Nephila ILS fund revenues jump 23% in Q2

Nephila Capital’s insurance-linked securities fund management revenues climbed 23% in the second quarter of 2026, lifting first-half gains to 30%, Markel reported. The gains stem from the firm’s expanding market share and property catastrophe rates that remain favorable, though a shifting reinsurance market is beginning to reduce premium volumes.

Quarterly revenues reached $37.7 million, up from $29.1 million a year earlier. The first half total hit $78.1 million, a 30% increase over the $54.6 million recorded in the same period of 2025.

Premiums decline as rates soften

The revenue growth occurred despite a drop in premiums ceded to Nephila’s reinsurance programs. Markel noted $769.4 million in premiums ceded during the quarter, down from $1.3 billion in 2025. The first-half total fell to $1 billion from $1.7 billion.

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Markel explained the decline resulted from “lower premiums on our property catastrophe programs with Nephila driven by rate decreases.” The pattern matches wider industry changes as reinsurance pricing eases after years of higher rates following large catastrophe losses.

Nephila has managed to write more business without a matching rise in managed capital, supporting its revenue growth. Third-party investor assets under management stood at $7.7 billion at the start of 2026. That size allows the firm to earn higher fees even as premium volumes change.

Nephila’s results have become a steady earnings contributor for Markel, which stopped writing property catastrophe risks years ago. The parent company reported 3% organic revenue growth in the quarter, with higher ILS management fees balancing declines elsewhere in its operations. Those fees now provide a more stable income stream, less exposed to underwriting swings than before.

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Investors in Nephila’s funds may still find the current environment appealing. Catastrophe losses have stayed relatively low in 2026, and the firm’s ability to produce consistent fee income—even amid market shifts—shows durability. However, the effects of softer reinsurance rates on premium volumes will require attention as the year unfolds.

The firm’s approach has relied on efficiency, using Markel’s infrastructure to write more business per dollar of managed capital. That strategy has delivered rising revenues, but the latest figures reveal its constraints when market conditions shift. Whether Nephila can maintain fee income growth as premium volumes decline remains an open issue.