Nephila delays launch of new specialty Lloyd’s syndicate 2358

Nephila Capital, the largest dedicated manager of insurance-linked securities (ILS) and reinsurance linked investment funds, told us it is delaying the launch of its specialty lined focused Lloyd’s syndicate 2358.

Sources had told us the launch was set to slip as Nephila Capital lined up all of the necessary capital and initial deployment opportunities into Lloyd’s underwriting business.

Nephila announced its intention to launch Syndicate 2358 at Lloyd’s through its dedicated Lloyd’s managing agency Nephila Syndicate Management Ltd (NSM) last year.

The strategy is to underwrite a diversified portfolio of specialty insurance and reinsurance risks from the Lloyd’s marketplace, for its ILS investor backers, bringing efficient, capital market sourced underwriting capacity more broadly into Lloyd’s than Nephila had already been doing through its largely weather and catastrophe focused syndicate 2357.

We understand that the target had been to launch in time for the January 1st renewals this year, but that the date was put back as Nephila Capital wasn’t immediately ready to write business at that stage.

Now, the company has confirmed this to us and explained that timing was the driver of this delay.

The company explained, “Nephila Syndicate Management has decided to postpone the launch of Syndicate 2358, our new syndicate which will provide institutional investors efficient access to specialty insurance and reinsurance . Notwithstanding an agreed 2021 plan with Lloyd’s and a significant level of market support, our potential investors’ timings have not yet aligned with our target launch dates.

“Nephila remain in active discussions with existing and new investors regarding investment in the specialty insurance market through our alternative syndicate model. We are happy to be patient as we seek to create this potential long-term source of alternative capital for the market, as well as an uncorrelated return stream for investors.”

Launching a Lloyd’s syndicate backed by ILS investors and targeting specialty classes of insurance and reinsurance was always going to take time.

In particular, educating investors on new classes of business takes time. But given the way financial markets are today, so too is finding the right time for large investors to make commitments to new investments as well.

We suspect both of these factors play into this delay from Nephila.

Increasingly, investors are seeking diversification within insurance-linked securities (ILS), but getting comfortable with what that means takes time and effort from managers.

While it might take a little longer than initially planned though, we also suspect Nephila will get the underwriting doors open for its new specialty lines focused Syndicate 2358 before too much longer.