International specialist insurer Hiscox Ltd. has announced plans for a capital raise in order to “position the Group to respond to future growth opportunities and rate improvement in the US wholesale and reinsurance markets” and to weather any uncertainties brought about by the global coronavirus pandemic.
In a first quarter trading statement, the Lloyd’s insurer announced an equity placing for up to 19.99% of its issued share capital. Group CEO Bronek Masojada issued a positive statement, describing the capital raise as a strategy to provide the company with more “flexibility” in these uncertain times. He stressed: “We have managed our investment prudently and our capital position is robust,” also pointing towards strong premium growth in Hiscox Retail and the Hiscox London Market.
Hiscox Group’s gross written premiums grew by 2% to US$1.18 billion in the three months ending March 31, up from US$1.16 billion in the same period of 2019. This growth was driven by strong results in Hiscox Retail – hitting US$635.1 million in Q1, up from US$593 million the year prior – particularly in the US and Europe.
Of the Hiscox Retail units, Hiscox USA’s gross written premiums grew 7% from US$212.6 million in Q1 of 2019 to US227 million in the first quarter of this year. Meanwhile, Hiscox UK achieved 3% growth, up from £137.3 million (US$178.9 million) to £140.8 million (US$181.7 million), and Hiscox Europe reported 15% growth from €136.6 million (US$154.9 million) to €156.4 million (US$154.9 million).
Hiscox London Market continued to benefit from rate momentum in the quarter. Continuing a trend for the third consecutive year, rates in Q1 went up for 15 of 16 lines, including US public company D&O, which saw an 85% increase, US general liability up 26%, cargo up 23%, and major property up 16%. The firm announced it expects the market to “continue to harden, driven by further capital contraction due to the uncertainty from COVID-19”.
Touching on the pandemic, Masojada commented: “The business responded rapidly to the changing circumstances caused by the global coronavirus pandemic, and almost all of our employees around the world are working from home. We have redeployed staff to frontline roles where possible.
“We are paying claims for event cancellation and abandonment, media and entertainment and travel, which are covered by our policies, and in the UK we welcome the positive steps by the FCA to resolve disputes in the industry over the application of property policies relating to business interruption.”
The firm stated some concern over its US retail business’ negligible exposure to business interruption. Hiscox USA provides business interruption cover for 25,000 small business as part of its Business Owners’ Package product. The coverage requires physical damage to trigger and uses a standard ISO form with an explicit virus exclusion. Regardless, there have already been several lawsuits against insurers in the US for denying business interruption claims linked to the pandemic.
Despite the significant economic challenges posed by the coronavirus pandemic, Hiscox claims to have “sufficient capital to meet liabilities arising as a result of expected exposures to the COVID-19 pandemic”. In the Q1 trading statement, the insurer reported: “Since the end of the first quarter, we have executed management actions to further strengthen the Group’s capital buffers.
“We expect uncertainty arising from the pandemic and consequent capital contraction to result in rates hardening across US wholesale and reinsurance markets. In order to provide Hiscox with the flexibility to respond to growth opportunities and rate improvement in the US wholesale and reinsurance markets, we have separately announced today our intention to conduct a non-pre-emptive placing of new ordinary share of the Company of up to 19.99% of the issued share capital.”
