be lower for 2024, when that gets initially reported next year. But with underwriting still profitable despite the higher loss ratio and investment returns rising, it’s expected to still look attractive.
Nephila Capital’s activities in the Lloyd’s market continue to be profitable and play a role with growing significance within its global reinsurance and ILS investment platform.
