Nephila catastrophe premiums soar, revenue rises, as Markel sells reinsurance renewal rights

Nephila Capital, the insurance-linked securities (ILS) investment manager arm of Markel, has written 75% more in property catastrophe reinsurance premiums in the second-quarter of 2025, as the ILS manager continues to do more with less since its integration into the Markel business.

At the same time, it now appears that all reinsurance premium will be underwritten backed by third-party capital managed by Nephila Capital at Markel, as the parent company has entered a deal to see its Markel Insurance units reinsurance renewal rights to P&C player Nationwide.

For Nephila Capital though, 2025 now looks to be the year when the ILS manager can really exert the benefits of efficient reinsurance capital and an efficient infrastructure within Markel, as it lifts the amount of catastrophe premiums sourced for its investors significantly this year.

Nephila uses some of Markel’s insurance entities to access risk, with catastrophe premiums fronted and channelled through the Markel program infrastructure back to Nephila’s reinsurance entities, then onwards to Nephila’s ILS funds.

The leverage generated through the way Nephila sources property catastrophe reinsurance premiums for the benefit of its third-party investors is now meaningful, allowing the ILS manager to do much more with still roughly the same assets under management as a year ago.

Which makes it all the more impressive that in the second-quarter of 2025, the volume of gross premiums written through programs using Markel fronting and insurers that were ceded to Nephila’s reinsurance entities soared to $1.3 billion, up by over 75% from H1 2024’s $741.7 million.

$1.3 billion of premium in a single quarter is a really meaningful expression of the role Nephila Capital continues to play in global property catastrophe risks, as one of the most significant writers. All this without growing assets under management in a significant way over recent years.

You should read our recent interview with Nephila leadership, on how the ILS manager now does more, with less, six years after Markel acquired the business.

For the first-half of 2025, the volume of catastrophe premiums ceded through to Nephila reinsurance entities via these Markel programs reached $1.7 billion, which was also up meaningfully by 55% over H1 2025’s $1.1 billion.

Which all means that the Nephila Capital ILS funds have a significant premium haul to earn through over the coming months, to the benefit of its investors, as long as natural catastrophe event losses around the world remain manageable of course.

In addition to the significant growth in catastrophe reinsurance premiums flowing through to the Nephila Capital ILS funds in 2025, the ILS manager has also increased its ILS fund management revenues.

For Q2 2025, Nephila’s ILS fund management revenue contribution to parent Markel has increased to $29.1 million, from $21.8 million a year earlier.

For the first-half of 2025, the Nephila ILS fund management revenue reached $54.6 million, up by 33% on H1 2024’s $41.1 million.

That is again a meaningful increase, especially with the shadow of the California wildfires having hung over Q1 2025, while severe weather in the United States will also likely have created some drag.

Other data points from the quarter and half-year that show the strength of the Nephila Capital business include the fact that Markel reported the reinsurance recoverables on its balance sheets saw the figure due from Nephila’s reinsurance entities only grow slightly to $986.2 million at June 30th 2025, from the $968.9 million it sat at January 1st this year.

Markel also continued to front some retrocessional reinsurance protection for Nephila’s reinsurers, it seems, with fronted ceded reinsurance contracts, primarily in the form of industry loss warranties.

Gross written premiums from the Nephila reinsurers under this fronting program were $60.5 million for Q2 2025 and and $74.2 million for the first-half, as Nephila Capital seemingly hedged some of its book around the middle of the year, likely with the wind season in mind.

A year ago, for the Q1 and H1 2024 periods, the premiums under this program had reached $168 million, perhaps suggesting that less extensive hedging has been undertaken in 2025.

Growth in the property catastrophe reinsurance programs with Nephila’s reinsurers is not just beneficial for the Nephila Capital ILS funds and their investors, Markel also benefits from the growing fronted premium volume, which it highlights in its latest results.

Markel said that a “significant growth in fronting gross premium volume was driven by expansion of our property
catastrophe programs with Nephila Reinsurers.”

For the first-half of 2025, Nephila operating revenues have reached over $54.6 million, driving operating income of almost $9 million for Markel, far better than a just over $2 million operating loss for H1 2024.

