Hiscox reinstated retro and bought additional cover after LA wildfires

The start of 2025 saw several wildfires impact the Greater Los Angeles area, causing loss of life and widespread destruction, with insurance industry losses currently coalescing around the $40 billion mark, leading Hiscox to tap its retrocession coverage.

Specialist insurer Hiscox recently reported that its own losses from the wildfires, projected at $170 million, remain within modelled expectations.

Joanne Musselle, Hiscox Chief Underwriting Officer, during last week’s full year 2024 earnings call, said: “Whilst not in our numbers, California had a devastating start to 2025 with the Los Angeles wildfires, and our thoughts are with all of those who are affected by this event.

“Our number one priority is to support our customers and cedents, and we’ve already paid over 70% of losses presented to us. We understand our loss and our exposure through both a top-down market share analysis, and also a bottom-up analysis working with our customers and cedents. And we’ve estimated our loss for this event to be $170 million, and that’s based on a $40 billion industry loss, the vast majority, $150 million in our reinsurance segment.”

Hiscox attributes its accurate loss prediction to its early adoption of the Version 12 model change at the end of 2024, which significantly increased its projected wildfire risk.

Following the event, Musselle stated, the re/insurer reinstated its retrocession programme and secured additional protection. The cost of the reinstatement is included in the firm’s $170 million wildfire loss.

“In terms of reinsurance, our London Market programme remains intact and we reinstated our retro program and we’ve bought some additional protection on both a second loss basis. We also placed a $200 million catastrophe bond out of our retro 1.1 savings,” Musselle commented.

According to the executive, the cat bond is unrelated to the California wildfires, it just coincided that its completion occurred after the event.

Despite the magnitude of the wildfires, Hiscox remains confident in its ability to execute its 2025 plans, emphasising that its capital remains strong and its appetite for business is unchanged.

“Regarding the future of this event on the market, clearly our own customers will need reinstatements, potentially backups. And we’ll see as we progress through the mid-years, the effect in terms of the market and rates,” said Musselle.

Concluding: “In summary, whilst an extreme tail event, this is modelled and within contemplation and our ability to execute our own plans for 2025 and our appetite is unchanged.”

Hiscox recently announced its financial results for 2024, reporting a profit of $267.5 million for Hiscox Re & ILS with an improved undiscounted combined ratio of 69%.

Hiscox Re & ILS also saw its insurance contract written premiums (ICWP) in 2024 grow to $1.03 billion, up from $986.3 million in 2023, while net ICWP rose to $499.3 million, driven by additional capital deployment amid attractive market conditions.

Meanwhile, the segment’s insurance service result of $165.7 million and an undiscounted combined ratio of 69.0% reflect “another year of excellent performance.”

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