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Hiscox Ltd
Report and Accounts 2021
People matter
Employees from across the business
talk about the key developments in
their areas during 2021, and what
the ‘human’ value means to them.
Opportunity knocks
Aki Hussain, our new Group Chief
Executive Officer, sees opportunities
everywhere for Hiscox. He discusses his
vision for the future, how he measures
success, and Hiscox’s growth ambitions.
At your service
Hear from the frontline about how we
focus on having conversations, not just
transactions, with customers.
Q&
A:
with Chloe Garbutt
Insurance Expert, Hiscox UK
At your service
Excellent customer
service is central to
the Hiscox proposition,
and it all begins with
the people on the front
line taking the calls.
Opportunity knocks
Q&A with Aki Hussain
Group Chief Executive Officer
2
An Englishman in New York
Q&A with Kevin Kerridge
Chief Executive Officer,
Hiscox USA
14
Euro vision
Q&A with Robert Dietrich
Chief Executive Officer,
Hiscox Europe
34
Re birth
Q&A with Kathleen Reardon
Chief Executive Officer,
Hiscox Re & ILS
60
Rising tide
Q&A with Dan Alpay
Line Underwriter – Flood,
Hiscox London Market
92
Recruitment driver
Q&A with Vanessa Newbury
HR Director and Head of Recruitment
126
Model citizen
Q&A with Robert Caton
Director of Underwriting Risk
and Reinsurance
132
people across Hiscox – I have
colleagues who started in a
role like mine and have gone
on to do a whole host of
other roles within Hiscox,
including in underwriting,
project management and
corporate governance.
Q: In October, you shaved
your head. What was the
motivation for that?
A: Both my grandparents
have had strokes – my
Grandad had three in three
years, and my Nanna had
two last year – so I wanted to
do something to raise money
for the Stroke Association.
My hair was really long, so
I shaved my head to raise
money, and donated the hair
to the Little Princess Trust,
which provides wigs for
young people who’ve
had cancer treatment. It’s
something that definitely
pushed me outside of my
comfort zone but I’m so glad I
did it. One of Hiscox’s values
is ‘human’ and this is one way
that I think I personally lived
the value in 2021.
Chloe Garbutt, whose
photo features on the
cover, works in the Hiscox
Customer Experience
Centre in York in a sales and
service role as part of our
UK home insurance team.
Q: How did you come to
work at Hiscox?
A: I applied when I was 18,
straight out of college. At
the time, I was working as a
kickboxing instructor, so this
was a bit of a change of scene!
I’ve grown so much though, as
a result of my work at Hiscox.
Every day you’ll get asked a
question that you’ve never had
to answer before. Insurance
can be complicated, so it’s
understandable that people
would have questions. It
keeps you on your toes, it
makes you better at your job,
and it means you’re always
learning. But you’re not thrown
in at the deep end – there’s
lots of support and a real focus
on learning and development.
For example, we get at least
an hour’s coaching every
week to help us develop our
confidence and knowledge.
Q: How would you describe
your team’s approach
to service?
A: Everything we do revolves
around our customers. We
want them to feel valued. We
want to give them the best
service possible. We sell
our products on our service
and the competitive cover
we offer, and we want to be
different to the type of slightly
automated, highly scripted
customer service that we’ve all
experienced – it’s frustrating,
and it’s just not Hiscox. We’re
not robots and we’ve always
prided ourselves on not
using scripts. It’s one of the
things that struck me during
the recruitment process in
fact – that there was such a
focus on hiring for attitude and
customer focus. We want to
have natural conversations
with our customers and I hope
that comes across in every
interaction a customer has
with us.
Q. What do you enjoy most
about your role?
A. I would consider myself a
‘people’ person so for me it
is the people – and not just
my colleagues, but also the
interactions I get to have
with customers. So many
of the customers we talk to
in the home insurance team
are happy because they’re
buying a new house, or they’re
excited to start some home
renovations, or they’ve just
got engaged, and so their
insurance requirements have
changed. It’s really lovely to
be part of those stories and
I hadn’t appreciated how
rewarding it would feel to be
a small part of someone’s
big life event before I worked
in insurance.
Q: What do you see yourself
doing in the future?
A: I have absolutely no idea.
The good thing is that there
are a lot of opportunities for
4
4
6
8
Chapter 1
Performance and purpose
Our key performance
indicators (KPIs)
Our purpose, values,
culture and vision
Our strategy and
how we operate
Key risks and business priorities
10
12 Why invest in Hiscox?
Chapter 2
16 A closer look
16 Chairman’s statement
20 Chief Executive’s report
36 Capital
38 Risk management
42
44
Stakeholder engagement
Environmental, social and
governance (ESG)
Task Force on Climate-related
Financial Disclosures (TCFD)
54
Chapter 3
62 Governance
62 Board of Directors
65 Board statistics
66
Group Executive
Committee (GEC)
Chairman’s letter
to shareholders
69 Corporate governance
76
68
Compliance with the UK
Corporate Governance
Code 2018
Nominations and Governance
Committee report
89 Audit Committee report
82
Chapter 4
94 Remuneration
94
Annual statement from the Chair
of the Remuneration Committee
Remuneration summary
98
100 Annual report on
remuneration 2021
108 Implementation of remuneration
policy for 2022
110 Other remuneration matters
114 Remuneration policy
Chapter 5
128 Shareholder information
128 Directors’ report
131 Directors’ responsibilities
statement
131 Advisors
Chapter 6
134 Financial summary
134 Independent auditor’s report
142 Consolidated income statement
142 Consolidated statement of
comprehensive income
143 Consolidated balance sheet
144 Consolidated statement of
changes in equity
145 Consolidated statement of
cash flows
146 Notes to the consolidated
financial statements
207 Additional performance
measures (APMs)
208 Five-year summary
Hiscox is a diversified international insurance group
with a powerful brand, strong balance sheet and plenty
of room to grow.
We are headquartered in Bermuda, listed on the London
Stock Exchange, and currently have over 3,000 staff
across 14 countries and 35 offices.
Our products and services reach every continent, and
we are one of the only insurers to offer everything from
small business and home insurance to reinsurance and
insurance-linked securities.
As a Bermuda-incorporated
company, Hiscox is not subject to the
UK Companies Act. As a company
listed on the London Stock Exchange,
we comply with the requirements set
out in the UK Corporate Governance
Code 2018 and the Listing Rules and
Disclosure & Transparency Rules
of the UK Listing Authority. Our
remuneration report is consistent
with UK regulations. Any additional
disclosures over and above these
requirements, have been made for
the benefit of shareholders, on a
voluntary basis.
Chapter 1
Chapter 1
Performance
Performance
and purpose
and purpose
4
4
Chapter 2
Chapter 2
A closer look
A closer look
16
16
Chapter 3
Chapter 3
Governance
Governance
62
62
Chapter 4
Chapter 4
Remuneration
Remuneration
94
94
Chapter 5
Chapter 5
Shareholder
Shareholder
information
information
128
128
Chapter 6
Chapter 6
Financial
Financial
summary
summary
134
134
At Hiscox people matter
Having a human approach to our work is really important to us.
At Hiscox, we care immensely about the job, each other, our
customers, partners and the brand.
It’s why we always aim to understand the person behind the
policy or claim, the job description or task. This means we try
to be clear, fair, and inclusive, and to treat everyone around us
with the respect they deserve.
Living our human value isn’t just about grand gestures, it’s also
about the ‘tiny noticeable things’ that can make a huge difference
to a customer or a colleague during the good times and the bad.
In the pages that follow, you will hear from people across our
business on what being ‘human’ means to them.
Hiscox Ltd Report and Accounts 2021
1
Q&
A:
with Aki Hussain
Group Chief Executive Officer
Opportunity knocks
The Group’s new Chief
Executive Officer sees
his main role as ‘clearing
the path’ for others to
do their jobs to the very
best of their ability.
Aki Hussain is the new
Group Chief Executive
Officer of Hiscox, having
stepped up to the role in
January 2022. He joined the
business in 2016 as Group
Chief Financial Officer.
