Nephila Capital, the specialist reinsurance and insurance-linked securities (ILS) manager owned by Markel, has continued to grow its stature in the reinsurance market in the last quarter, with catastrophe premiums written growing and as a result the ILS manager has delivered increased fund management revenues to its parent as well.Nephila Capital has been steadily growing its premium base in recent years, writing more catastrophe risk for the strategies its investors allocate to even while not having to grow assets under management significantly.Being able to do more with less is one of the features of the maturation and institutionalisation of the ILS asset class over the last few years, as specialist ILS managers have identified efficient ways to create infrastructure that allows them to grow their stature in the catastrophe reinsurance marketplace, something we’ve very clearly seen with Nephila Capital.As Nephila integrated into Markel since its acquisition by the parent, it has developed sophisticated ways to utilise and work with a wide-range of insurance entities to access risk.

In particular, the way catastrophe premiums are fronted and channelled through the Markel program infrastructure, such as State National, and back to Nephila’s reinsurance entities, then onwards to Nephila’s ILS funds drives greater efficiency in every dollar of risk sourced.As well as which, the way Nephila has utilised the Lloyd’s market infrastructure has always driven benefits, in terms of helping deployable investor capital work harder for the ILS manager’s clients.Leverage generated through the way Nephila Capital sources property catastrophe reinsurance premiums, for the benefit of its third-party investors, is also meaningful.

Giving the ability to write more risk without needing to significantly grow overall assets.For the third-quarter of 2025, the expansion continues to be evident, as Markel reported that Nephila Capital generated fund management revenues of $30.3 million for the quarter, up on $25.1 million in the prior year.For the first nine months of 2025, total fund management revenues attributed to unconsolidated entities managed by Nephila reached $85 million, again up on the prior year period’s $66.2 million.

Which given the occurrence of the wildfires in California earlier this year is impressive growth, as that event will no doubt have resulted in some impacts to the Nephila strategies.But, it’s also reflective of a growing pool of catastrophe risk premiums to earn revenues against, as well as a relatively quiet major catastrophe loss year (wildfires aside).Nowhere is the effect of this clearer than in the significant catastrophe premiums fronted to Nephila’s reinsurance entities through Markel paper.

Nephila Capital uses certain Markel entities to source a portion of its portfolio of U.S.catastrophe-exposed property and specialty risks and in the third-quarter of 2025 this amounted to almost $163 million of premiums, up from the prior year’s $94.3 million.For the year to September 30th 2025, the volume of catastrophe premiums written through these programs and channeled to Nephila’s reinsurance structures reached a significant $1.8 billion, up meaningfully from the $1.2 billion for the first nine months of 2024.

That’s premiums, not limit, so a $600 million increase year-on-year is a really significant amount of additional risk premia sourced and underwritten for Nephila Capital’s ILS fund strategies and the investors supporting them.It’s worth also noting that Markel entities earn fronting fees for this work as well, which constitutes another revenue source for the parent.Growth in the Nephila programs has been the key source of fronting fee revenue growth for Markel again, it appears.

Markel also fronts ceded reinsurance contracts, in the form of industry-loss warranties (ILW’s), to help Nephila Capital hedge its portfolios efficiently.In the third-quarter $7 million in premiums were written under this hedging program, with $81.5 million for the nine months, down on the nine months of 2024’s $168 million and suggesting Nephila hedged less in 2025.Another data point from Markel’s results that typically shows an increase and the strength of the Nephila Capital business, is the reported reinsurance recoverables on its balance sheets due from Nephila’s reinsurance entities.

But this has actually fallen in the third-quarter, as Markel commuted a portfolio of ceded reinsurance contracts with some of Nephila’s reinsurers, which shows the ILS manager and its parent continuing to work together to make capital more efficient and unlock value for Nephila’s investor base.In the third-quarter of 2025, Markel commuted a portfolio of ceded reinsurance contracts with Nephila reinsurers covering property catastrophe and brokerage property exposures for policy years 2023 and prior.The subject commutted contracts featured gross and ceded reserves for losses and loss adjustment expenses amounting to $312.2 million and resulted in cash payments of $292.6 million as well, Markel explained.

As a result, Markel’s reported reinsurance recoverables on its balance sheets due from Nephila’s reinsurance entities fell to $604.3 million, down from $968.9 million at the end of 2024.This is again a way that Nephila Capital utilises the Markel infrastructure to make its ILS capital more efficient for its investors.Commutations are a pro-active way to settle legacy exposures from the catastrophe reinsurance programs of prior years, which allows value and capital to be unlocked.

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