Hiscox has spent $15m (£11.5m) preparing for business after Brexit, the specialist insurer disclosed in its third quarter trading statement.
The statement – which reported a 14% rise in gross written premiums in the first nine months of 2018 – said the Lloyd’s underwriter is moving European business to the new Lloyd’s subsidiary in Brussels via Part VII transfer. It has set up a new European subsidiary, Hiscox S.A., which is expected to start writing business from 1 January 2019.
Hiscox said: “Our plans have always assumed a worst-case scenario ‘hard Brexit’ and we are prepared, irrespective of the outcome of the government’s negotiations.
“The financial impact of re-organising the business in preparation for Brexit is $15m across the group in 2018, and we will inject incremental capital of approximately €40m (£30.7m) in the new entity.
“However, as we have said before, Brexit is just one of a number of regulatory projects which will have an on-going impact on expenses.”
Elsewhere Hiscox noted that it had seen rates rise by 5% in the last year across its London Market portfolio, attributing some of the more recent increases to Lloyd’s ‘decile 10’ initiative.
The decile 10 initiative mandates that insurers must report to Lloyd’s their worst-performing 10% of business, and then either remediate or remove those parts of their portfolio.
One class of business that has been particularly impacted by the initiative is cargo lines, in which Hiscox report a 20% rate increase since August.
“We are also beginning to see the benefits of the tough decisions we have taken over the last two years to reduce or exit areas such as extended warranty, aviation hull and aviation liability,” the trading statement said.
“The Lloyd’s ‘decile 10’ directive has challenged the whole market to take similarly tough action in unprofitable lines and it is already having an effect. We are seeing positive movement in rates and signs of a re-balance of influence with brokers.”
Bronek Masojada Hiscox CEO, said: “We have had strong growth, but as the market remains challenging, we will remain disciplined, and I expect our growth to moderate over the balance of the year.
“It has been an active third quarter for claims across the Group, both from large losses and catastrophes, and I am pleased with how we have responded.”
The group has set aside $125 million to cover claims resulting from Hurricanes Florence and Michael in the US and Typhoons Jebi and Trammi in Japan.
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