Q: When you joined as Group
Chief Financial Officer back
in 2016, what was it that
drew you to Hiscox?
A: I loved the culture and the
ethos – and, quite frankly, the
scale of the opportunity. The
thought of being able to work
in a more entrepreneurial
environment, an organisation
that is much closer to the start
of its journey, was and still is
incredibly exciting to me.
Q: What do you think is the
most important quality for a
leader to have?
A: You have to be able to
recognise that you’re there
to serve the organisation. It’s
not about you. The way I see
it, one of my major roles is
what I call ‘clearing the path’.
We have a clear strategy
and great people who are
trying to do the best they
can every single day, and a
massive part of my job is to
clear the path to allow that to
happen. Business is never
straightforward, environments
change, so continuously
clearing the path so that
people can give their best
is absolutely key.
Q: This is the first time
you’ve fronted a whole
business. How are you
finding the step up?
A: I’ve had lots of experience
of running large, complex
operations and I’ve always
taken ownership of everything
I’ve done, but being the Group
Chief Executive Officer is
totally different. Taking on that
responsibility, realising that
the buck really does stop here,
that the problem is not going
to go anywhere else – that’s
something I’m getting used to,
and I’m enjoying it immensely.
Q: Is growth still the
most important measure
of success?
A: It’s one of many, but a very
important one. But growth
is not an end in itself; it’s just
an indicator that we’re doing
things right. Partly, it’s a
2
Hiscox Ltd Report and Accounts 2021
barometer of the choices we
make: through good decisions
made over a long period of
time, we’re now exposed to
markets in the USA, the UK
and continental Europe that
are growing quite quickly, and
that really helps. Then you’ve
got to ask: why do we do what
we do? Our expertise helps
individuals and businesses
realise their own strategies and
ambitions while minimising the
chances of ruin. If we do that,
if we serve our customers to
the best of our ability, growth
is going to come.
Another key mark of success
for me is having people who
are happy and proud to work
at Hiscox. If we have those
three things – happy people,
satisfied customers, and the
ability to innovate in a rapidly
changing environment – I’ll be
pretty satisfied.
Q: What do you think are
Hiscox’s biggest strengths?
A: In our London Market and
reinsurance businesses, our
big advantage is that we have
deep underwriting expertise,
built over many, many years.
In our retail business, that
underwriting pedigree is
complemented by the brand
we’ve built and the investment
we’ve put into technology.
Companies like Google and
Amazon have completely
transformed the way people
interact with the internet – click
just three or four times and
you’ve bought something. For
insurance, and certainly the
kind of specialist insurance we
provide, that’s quite unusual,
but through our investments
in technology, underwriting
and pricing, that’s what we’re
able to provide.
Q: As the retail business
grows, what kind of
relationship do you want
to have with customers?
A: I’m not naïve about this
– we’re never going to be
able to create the depth
of relationship that a
customer might have with
their favourite retailer. But nor
do we see buying insurance
as a one-time transactional
relationship. We want to create
an ecosystem that takes
into account the cycle of a
customer’s life or business.
Our ambition is to understand
and predict how their
insurance needs will change
over time and what sort of
help they might need through
that process. We’re not there
yet, but it’s something we’re
very focused on.
Q: What does sustainability
mean to Hiscox?
A: It means building for the
future, not just for the short
term. It means understanding
long-term risk, investing
in technology, investing in
people and building their
capabilities, understanding
that we have a role to play in
the communities in which we
operate, understanding our
customer base, and, given
the range of environmental
changes we’re seeing today,
thinking about the impact
of our work on the planet.
Ultimately, it’s about being
a responsible organisation,
understanding that we’re
not an island, and building a
business for the long term.
Q: How do you see the
human value being
applied at Hiscox?
A: I see it most tangibly
in the interactions, the
interdependency, the
teamwork. Here, the
awareness people have
of each other’s welfare is
palpable. I’ve seen it in other
organisations, but not turned
up to that level. Everybody here
is approachable. My door is
always open, and people from
all parts of the organisation can
come to me with questions
and ideas. My job is to clear
the path, but how do you clear
a path for people if they don’t
feel they can tell you truthfully
what’s going on? Ours is
an environment where a
graduate who has just joined
the business can put me on
the spot, ask difficult questions,
or highlight something that
I wouldn’t otherwise know.
I think that’s quite human.
I also think it’s quite normal.
Hiscox Ltd Report and Accounts 2021
3
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Our key performance indicators (KPIs)
Financial KPIs
Gross premiums written
$4,269.2m
Net premiums earned
$2,919.9m
Profit/(loss) before tax
$190.8m
2021
2020
2019
2018
2017
4,269.2
4,033.1
4,030.7
3,778.3
3,286.0
Combined ratio
93.2%
2021
2020
2019
2018
2017
93.2
114.5
106.8
94.4
98.8
2021
2020
2019
2018
2017
2,919.9
2,752.2
2,635.6
2,573.6
2,416.2
Basic earnings/(loss)
per share
55.3¢
2021
2020
2019
2018
2017
(268.5)
190.8
53.1
135.6
37.8
Ordinary dividend
34.5¢
2021
2020
2019
2018
2017
55.3
(91.6)
17.2
41.6
8.1
2021
2020
2019
2018
2017
34.5
0.0
13.8
41.9
39.8
Net asset value per share
739.8¢
Tangible net asset value
per share
648.6¢
Return on equity
8.1%
2021
2020
2019
2018
2017
739.8
689.0
768.2
798.6
817.1
2021
2020
2019
2018
2017
648.6
601.5
670.6
726.2
751.5
4
Hiscox Ltd Report and Accounts 2021
2021
2020
2019
2018
2017
8.1
(11.8)
2.2
5.3
1.0
Chapter 1
Performance
and purpose
Our key performance
indicators (KPIs)
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Non-financial KPIs
UK gender pay gap
19.1%
As a UK company with 250 or more employees,
we are required to disclose our gender pay gap
for UK employees, which we have done since
2017. Improving diversity and inclusion at Hiscox
is a high priority, and we continue to focus on
finding ways to reduce our gender pay gap.
London Market broker
satisfaction 71%
Each year, we survey our London Market broker
partners to understand more about their
experience of working with Hiscox throughout
the year. Their feedback is a reflection of our
products and service levels, so receiving
consistently good scores matters to us.
UK customer satisfaction
92%
In the UK, customers who speak to one of our
insurance experts in our customer experience
centre in York are asked to rate their experience
of Hiscox at the end of the call. Whether they
have phoned for advice, a quote, to purchase a
new policy or make changes to an existing one,
their feedback helps us to constantly improve
our service.
2021
2020
2019
2018
2017
19.1%
21.2%
26.1%
28.8%
31.1%
2021
2020
2019
2018
2017
71%
69%
78%
76%
66%
2021
2020
2019
2018
2017
92%
92%
89%
90%
90%
0.0
12.5
25.0
37.5
50.0
62.5
75.0
87.5
100.0
Employee engagement
64%
Our annual global employee engagement
survey looks at how connected we feel to
Hiscox, our managers, teams and roles.
The results are shared widely and heavily
influence our people strategy, and improving
our employee engagement scores is a
focus for 2022 as part of our work around
building connected teams with shared values
(see page 11).
Germany customer
satisfaction 95%
In Germany, we ask all customers that purchase
a policy to provide feedback on their experience
so that we can continue to improve our service.
This includes both quantitative analysis on
how they would score their experience with us,
and also qualitative insight on what they were
satisfied with, whether they would recommend
Hiscox, and any areas for improvement, so we
are pleased to have maintained consistently
high scores over time.
US customer reviews
using Feefo 4.8/5
In the USA, we ask customers to review their
experience of Hiscox post-purchase. We do this
using Feefo, which has a five-star rating system,
and are pleased to maintain such high scores
year after year even as the business grows.
