Hiscox’s London market arm targets ‘underwriting discipline’ to ‘grow profitably’ amid ‘microcycles’

Hiscox plans to “exercise underwriting discipline” across its London market division in the second half of 2024 in order to “grow profitably” amid “microcycle” fluctuations that detrimentally impacted its financial figures for H1, according to Jo Musselle, the insurer’s chief underwriting officer.

In its 2024 half-year financial results, published on 7 August 2024, Hiscox reported a year-on-year drop in its London market insurance contract written premium (ICWP) from $667.1m (£509m) to $648.3m (£495m).

Similarly, its net insurance contract written premium for this part of the business declined from $453.8m (£346m) to $439.1m (£335m) between H1 2023 and H1 2024, while profit before tax decreased from $114.1m (£87m) to $108.1m (£83m) over the same reporting period.

The London market combined ratio also worsened year-on-year, sitting at 81.5% for 2024’s first half compared to 79.2% for the same time last year.

Despite describing the London market landscape overall as “a favourable market”, Musselle acknowledged that there are turbulent “microcycles” within it that have affected the insurer’s growth across certain lines of business.

Speaking exclusively to Insurance Times, she explained: “There are some markets that are attractive and we want to grow – and indeed we are growing. We’re growing things like our property line. We’re also growing things like terror, kidnap and ransom and marine and energy.

“But there are some lines that are in a softening market and so rates are coming off. Our strategy in our London market business is to exercise underwriting discipline because we want to grow, but we want to grow profitably. When we’re in a softening market, obviously our job is to exercise discipline.

“Some lines are actually shrinking. A good example would be our directors’ and officers’ (D&O) line, [which has] slightly shrunk these first six months. Then our product recall [product].”

Hiscox’s financial report attributed its H1 ICWP decrease in its London market arm to three main factors.

These include “the decision to non-renew certain large binder deals, our proactive management of the underwriting cycle in casualty lines and a reduction in space premiums, as there were fewer risks in the market and we took a decision to reduce line size due to heightened recent loss activity”.

Backing Musselle’s comments, the report continued: “Cycle management activities in cyber and D&O are ongoing as rates decreased by 9% and 8% respectively. ICWP reduced at a double digit rate in both of these lines.”

Lack of ‘metronomic’ growth

Expanding on her description of “microcycles”, Musselle added that in the London market, “things don’t come on in a linear way”. This trend has impacted Hiscox’s bottom line in the first half of 2024.

She said: “If I look at something like power renewables, which we think is a really great opportunity and we want to enable that transition to clean energy, these things don’t come on metronomically through the year.

“We grew 35% in that division last year. These [past] six months, it’s flat.

“It’s not because we don’t see that market as attractive – we do. And it’s not because there’s not new construction projects coming to market, because there are.

“It’s just because they don’t come on in a metronomic way that maybe some of our other business does.”

Hiscox’s report added: “We continue to see attractive structural growth opportunities in power and renewables and aim to lead more in this space.

“We continue to proactively pursue new business in our environmental, social and governance sub-syndicate, Syndicate 3033, and have included liability, D&O, carbon offset and product recall risks for the first time.”

Second half hopes

Hiscox’s half-year report further noted that it predicts “moderate growth” in its London market division for H2 of 2024 as it writes “more business to replace non-renewed binders”.

Musselle agreed: “When I look at the London market business, what we’ve said is yes, it’s come off a little bit in the first half.

“We expect it to grow in the second, but we will of course continue to manage those microcycles and it is all about growing – but growing profitably.”

• Insurance Times has converted dollar amounts into pound sterling using an exchange rate of $1.31 = £1, as of September 2024.