A higher effective management fee rate contributed to the increase in revenues, Markel reported.

But, on a go-forward basis, given the enormous catastrophe premium pool that has been constructed, the earnings potential of the Nephila portfolio will be far more meaningful for Markel, it appears.

This strong performance from Nephila Capital and its contribution to Markel’s business comes at the same time as the parent company has announced a significant change to its overall Markel Insurance strategy.

“We’ve made meaningful changes across our business in recent years, all with the goal of consistently compounding your capital,” explained Tom Gayner, Chief Executive Officer of Markel Group. “Our results included $1.4 billion in operating income through the first half of the year. Also, this quarter, we took another step to simplify the structure of our insurance business by placing reinsurance into run-off. That decision enables the team to focus more clearly on the core underwriting activities where we have distinct strengths.”

Markel announced an agreement to sell the renewal rights for its Global Reinsurance business to US property and casualty specialist insurer Nationwide, a deal that will see that Markel business go into run-off, while Nationwide will get the option to renew as much of it as it chooses.

Markel said this move is part of a strategy to “simplify operations and grow the business by empowering local expert teams to serve the distinct needs of their core specialty insurance markets.”

“We are grateful for the work that our Global Reinsurance team has done for our valued customers, but our scale has held us back from being a leader in the reinsurance market,” Simon Wilson, Chief Executive Officer of Markel Insurance said. “With this change, we will sharpen our focus on doing more of what we do best by growing our core specialty insurance business.”

Nationwide will delegate the underwriting and management of all renewal reinsurance policies included in the transaction to Ryan Re Underwriting Managers, a managing general underwriter unit of Ryan Specialty.

Markel is not selling any insurance entities as part of the deal and its Global Reinsurance goes into run-off, while premiums are expected to earn out over the next two to three years, the company said.

Previously, Markel had shifted all of its catastrophe reinsurance business over to Nephila Capital, with it being written on third-party capital.

While the announcement of the running-off of Global Reinsurance and renewal rights deal with Nationwide does not make any reference to Nephila, it is assumed at this time that business remains unchanged for the ILS specialist.

So we assume, at this time, that what this move by Markel means, is that any reinsurance premiums written under its infrastructure will now only flow to the third-party capital backing Nephila’s ILS funds, rather than being retained by Markel.

Which exits Markel from writing and retaining reinsurance on any of its balance-sheets, while still enabling it to benefit from its insurance-linked securities (ILS) business unit Nephila being one of the biggest writers of property cat risks in the world and using its program fronting infrastructure to facilitate that.

“Nationwide and Ryan Re have the scale, market presence, and expertise necessary to leverage these renewal rights to build an even stronger foundation for long-term success,” explained Wilson. “We are confident that they will deliver for our reinsurance customers and trading partners.”

The renewal rights deal gives Nationwide a route to grow its access to reinsurance-linked returns, helping to diversify its large business, while for Ryan Re it grows its stature as an MGU in the reinsurance marketplace.

It currently includes $1.2 billion in premiums, Nationwide said.

“By working with two respected names in the industry, this strategic acquisition reinforces Nationwide’s position as a diversified risk partner and creates an opportunity for us to expand our reinsurance footprint,” explained Nationwide CEO Kirt Walker. “Nationwide’s collaboration with Ryan Specialty, and Ryan Re in particular, has positioned us to increase our presence in the specialty reinsurance market. This strategic move accelerates this progress, and we’re excited about the diverse portfolio it unlocks.”

“We are confident in our ability to meet the protection needs of Markel’s clients and deliver long-term value to broker partners,” added Mark Berven, President of Property & Casualty at Nationwide. “Our partnership brings the scale, reach and specialized capabilities to offer these clients a broad suite of products, including specialty lines that enhance their options in meaningful ways.”

Nationwide also said the deal will allow it to strategically expand its team with reinsurance underwriting talent.

So Markel continues to evolve, while Nephila Capital has continued to expand its business, meaningfully so in the first-half of 2025 in catastrophe premium terms.

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