2021
2020
2019
2018
2017
64%
68%
71%
74%
77%
2021
2020
2019
2018
2017
95%
90%
99%
99%
97%
2021
2020
2019
2018
2017
4.8
4.8
4.8
4.7
4.7
Hiscox Ltd Report and Accounts 2021
5
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Our purpose, values, culture and vision
Our culture
We work hard to nurture our culture, and
it is something we regularly measure
and monitor to ensure we keep it alive.
We have a number of culture standards
we wish to live by, such as diversity and
inclusion, diligence in risk management,
good leadership, integrity and respectful
behaviour. As Lloyd’s participants, these
also contribute to the wider market focus
on culture and talent.
We are also embedding new hybrid
working practices that balance the
ability to work remotely with the culture,
collaboration and energy of our offices.
This has required new technology and
tools to ensure a seamless remote
working experience, but it has also
meant a re-engineering of our existing
office space – with greater use of
hot-desking and the creation of
‘neighbourhoods’ that bring teams
and like-minded functions together.
Our vision
For Hiscox to be the leading specialist
insurer in material markets – not the
biggest, but the most respected.
We want to be known by customers for
being true to our word, by our employees
as a great place to work and grow for
those who are ambitious and talented,
and to be seen as an industry leader
in attitude, sales growth, profits and
value creation.
Our purpose
As experts in risk, we give people and
businesses the confidence to realise
their ambitions. To do this we need
differentiated products and services,
great talent and a winning spirit.
Success is measured in our reputation
and financial performance.
Our values
We have had a strong set of values
for decades and they are incredibly
important to us; we talk about them often
and they guide our decision-making.
We want our values to differentiate us,
which is why they are considered in our
strategy and how we operate (see pages
8 to 9). Our values play an important part
when it comes to being a business our
customers can relate to, and to providing
all employees with a work environment in
which they can flourish. We periodically
review our purpose, values, culture and
vision to ensure they are still true to the
business and fit for the future.
In our 2021 annual global employee
engagement survey, which was
completed by 85% of employees:
• 90% said they believe in our
corporate values;
• 83% said employees are treated
fairly, regardless of disability,
age or professional background;
• 73% said they felt proud to work
for Hiscox.
During 2021 we:
• attracted 644 new talented
permanent employees;
• promoted 368 existing employees;
• delivered over 43,500 hours of staff
training worldwide.
Our culture and values
are a really important
part of our employment
proposition. They are
distinctive, they attract
people to Hiscox, and
they are a big part of
why people stay with
us for so long.”
Amanda Brown
Chief Human Resources Officer
6
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
Our purpose, values,
culture and vision
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Our values
Hiscox Ltd Report and Accounts 2021
7
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Our strategy and how we operate
We have built a good reputation as
a specialist insurer in our chosen
segments through a long-held strategy
of balance between our big-ticket and
Retail businesses – where greater
volatility in our big-ticket businesses
has typically been offset by more stable
returns in Retail – and a long-term
investment in a differentiated brand
that customers value. This approach
has served us well, forming the
building blocks of our success, but
over time that balance has evolved
as the Retail businesses have grown
consistently while the big-ticket
businesses have been subject to a more
cyclical environment.
As the external environment evolves and
new opportunities emerge, how we think
about balance evolves too. In Hiscox
London Market and Hiscox Re & ILS,
we have begun building out more
balanced portfolios with an emphasis
on leading the business we write.
This means Hiscox underwriting
plays a greater role in risk selection
and contractual terms, with greater
control over growth. Volatility exists in
every part of insurance, but through
a focus on building and maintaining
balanced portfolios we will create more
manageable volatility across the Group.
By thinking about balance in this way,
we believe we can maximise both the
profitable, cyclical growth and the
structural growth opportunities ahead.
The Hiscox Group comprises four
businesses facing into different
opportunities and challenges, but with
a common set of capabilities and the
capital support required for success.
Balanced portfolio of large and complex risks
SME and personal lines
• Global risks through Lloyd’s platform
• Heritage of deep technical expertise
• Leading the market in applying
technology to distribution
and underwriting
Delivers profits and capital
generation for reinvestment
ox Lon d o n M
c
His
H
i
s
c
o
x
R
e & ILS
o
c
s
H i
• Specialist reinsurance capability
• Holistic risk insights
• Expert alternative capital manager
Delivers underwriting profit
and capital-light fee income
8
Hiscox Ltd Report and Accounts 2021
k e t
r
a
Hisco
x R
e
t
a
il:
• Small and micro businesses
• Digitally traded, with
low-cost distribution and
auto-underwriting
• Partnership management capability
through digital connectivity
People
and culture
Brand
Underwriting
Technology
Capital
d
i
g
i
t
a
l
Significant structural
growth opportunity
l
a
n
x R etail: traditio
• Focus on SMEs, not traded digitally
• Leadership in specialist lines
• Long-term broker partnerships
Delivers stable profit generation
and growth
Chapter 1
Performance
and purpose
Our strategy and
how we operate
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Our strategy in practice
Opportunity
There is an abundance of opportunity
ahead for Hiscox. In many of our
chosen lines and markets, our market
shares remain small, giving us plenty
of headroom for growth. This is
where our specialist knowledge and
multi-year investments in digital trading
differentiate us.
Innovation
The insurance industry consists of an
ecosystem of different types of business;
there are the ‘wave surfers’ for example,
who enter the market on the upside of
opportunity and retreat when it recedes.
Hiscox aims to be a ‘game changer’
and here for the long term: innovating
through long-held market experience
and underwriting acumen, embracing
technology and taking risks to evolve
with and lead market change.
Growth
Growth is important to us, but not at
the expense of profitability. That’s
why our focus is on maximising the
structural growth opportunities
ahead as we see them in Retail, and
in building out balanced portfolios in
our bigger-ticket businesses.
Volatility
Our business is naturally exposed to
volatility. We manage this through our
underwriting experience and expertise,
our investment in data, and our risk
management processes, and we work
hard to ensure the risks we take are
commensurate with the premium that
is paid.
A differentiated offering
Global reach
We are a truly international business,
with over 3,000 employees across
14 countries and 35 offices. We invest in
local market knowledge and experience
which ensures we understand the
markets we operate in and provide
relevant products and services. This
gives us a unique breadth of expertise,
serving customers from one-man-bands
to multinational companies and
ILS investors.
Specialist products
In every part of the Hiscox Group, we
focus on providing products and services
that differentiate us. These range from
high-value home insurance and fine art –
areas where we have deep foundations
to build on – to small business, flood and
kidnap and ransom – where innovative
products set us apart.
Claims experience
Being true to our word is the cornerstone
of our claims service. We know that
each customer and each claim is
different, which is why we have
embedded experienced claims teams
with specialist product knowledge in
every part of our business.
Talented people
The quality of our people is a crucial
factor in our continuing success. Their
expertise, energy and commitment
drive our reputation for quality and
professionalism. In return we aim to
provide a work environment that brings
out the best in everybody and rewards
hard work.
Powerful brand
We have invested significantly over
many years to build a recognised
and renowned brand. Our distinctive
marketing campaigns are developed
from a deep understanding of our
customers and positively contribute
to consumer buying decisions.
Hiscox Ltd Report and Accounts 2021
9
Our mix of businesses
provides exposure to
both long-term structural
growth and cyclical
trading opportunities.
Market conditions are
incredibly attractive,
and we have a powerful
combination of
underwriting pedigree,
data analytics and
investment in technology
which I believe sets
us apart.”
Aki Hussain
Group Chief Executive Officer
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Key risks and business priorities
As an insurance group,
specific risks related
to our business include:
case reserves and/or insufficient
outstanding reserves being in place to
meet incurred losses and associated
expenses, which could affect the
Group’s future earnings and capital.
Strategic risk
The possibility of adverse outcomes
resulting from ineffective business
plans and strategies, decision-making,
resource allocation or adaptation to
changes in the business environment.
The Group’s continuing success
depends on how well we understand
our clients, markets and the various
internal and external factors affecting
our business, and having a strategy in
place to address risks and opportunities
arising out of this. Not having the right
strategy could have a detrimental impact
on profitability, capital position, market
share and reputation.
