Fund management revenues earned through the activities of its insurance-linked securities (ILS) investment management business Nephila Capital rose 33% for owner Markel in the first-quarter of 2025, with the company reporting they reached the highest level in at least three years for the period, at $25.5 million.
A year ago, Q1 2024 saw fund management revenues attributed to unconsolidated entities managed by Nephila Capital reach $19.2 million, which was double the level earned in the year prior to that.
For Q1 2025, the equivalent figure is $25.5 million, a further significant increase, which Markel puts down to the continued expansion of the premium base underwritten through Nephila Capital and ceded to its third-party ILS investors.
In Q1 2025, gross premiums written through Markel’s program services and ILS operations that were ceded to reinsurance structures operated by Nephila and backed with third-party investor capital reached $389.3 million, up from $353.1 million in the prior year.
Given the interconnection between the program services business and Nephila’s ILS operation, Markel earned fronting fees of $4.2 million from this, slightly down on $4.5 million earned in Q1 2024.
With the continued expansion of the premiums that flow to third-party capital through Nephila’s ILS infrastructure, Markel reported that the reinsurance recoverables on its balance sheets related to this activity reached $1.1 billion at the end of Q1 2025, up from $968.9 million at the end of 2024.
Hedging the Nephila Capital ILS portfolios continues, with Markel reporting that in Q1 2025 $13.7 million of gross written premiums were ceded to third-party reinsurers to obtain reinsurance protection for a portion of the Nephila vehicles exposures.
Markel has cited growth of Nephila’s property catastrophe and specialty programs as the key drivers of higher premiums within the ILS operation during the first-quarter of 2025.
Fronted premium volume for the ILS business reached over $378 million for the Q1 period, up from last year’s almost $309 million.
That has helped to drive a higher effective management fee rate for the three months, which in turn has resulted in higher insurance-linked securities (ILS) segment revenues for Markel.
Operating revenues for the ILS business at Markel reached $28.64 million in Q1 2025, up from $21.7 million in the prior year, while operating income reached almost $3.8 million, which was much better than the prior years Q1 ILS operating loss of -$4.19 million.
No disclosure of assets under management (AUM) at Nephila has been made this quarter by Markel.
Finally, it’s safe to assume certain of Nephila Capital’s ILS strategies will have felt the effects of the California wildfires in January, however Markel reported a “lower than initially anticipated impact from the California wildfires.”
Markel said it experienced an $80.6 million of underwriting losses, or four points on the consolidated combined ratio, attributed to the January wildfires in southern California.
However, it’s worth noting that Markel also reported that gross incurred losses and loss adjustment expenses in its program services and insurance-linked securities fronting operations reached $957.5 million for Q1 2025, up meaningfully from $603.7 million in Q1 2024. All of these losses were ceded, with some no doubt finding their way to certain investors backing Nephila Capital ILS structures.
View information on dedicated ILS fund managers, as well as reinsurers offering ILS style investment opportunities, in our Insurance-Linked Securities Investment Managers & Funds Directory.
