Hiscox Limited raises capital to take advantage of improving insurance rating environment..

On 5th May 2020, Hiscox Ltd confirmed their intention to issue new shares to capitalise on “opportunities for profitable growth in wholesale and reinsurance markets as a result of capital contraction and rate improvement across the market following the uncertainty caused by the Covid-19 pandemic”.

The prospectus published to accompany the confirmation of the capital raise gives a very useful view of current London market conditions including:

  • Rate increases in Q1 2020 of +12%
  • Rates up in 15 of 16 classes of business
  • Rate increases of more than 10% in over 70% of the book underwritten by Hiscox including
    • D&O +85%
    • General Liability +26%
    • Cargo +23%
    • Major property +16%
    • Household and commercial +11%

Hiscox is also reporting continued positive rate movement in its reinsurance and ILS markets.

All of these positive indicators tally with the various conversations that we are continuing to conduct with managing agents during the Covid-19 lockdown.

Hiscox’s market capitalisation is approximately £2bn and the share issuance is designed to bring in up to £400m to the business.  The insurer has been in the new recently with some policyholders claiming that their SME policies should pay out as a result of the Covid-19 lockdown.  Hiscox disputes that their policies are liable, but have indicated that their modelled outcomes for the disputes are losses of between £10m-£250m.  These disputes relate to the retail division of Hiscox and not their London Market operations of syndicates 33 or 6104.  The share raise, if successful, will bolster Hiscox’s capital position and is designed to help them capture the opportunities presented in the current, disrupted markets in which they operate.

Those wishing to review the published literature in more detail can find it on https://www.hiscoxgroup.com/investors/results-and-presentations.