Credit risk
The risk of a reinsurance counterparty
being subject to a default or downgrade,
or that for any other reason they may
renege on a reinsurance contract
or alter the terms of an agreement.
The Group buys reinsurance as a
protection, but if our reinsurers do not
meet their obligations to us, this could
put a strain on our earnings and capital
and harm our financial condition and
cash flows. Similarly, if a broker were
to default, causing them to fail to pass
premiums to us or pass the claims
payment to a policyholder, this could
result in Hiscox losing money.
Underwriting risk
The risk that insurance premiums prove
insufficient to cover future insurance
claims and associated expenses. Likely
causes include failing to price policies
adequately for the risk exposed, making
poor risk selection decisions, allowing
insurance exposures to accumulate
to an unacceptable level, or accepting
underwriting risks outside of agreed
underwriting parameters. This includes
people, process and system risks
directly related to underwriting, and
considers emerging external risks such
as climate, geopolitical and changing
customer trends.
Reserving risk
The Group makes financial provisions for
unpaid claims, defence costs and related
expenses to cover liabilities both from
reported claims and from ‘incurred but
not reported’ (IBNR) claims. Reserving
risk relates to the possibility of unsuitable
10
Hiscox Ltd Report and Accounts 2021
Market risk
The threat of unfavourable or unexpected
movements in the value of the Group’s
assets or the income expected from them.
It includes risks related to investments
– for example, losses within a given
investment strategy, exposure to
inappropriate assets or asset classes, or
investments that fall outside of authorised
strategic or tactical asset allocation limits.
Liquidity risk
This relates to the risk of the Group
being unable to meet cash requirements
from available resources within the
appropriate or required timescales,
such as being unable to pay liabilities to
customers or other creditors when they
fall due. It could result in high costs in
selling assets or raising money quickly
in order to meet our obligations, with the
potential to have a material adverse effect
on the Group’s financial condition and
cash flows.
Operational risk
The risk of direct or indirect loss resulting
from internal processes, people or
systems, or from external events. This
includes cyber security risk, which is
the threat posed by the higher maturity
of attack tools and methods and the
increased motivation of cyber attackers,
in conjunction with a failure to implement
or maintain the systems and processes
necessary to protect the confidentiality,
integrity or availability of information
and data. Operational risk also covers
the potential for financial losses, and
implications from a legal, regulatory,
reputational or customer perspective,
for example, major IT, systems or
service failures.
Regulatory, legal and tax governance
This relates to the risk that the business
fails to act, or is perceived to have failed
to act, in accordance with applicable
legal, regulatory, and tax requirements
in all of the jurisdictions where the Group
operates. The regulatory, legal and tax
environment continues to be complex,
with frequent changes in rules and
expectations which increase complexity
in this area.
Climate-related risk
This relates to the range of complex
physical, transition and liability risks
arising from climate change. This includes
the risk of higher claims as a result of
more frequent and more intense natural
catastrophes; the financial risks which
could arise from the transition to a
lower-carbon economy; and the risk that
those who have suffered loss from climate
change might then seek to recover those
losses from others who they believe may
have been responsible. Climate-related
risk is not considered a stand-alone risk,
but a cross-cutting risk with potential to
amplify each existing risk type.
Chapter 1
Performance
and purpose
Key risks and
business priorities
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
38
156
103
Read more about our key risks
hiscoxgroup.com/about-hiscox/
risk-management
Read more on risk management in
chapter 2, and on our key risks and
how we manage them in note 3.
Read more on performance against
our 2021 business priorities.
Business priorities
for 2022
Realising the retail opportunity
We will continue to build on our multi-year
investments in technology during the
year ahead, as we look to realise the
significant growth opportunities that exist
across our retail operations. Our head
start in digital small business insurance in
the UK, USA and a number of European
markets positions us well to serve the
needs of this high-growth segment of
the economy. We will use customer
analytics and insights to continue to
enhance our digital trading strategy
to best support the evolving buying
behaviours of our customers.
Balancing big-ticket growth
with volatility
With Hiscox London Market and
Hiscox Re & ILS currently enjoying
more favourable market conditions,
in 2022 we will leverage our unique
combination of underwriting and digital
expertise to achieve profitable growth
while balancing volatility. This will involve
the use of balanced performance metrics
and require best-in-class underwriting,
active portfolio management and
technical excellence.
Technical excellence
The strong progress made in 2021 in
optimising our underwriting portfolios
provides a solid basis for further work
in 2022. We will continue to address
lower decile lines through active portfolio
management, as we dynamically
adjust to evolving market conditions
and maintain an optimum portfolio
mix. Equally, we will look to grow in
top quartile lines and in line with our
ambitions. We will also build on progress
made in the Group’s underwriting
controls and governance around
product, pricing, appetite and wordings
by finding new and improved ways to
share data, insights and expertise across
claims, underwriting and reserving and
the areas that support them.
Operational efficiency
In 2022, we will build on the operational
efficiencies realised in 2021 in areas such
as procurement and operations, where
automation has played a part, and in
the rebalancing of our global versus
local capabilities. We will continue to
evolve our operating model to ensure
we have the right structure to enable fast
decision-making, and a strong culture
of accountability. We will also review
and refine our supplier assessment
and management processes. This
will include new tools that improve
consistency in our procurement
processes and ensure factors such as
ESG are considered in decision-making.
Connected teams with shared values
and mindset
The global pandemic has changed
where and how we work, and in 2022 we
will continue to embed the new hybrid
working styles that we established in
2021. This means an ongoing focus
on activity-based working; balancing
the more autonomous tasks that can
be achieved through remote working,
with those that require the collaboration
and energy of our offices. It also means
finding new ways to communicate a
common vision, and a strategy that
unites our people. In addition, we will
look to find new ways to enhance our
employee proposition and evolve our
approach in areas such as employee
benefits, in line with our ambitions to be
an employer of choice within our sector.
Hiscox Ltd Report and Accounts 2021
11
The opportunity ahead
of us is huge and I’m
personally very excited
by our 2022 plans, which
build on the progress
we’ve already made
in optimising both our
underwriting portfolios
and our operating model.”
Joanne Musselle
Group Chief Underwriting Officer
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Why invest in Hiscox?
A focus on generating sustainable and
compounding shareholder returns
We aim to balance consistent and
progressive shareholder cash returns
with reinvestment into the business
to support long-term growth and
value creation.
A unique structural
growth opportunity
We aim to grow the business in a way that
is organic, sustainable and profitable,
and the abundance of opportunity we
see ahead supports this continued
trajectory. In Hiscox Retail, where our
market shares remain modest, the size
of the addressable market is huge, giving
us plenty of headroom for growth; and
in our big-ticket businesses, where we
now lead on more open market risks, our
combination of underwriting and digital
expertise differentiates us.
148%
total shareholder return over the
last ten years.
50m SMEs
size of the addressable SME market
across the UK, USA and Europe.
$1.7bn*
returned to shareholders over the
last ten years.
300%
increase in Retail customer numbers
across the Group since 2013.
A rated
over ten years of S&P A rating.
68%
Hiscox London Market now leads
on 68% of the business it writes,
14 percentage points more than
it did five years ago.
Hiscox is a diversified
and resilient business
with a great runway of
future opportunity in
both Retail and big-ticket
lines. This, along with our
unique combination of
underwriting and digital
expertise, talented people,
powerful brand and
robust capital position,
is a real differentiator
in the market.”
Liz Breeze
Interim Chief Financial Officer
12
Hiscox Ltd Report and Accounts 2021
* Based on special, ordinary and Scrip Dividends
paid to shareholders since 1 January 2012.
Excludes the final dividend proposed for 2021.
Chapter 1
Performance
and purpose
Why invest in Hiscox?
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Big-ticket business
Hiscox Re & ILS
Hiscox London Market
Retail business
Hiscox UK
Hiscox Europe
Hiscox Special Risks
Hiscox USA
Hiscox Asia
* 2020 restated for Hiscox Special Risks.
