6 February 2014

Hiscox broker facility negotiations a sign of strength

Hiscox has outperformed its Lloyd’s peers in terms of underwriting strength and willingness to return capital to shareholders, while its ongoing negotiations with Willis 360 regarding its broker facility suggest a position of strength.

That is the view from a recent report published by business intelligence firm, SNL, which tips Hiscox for success thanks to a 2013 half-year combined ratio of 74.7 percent and a diverse book that has seen growth in its specialty, primary and even its reinsurance business in recent months.

SNL warns that headwinds do persist, particularly due to the boom in capacity driven by convergence capital and excess industry capital, but says that Hiscox is in an enviable position.

SNL finds that Hiscox responded to the threat posed by broker facilities by publicly announcing its intention to team up with Willis 360. The company has since entered into negotiations with the broker over terms, which suggests that the strength of its franchise is enabling it to dictate provisions of a potential allocation.

The report foud that it is unclear yet whether Hiscox will in fact allocate capacity to Willis 360, but analysts believe that any deal struck would be of significant benefit to Hiscox. Those companies not signed up to broker facilities have been obliged to reduce their rates in order to retain business.

Meanwhile Hiscox’s reorganisation of its reinsurance division and a strategic partnership with Third Point Re has been commended by analysts as positive steps in coping with changing industry dynamics.