4,795
4,530
4,532
4,224
S
L
I
&
e
R
x
o
c
s
H
i
,
t
e
k
r
a
M
n
o
d
n
o
L
x
o
c
s
H
i
3,625
3,652
3,268
3,310
l
i
a
t
e
R
x
o
c
s
H
i
Total Group controlled income
($m)
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,506
1,500
1,000
500
2,951
3,008
2,839
2,587
2,570
2,585
2,690
2,669
2,033
1,928
1,901
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020*
2021
Hiscox Ltd Report and Accounts 2021
13
realise the next phase of our
growth. We’re just about to
start this new chapter, and
I think that’s really exciting.
Q: How do you see the
human value being
applied at Hiscox?
A: When I think about our
values, we’ve always been
strong on things like courage
and ownership, but the two
that have really come into
their own recently have been
connected and human.
Because of Covid-19, and
because of the important
conversations that began here
in the wake of George Floyd’s
death, we’ve really leant into
those values in a big way.
We’ve thought a lot about how
we can be more supportive,
more inclusive. We’ve started
a development programme
for diverse talent, we’ve given
our people time off to attend
peaceful protests, and that’s
really just the beginning.
Q: What was your experience
of the lockdowns of the past
two years?
A: It wasn’t until I first saw a
lot of people back in the office
again, and started going to
events with our brokers, that
I realised just how much we’d
missed. It’s like the frog in the
pot: when the temperature’s
turned up slowly, you don’t
really notice. You forget how
life used to be. When you see
people back in the office,
gathered around a screen,
trying to solve a problem – or
you’ve got new people making
themselves heard, getting
on-boarded in person – it’s
then that you realise how
much we missed out on, how
much of that social capital got
eroded over that period.
Q&
A:
with Kevin Kerridge
Chief Executive Officer, Hiscox USA
An Englishman in
New York
From a standing start just
over a decade ago, Hiscox
USA is now the country’s
leading digital small
business insurer and
is busy reshaping its
broker business.
Kevin Kerridge has worked
for Hiscox for over 25
years. In 1999, he was given
the task of, in his words,
‘figuring out what we should
do on this thing called the
internet’. Ten years later,
having played a major role
in developing the brand’s
digital operations in the
UK, he moved to the USA
to carry out the same task.
He is now Chief Executive
Officer of Hiscox USA.
Q: What did you find when
you first came to the USA
in 2009?
A: I came over here just to
scout around and was amazed
by what I found: nobody in
the small business insurance
space, which was our sweet
spot, was doing anything on
the internet. When you typed
into Google ‘small business
insurance’, the message was:
‘call us on this number’, or: ‘fill
out this form and someone
will come back to you’. We
realised at that point how
huge an opportunity this was.
Within a couple of months, I’d
agreed to uproot my wife and
four children and move to New
York. It was only meant to be
a three-year secondment,
but the possibilities here are
just so massive. I don’t think
I – or the Company – ever
looked back.
Q: What does the US
business look like now?
A: We are now almost a
billion-Dollar business in
terms of top-line revenue.
The most exciting thing is
that today we’re America’s
leading digital small business
insurer. We’ve got more digital
scale than anybody else out
there, even compared to
the biggest brands, brands
that have been around for
100-plus years. At the other
end of the scale, there are a
number of start-ups with
great ideas and technology,
but the great thing is we’ve
got more scale and capability
than them. If you’re a start-up,
you’re clamouring to get
traction, but we’re sitting
here with over 600,000
policies in force. We’re in the
middle of those two things –
the incumbent giants and the
nimble start-ups – and we
feel good about that.
14
Hiscox Ltd Report and Accounts 2021
The scale we’ve reached
also means that we’ve got a
wealth of data that will help
with our future assessment
of risk. Digital business is
all a data game. We don’t
have underwriters sitting
there looking at individual
applications that come in.
It’s the machine that’s doing
the underwriting. The other
thing that’s happening right
now is that we’re using a lot
more third-party data. Use of
third-party data will be a big
strategic battleground for us
in the future.
Q: Looking back at 2021,
what were some of the big
highlights for you?
A: We’ve continued to
make strides on our digital
business. We’re really keeping
that momentum going.
Despite the economic and
social impacts of Covid-19,
which have obviously been
terrible, from our perspective
it’s caused a real tailwind.
When the world shut down,
everyone in the insurance
space was like: “Blimey, how
do we do business?”. They’re
used to bricks and mortar,
face to face. Now everyone’s
having to consider a digital
model, and because we’re so
well advanced that has played
to our strengths.
Then on the more
traditional side, which is
still around 50% of our US
business, we’re going
through this thing called
A25, which is short for
‘accelerate to 2025’. We’ve
been reshaping the broker
business here because it’s
not been profitable enough,
quite frankly. We made good
progress in addressing this
in 2021.
Q: So, you’re feeling
positive about the future?
A: I am. This past year has
been an emotional one for
those of us who’ve been here
a long time. We’ve celebrated
Bronek’s contribution over
the past few decades and
now we’ve got a new leader
in Aki, who’s bringing a fresh
perspective and looking to
Hiscox Ltd Report and Accounts 2021
15
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Chairman’s statement
16
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chairman’s statement
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
I am pleased to report that our
skilled underwriters have substantially
contributed to a very good result in
a period of low investment returns.
Joanne Musselle, Group Chief
Underwriting Officer, has provided
strong leadership and the active
portfolio management is producing
results. We have strong teams
in place to make the most of the
opportunities ahead.”
Robert Childs
Chairman
The Retail businesses are going well;
Hiscox Europe in particular. The UK
and USA divisions are making great
strides in their direct and partnerships
business, where we maintain a strong
competitive advantage. Hiscox USA is
on track, increasing rates and trimming
the portfolio in broker lines. In the UK,
the broker business continues to do
well, particularly in our commercial
lines business.
Our big-ticket businesses in London
and Bermuda are benefitting from
good risk selection and substantial
rate rises. Digital initiatives in Hiscox
London Market are broadening
our appetite and providing new
opportunities. In Hiscox Re & ILS,
our prudent approach to reserving
and discipline in risk selection has
delivered an excellent result in
another year of higher than average
natural catastrophes.
We are in this business for the long
term, innovating through deep market
expertise, embracing technology, and
unafraid to take risks to evolve. In 2021,
particularly in the UK, we have had some
challenges, but we have learned a lot.
Courage is one of our values and we
have needed it in 2021, but Hiscox is
a stronger business for it in 2022.
We are pleased that our good
performance has allowed the Group
to resume paying dividends with the
2021 interim results and the Board is
pleased to propose a final dividend
for 2021 (subject to shareholder
approval) of 23 cents per share. The
record date for the dividend will be
6 May 2022 and the payment date will
be 13 June 2022. The Board proposes
to offer a Scrip alternative, subject to the
terms and conditions of Hiscox’s 2019
Scrip Dividend Scheme. The last date
for receipt of Scrip elections will be
20 May 2022 and the reference price
will be announced on 30 May 2022.
People
Following Bronek Masojada’s decision to
retire at the end of 2021, we announced
the appointment of Aki Hussain as our
new Group Chief Executive Officer back
in July. Aki has 22 years’ experience
working in financial services, telecoms
and media which we are benefitting from.
Having worked with Aki over the last five
years I have seen his strong leadership
as our Group Chief Financial Officer
first-hand, his capable management of
the Group’s finances in what has been
a challenging period for Hiscox and the
industry while delivering a highly complex
finance transformation programme. Over
the years, the Board and I have seen the
energy, passion and determination with
which Aki operates, and this combined
with a strategic mindset and clear
ambition for building a customer-focused
businesses, means he is well placed to
shape our future strategy and capture
the vast opportunities ahead.
I would also like to take this opportunity
to pay tribute to the outstanding
contribution that Bronek has made in
leading the strategic development of
the Group over the last three decades.
Hiscox Ltd Report and Accounts 2021
17
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chairman’s statement
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Courage is one of our
values and we have
needed it in 2021, but
Hiscox is a stronger
business for it in 2022.”
I had the pleasure of working with Bronek
for over 28 years and throughout that
time, his leadership skills, tenacity and
desire to build a better business have
shone through. With Bronek’s energy
and commitment, we have overcome
some of the biggest challenges the
industry has faced, and seized some of
the greatest opportunities. His intellect
and vision built Hiscox from a small
private company to a FTSE 250 with
$4 billion of premium – which is an
immense achievement.
Following nine years of service, including
six as Chair of the Audit Committee,
Caroline Foulger will retire from the Ltd
Board at the 2022 AGM. I have valued
Caroline’s counsel greatly over the
years and would like to thank her for the
passion and challenge she brought to
the role. Ahead of Caroline’s retirement,
Donna DeMaio joined the Board as an
Independent Non Executive Director at
the end of 2021 and will replace Caroline
as Chair of the Audit Committee. Donna
has an impressive financial services
background and experience of the
US market which we will benefit from.
We also strengthened our subsidiary
Boards with the appointment of three
new Independent Non Executive
Directors. Mark Cliff and Jane Hayes
joined Hiscox UK while James Illingworth
joined Hiscox London Market; between
them they bring a wealth of industry
knowledge, underwriting and
distribution expertise.
Environmental, social and governance
We take ESG seriously and we have
made significant progress this year.
The Board has been very supportive
and the staff enthusiastic. We started
2021 by approving our ESG exclusions
policy which sets out our ambition
18
Hiscox Ltd Report and Accounts 2021
From left to right: Robert Childs, Joanne Musselle, Aki Hussain and Bronek Masojada.
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chairman’s statement
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Aki’s deep knowledge
of the Hiscox Group,
combined with a
strategic mindset and
ambition for building
customer-focused
businesses, means he
is well placed to shape
our future strategy
and capture the vast
opportunities ahead.”
to reduce steadily, and eliminate by
2030, our insurance, reinsurance and
investment exposure to some of the
most carbon-intensive industries.
We are now embedding the required
supporting processes and a
dashboard to measure our progress.
We continue to attract and develop top
talent: last year we welcomed 644 new
permanent employees and made 368
internal promotions. It is thanks to the
hard work, ingenuity and flexibility of
our colleagues across the globe that we
have been able to continue to support
our customers and brokers during the
pandemic. We paid out $1.25 billion
in claims last year across the whole
business – from exceptional events like
Covid and catastrophes, to the more
frequent fires and thefts. We have also
contributed very substantially to the
restitution of many businesses through
indemnifying them following their loss.
We have also served our communities
through our charitable work, resulting
in $1.5 million being donated to good
causes and over 1,000 volunteering
hours – from beach clean-ups in
Bermuda to plastic fishing on the
River Thames.
We continue to focus on improving
diversity at all levels. Our 15 employee
network chapters play an important
part in this, but so too does our diversity
reporting. 2021 marked our fifth year of
UK gender pay reporting and although
our gender pay gap has been steadily
reducing since 2017, it continues to
be predominantly driven by more men
than women holding more senior roles.
In this respect it is important to show
leadership: our current Board diversity
is 55% men and 45% women, and
the newly formed Group Executive
Committee comprises 40% men and
60% women. There is more work to
do throughout the Company but we
are on a positive trajectory.
Outlook
Hiscox is a growing company. We aim
to grow our top-line profitably in this
underwriting climate and continuously
attract first-rate talent. We are embracing,
and in many cases leading, the digital
revolution in insurance and continue to
invest. Aki has clear and exciting plans
that are motivating our people and which
the Board supports.
In the insurance industry, catastrophes
can happen at any time, but there is a fair
wind behind us and I am looking forward
to a great year – we are disciplined, rates
are up, we are attracting exceptional
talent, and the opportunity ahead of
us is huge.
Robert Childs
Chairman
2 March 2022
Hiscox Ltd Report and Accounts 2021
19
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Chief Executive’s report
I am pleased with the strong results
the Group has delivered despite
elevated natural catastrophe losses,
reflecting successful execution of
our strategy and the management
actions we have undertaken to
improve the performance and
quality of our portfolios.”
Aki Hussain
Group Chief Executive Officer
On 1 January 2022, I officially
assumed my role as the Group
Chief Executive Officer of Hiscox
and I am pleased to be able to
report a strong 2021 result for the
Group. Hiscox delivered a pre-tax
profit of $190.8 million (2020: loss
of $268.5 million) and a combined
ratio of 93.2% (2020: 114.5%),
despite reserving $223.8 million
net of reinstatement premiums for
natural catastrophe losses in an
elevated catastrophe loss environment.
This strong performance is the
outcome of proactive portfolio
actions undertaken over the last
few years to improve our margins.
Bronek Masojada, who retired as Group
Chief Executive Officer at the end of
2021, left the business in good shape
and I am delighted to be taking the reins
at this exciting juncture with plentiful
opportunities ahead. In my first CEO
statement I would like to share my views
on the ambition we have as a business
and how we are going to achieve it. I will
also provide the usual commentary on
business performance in 2021.
Strategy
Our long-standing strategy of balance
has served us well through the years,
allowing us to generate $4.3 billion of
profits over the last two decades, while
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Hiscox Ltd Report and Accounts 2021
also seeding and organically growing
Retail to the $2.3 billion gross premiums
written business it is today. The greater
volatility in the big-ticket businesses
has been balanced, or offset, by more
stable returns in Retail (2020 being the
exception when the result was affected
by the global pandemic). Excess profits
in our big-ticket businesses have been
used to fund our Retail expansion.
This strategy has allowed the Group
to build a solid platform to expand its
footprint and product offering through
multiple distribution channels, develop
a recognised global brand and nurture a
reputation as a leading specialist insurer
with deep technical expertise.
We remain committed to the concept
of balance, however, as our markets
are evolving, so too is the way we think
about balance. We are in the business of
taking calculated risks, so while volatility
is an inherent feature of our business
model, we are also focused on building
a business that delivers sustainable,
attractive returns. As our strategy
continues to evolve, our focus is on
building more balanced portfolios within
each business, with an increased focus
on and use of the Hiscox underwriting
ecosystem, which includes underwriting,
pricing, claims analytics, reserving,
research and modelling, in our chosen
lines of business.
The fundamentals of our strategy remain
unchanged: we continue to have strong
competitive positions in all our business
segments, but managing volatility
across the Group will pave the way to
maximising the long-term structural
growth opportunity we have in our Retail
businesses. Our purpose is ’to give
people and businesses the confidence
to realise their ambitions’ and this
remains core to our strategy.
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Hiscox Ltd Report and Accounts 2021
21
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
In summary, this is strategic evolution as
we evolve our business model to make
the most out of the opportunity in each
of our businesses, with each playing a
critical role in what it brings to the Group
and our strategic ambitions. I think
about our business in four component
parts – Retail digital, Retail traditional,
London Market and Re & ILS1. Each
component faces unique opportunities
and challenges, which informs the role
that each will play in our future growth
and success, underpinned by our
long-term investment in both
underwriting and digital expertise.
first and foremost, technical rigor and
disciplined risk management are a
prerequisite. We see technology as being
an enabler, allowing Hiscox to access
new markets in new ways.
Through long-term investment Hiscox
now has market-leading platforms in
the USA and UK and an emerging digital
business in Europe. The opportunity is
particularly significant in the USA where
we believe we will continue to win in the
long run, becoming one of the dominant
players, so it makes clear strategic sense
to continue investing in this business.
Retail digital – significant structural
growth opportunity
Retail digital presents the Group’s most
significant long-term structural growth
opportunity. This business has benefitted
from the secular trends in society where
our customers and partners increasingly
want to deal with us digitally. Across our
geographies, there are approximately
50 million SMEs, so the market is huge
and we are barely scraping the surface
of the opportunity ahead; I expect our
digital platforms to grow strongly for
many years to come.
In this new and emerging landscape,
Hiscox has developed market-leading
capabilities including products designed
to meet customer needs, strong brand
awareness, an underwriting ecosystem
and investment in technology; this has
enabled a significant part of the value-
chain to be automated, while delivering
superb customer service. Capturing this
opportunity is not simply about deploying
cool technology, we are underwriters
Building scale is important, not just for
operating leverage and cost efficiency,
but to drive further growth. Expanding
our customer base will make us into
an increasingly attractive distribution
partner. Over time our objective is to build
a marketplace for our customers, offering
a broad range of insurance products
catering for all their key needs. Some of
these products Hiscox will underwrite on
our own balance sheet, while others we
will offer through our expanding range of
reputable partners. The aim is to create
a small business commercial insurance
marketplace in which Hiscox is a central
and meaningful player.
Our confidence in being able to succeed
comes from the strength of our core
Group capabilities – our powerful brand,
the cross-divisional fertilisation of data
and analytics to improve underwriting
decisions and our ability to selectively
invest from the Group’s capital pool to
keep our client service and scalability
of platform market-leading.
1 These are Group strategy business components.
Accounting segmentation, which reflects
how the businesses are managed, remains
unchanged, as represented in 2021 financial
performance sections.
Retail traditional – source of continued
growth and profitability for the Group
Our Retail traditional business, which
is distributed and serviced through the
traditional non-digital channels, has been
the backbone of growth and profitability
for the Retail division and in recent years
for the Group (with the exception of 2020
that was affected by the pandemic) as we
have traded through challenging market
conditions in our big-ticket businesses.
Over the years we have built this
business carefully by being specialists
in attractive and large niches, getting to
know our customers’ needs intimately,
building strong distribution partnerships,
maintaining robust risk selection and
delivering excellent customer service.
We operate in meaningful niches with
material further growth potential, while
we also explore new adjacent niches
with specialist distribution partners,
into which the business can expand.
This business will continue to evolve:
for instance, we are in the process of
reshaping our US broker channel book
to focus on smaller business, and we are
making changes to further improve our
broker service model in the UK. This is all
part and parcel of building a sustainably
profitable business. This business will
continue to provide growth and most of
the Retail profits over the next five years.
Hiscox London Market – underwriting
pedigree meets trading innovation
Hiscox’s roots lie in the London Market.
This is our heritage and where we have
built a tremendous track record of delivery.
Our business continues to evolve as we
develop deeper underwriting expertise
and data analytics in our specialist
areas. We now lead over two-thirds of
the business we write in premium terms,
compared to just over a half four years
ago. This ensures we have much more
control of the business and the terms
on which it is being written, in short,
the Hiscox underwriting ecosystem
is driving decisions. I am also excited
22
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
An actively managed business
Total Group controlled premium 31 December 2021: $4,795m
Period-on-period in constant currency
Small
commercial
Reinsurance
Property
Specialty
Art and
private client
Global
casualty
Marine
and energy
+2%*
+8%
+3%
+9%
0%
+6%
-1%
$1,707m
Professional liability
Errors and omissions
Private directors
and officers’ liability
Cyber
Commercial
small package
Small technology
and media
Healthcare related
Media and
entertainment
$917m
Property
Marine
Aviation
Casualty
Specialty
$562m
Commercial
property
$482m
$479m
Onshore energy
Kidnap and ransom
Home and contents
USA homeowners
Contingency
Fine art
Flood programmes
Terrorism
Product recall
Personal accident
Asian motor
Classic car
Luxury motor
Managing
general agents
International
property
* 8% including
$109m of US
exited business.
$359m
Public directors and
officers’ liability
Large cyber
General liability
$289m
Cargo
Marine hull
Energy liability
Offshore energy
Marine liability
Hiscox Ltd Report and Accounts 2021
23
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
about Hiscox London Market pioneering
digital underwriting and distribution in the
Lloyd’s market with its HiscoxPlus suite of
products reaching a critical mass of over
$100 million of gross premium written.
While this is still a small proportion of
Hiscox London Market’s top line, digital
distribution and auto-underwriting will
continue to grow in both importance and
quantum in the years to come, and in
2022 we expect this business to double
to over $200 million.
Hiscox London Market provides cyclical
growth opportunities, expanding
and shrinking as market conditions
change. Since 2017 conditions have
been improving and we now enjoy rate
adequacy in all of our lines. We have
used these improving market conditions
to create a better-balanced portfolio of
business, improve terms and conditions,
expand margins and grow net revenues in
business lines with better risk-adjusted
returns. As I look forward, the improved
balance and control, combined with
stronger margins and therefore resilience
in the portfolio position us well for
generating attractive risk-adjusted
returns through the cycle.
Hiscox Re & ILS – specialist capabilities
complemented by third-party capital model
Hiscox Re & ILS is also part of our
heritage and once again a business
that has had an excellent long-term
track record. This business operates in
a market where conditions are cyclical,
although the shape of the cycle has
changed over the last decade. The
development of insurance-linked
securities (ILS) platforms has resulted
in new and efficient capital coming into
the market. We have capitalised on this
opportunity and Hiscox Re & ILS has built
a successful ILS proposition, providing
a mechanism for lowering the cost of
24
Hiscox Ltd Report and Accounts 2021
capital for the business and providing
a means of scale in specialist areas in
which the business participates.
However, as the rating cycle unfolds at
a different pace, the dynamic is slightly
different by business segment.
Market conditions have significantly
improved, although further rate increases
are necessary in some areas to genuinely
achieve satisfactory returns through the
cycle. We have used the last few years
to refocus on business lines in which we
have deep expertise, thereby creating
a balance which is consistent with our
underwriting expertise. This combined
with improving market conditions is
increasing the resilience of the portfolio
and creates the capacity to grow in lines
where the returns are stronger. Looking
forward, the improved resilience in
the portfolio, together with the growth
of ILS AUM, is expected to drive
much-improved generation of capital
and profits through the cycle.
Hiscox London Market began
benefitting from rate increases as
early as 2017 and has seen a cumulative
rates increase of 60%. In 2021, we
saw a 13% average rate improvement.
While rate growth is continuing, the
speed of increase is now slowing in all
lines except cyber. This is particularly
pronounced in US public company
D&O and US general liability, although
the overall rate adequacy remains
significantly above the loss experience
and expectation. We expect this trend
to continue in 2022 with momentum
slowing further, however, rate adequacy
remains solid and rates are likely to
remain in positive territory growing
by mid-single digits.
These component parts of our business
enjoy a symbiotic relationship. The
development of market-leading
underwriting capabilities, deep
relationships, innovation and
entrepreneurial drive have traditionally
come from the big-ticket businesses.
In recent years, operational know-how,
new-generation digital technology, data
analytics and the auto-underwriting
expertise of the Retail digital business
have been supporting growth in the
rest of the Group. It is this ecosystem
wrapped in the unique culture of Hiscox
that is a source of strength and has helped
the business to withstand the external
challenges of recent years in order to
continue to deliver a resilient performance.
Turning to the 2021 financial result.
Rates
Rate momentum continues to be
favourable across all business divisions.
For Hiscox Re & ILS the market started
to turn slightly later, but the business
has achieved a cumulative rate increase
of 35% since 2017. In 2021, Re & ILS
saw an average rate increase of 8%.
European floods in July, Hurricane Ida’s
landfall in August and US tornadoes in
December were once again a useful
reminder of the risks borne by property
catastrophe reinsurers. As a result,
we have seen better underwriting
discipline and further rate strengthening
in North American property lines, risk,
retro, marine and specialty as well as
loss-impacted European business.
At the January 2022 renewals we saw
10% reinsurance rate growth, however,
it is our view that further increases are
necessary to achieve satisfactory returns
through the cycle in all property lines.
In light of this, Hiscox Re & ILS will
continue to be disciplined to ensure
the business we write is sufficiently
rated to make a sustainable profit.
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Hiscox Retail
Gross premiums written
Net premiums written
Underwriting profit/(loss)
Investment result
Profit/(loss) before tax
Combined ratio (%)
Combined ratio excl. Covid-19 and loss portfolio transfer cost (%)
2021
$m
2,290.0
1,969.3
34.9
26.9
54.9
98.9
97.3
2020*
$m
2,180.0
1,907.8
(397.7)
103.4
(295.6)
123.4
99.9
* Numbers have been re-presented to reflect reclassification of the Special Risks division.
See note 4 to the financial statements.
Hiscox Retail is generally less cyclical
business with rates less prone to
extreme fluctuations, yet in 2021 Retail
rates increased by 5% on average.
This was led by Hiscox UK with rates
up 7% and Hiscox USA, where rates in
the broker business grew 10%. Even in
Hiscox Europe, where rate increases are
typically dampened by tacit renewals,
we saw increases of 4% on average.
Across all regions Retail rate increases
are at least adequate or in excess of loss
experience and expectation, resulting in
sustained or expanding margins.
Across all our business segments, through
a combination of an indexed increase to
exposure data and increasing rates, we
believe we are achieving premium growth
in excess of inflation expectations.
Claims
2021 was another year with above-mean
natural catastrophe losses. The Group
has reserved $223.8 million net of
reinstatement premiums, with Hiscox
Re & ILS most impacted. In Hiscox
London Market we reduced the property
catastrophe exposure in 2021 as we
made a conscious choice not to write
business where pricing is not deemed
adequate. In Hiscox Re & ILS, we
continued the re-underwriting action
commenced in 2020 as we further
reduced our exposure to aggregate
covers and increased attachment levels.
In 2021, we saw a continuation of
heightened threats in cyber and
fine-tuned our cyber appetite, focusing
our SME business within Retail,
reducing our exposure to ransomware
events in Hiscox London Market and
reducing cyber aggregate exposure.
The Hiscox CyberClear Academy, our
free online training program for our
smaller customers, goes from strength
to strength: we have now enrolled
over 30,000 customers across the
geographies in which we operate.
Our dedicated central cyber team
continues to support our cyber
underwriters across the Group,
delivering training to our underwriting
and claims teams. We now have nearly
20 employees who have gained
external cyber security certifications.
We have also added significant new
features to our Hiscox Cyber Insight
tool to support underwriting decisions,
including integration with Microsoft
Secure Score, which allows us to
streamline questions for customers,
and gain far greater insight into our
customers’ security position.
Throughout 2021, we worked closely
with customers and brokers in the UK
to pay business interruption claims as
quickly as possible. As of 31 January
2022, 84% of the claims notified
had received an outcome and we
expect to maintain the current claim
settlement momentum to resolve the
outstanding claims. The business
interruption claims in aggregate
continue to settle within the actuarial
best estimate and in addition we
continue to hold conservative
margin above the best estimate.
The UK business interruption book
has now been fully renewed with
the appropriate pandemic exclusion
terms. We have maintained continuous
and transparent dialogue with our
reinsurance panel throughout this
period and the reinsurance recoveries
are now being collected.
Hiscox Retail
Hiscox Retail comprises our retail
businesses around the world: Hiscox
UK, Hiscox Europe, Hiscox USA
and DirectAsia. In this segment, our
specialist knowledge and retail products
differentiate us and our ongoing
investment in the brand, distribution
and technology reinforces our strong
market position in an increasingly
digital world.
Hiscox Retail grew gross premiums
written by 5.0%, or 1.5% in constant
currency. Our commercial businesses,
which constitute over three-quarters of
the Retail portfolio in gross premiums
written terms, grew strongly across all
geographies. This was partially offset by
slower momentum in personal lines and
the impact of deliberate portfolio actions
in the US broker channel to reposition the
business towards smaller customers.
We have now exited over $100 million of
the non-core US business and, adjusting
for this, the Group Retail underlying
portfolio grew by 6.8% on a constant
currency basis.
Hiscox DPD business grew gross
premiums written by 18.2% in constant
currency to $694 million and now serves
over 910,000 customers. In the USA
our DPD business grew 25.5% and it
now represents almost two-thirds of
our global DPD business.
With the more significant portfolio action
largely executed in the broker channel,
the headline growth rate is expected to
trend back towards the middle of the
5% to 15% range for the Retail division
in 2022.
Together with delivering robust growth,
the Retail business has achieved an
underlying combined ratio of 97.3%,
a 2.6 points improvement on prior
year, despite sustaining a net natural
catastrophe loss of $34 million net of
reinstatement premiums. This underpins
Hiscox Ltd Report and Accounts 2021
25
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
our confidence that we are on track to
return to the 90%-95% combined ratio
range in 2023.
Hiscox UK
Hiscox UK provides commercial
insurance for small- and medium-sized
businesses as well as personal lines
cover, including high-value household,
fine art and luxury motor.
in our established niches such as
technology, consultants and other
emerging professions, where Hiscox’s
competitive advantage is strong and
the opportunity is the most attractive.
In 2022, we expect to increase our
investment in marketing to build affinity
with new audiences and accelerate
the ongoing positive growth of the
digital acquisition channel.
Hiscox UK gross premiums written of
$831.1 million (2020: $756.1 million)
are up 9.9% or 2.9% on a constant
currency basis. The business has
delivered a resilient performance,
despite the ongoing impact of Covid-19
on events and art exhibitions. The
commercial lines business is showing
strong growth of 9.9% in constant
currency, boosted by rate improvements,
maintaining good retention rates and
adding a net 45,000 customers. Rate
increases were achieved across the
portfolio of commercial business led
by cyber and professional indemnity
lines. In our personal lines business,
which includes art and private client
and direct home, we have taken
deliberate action to rebalance the
portfolio and non-renew some of
the higher commission business.
As a result, we have seen premiums
reduce by 4.9% in constant currency,
however, this action will improve our
business returns. The personal lines
business is expected to return to
growth in 2022.
The non-natural catastrophe loss
performance has been better than
the prior year, with a particularly benign
first half and return to a more normal
claims frequency in the second half.
The outlook for Hiscox UK is positive,
with opportunities to continue growing
26
Hiscox Ltd Report and Accounts 2021
Hiscox Europe
Hiscox Europe provides personal lines
cover, including high-value household,
fine art and classic car; as well as
commercial insurance for small- and
medium-sized businesses.
Hiscox Europe delivered another
strong top-line performance, growing
gross premiums written by 9.8% in
constant currency to $532.0 million
(2020: $461.1 million). Rates are up
4% on average, with double-digit
rate increases in cyber, commercial
property and traditional professional
indemnity. A large share of the European
book renews in January and our
underwriters have been focusing on
improving rate adequacy in cyber.
Hiscox Germany, Benelux and Iberia,
which together constitute around
60% of Hiscox Europe’s gross
premiums written, all grew top line
at double-digit rate in constant
currency, underpinned by healthy
growth in commercial lines. Hiscox
France, our second largest European
business, grew gross premiums
written by 5.9% in constant currency
despite the impact of continuing
course correction actions and
delivered strong new business
growth. Ireland’s performance is up
4.4%, as the business continues to
undertake re-underwriting actions.
Europe’s DPD business is relatively
nascent with gross premiums written
of just over $50 million and is growing
well. The digital opportunity in Europe is
attractive with around 11 million SMEs
in the markets where we operate and
about a half of these being our target
customers. Hiscox Europe started its
direct digital business first in France,
almost a decade ago, followed by
Germany. In June 2021, the Netherlands
became the latest market to launch a
digital proposition. Europe DPD is an
excellent example of leveraging
cross-market expertise and infrastructure
with the businesses using common
technology and sharing product
expertise and marketing collateral.
Similar to the UK, the non-natural
catastrophe loss performance has
been in line with expectations.
The roll-out of the new core technology
is progressing well in Germany and
France and we continue to enhance
our data infrastructure to drive more
sophisticated underwriting and pricing.
Hiscox USA
Hiscox USA focuses on underwriting
small commercial risks with
distribution through brokers, partners
and direct-to-consumer using both
traditional and digital trading models.
Our aspiration remains to build America’s
leading small business insurer.
Hiscox USA saw gross premiums
written decline 3.9% to $879.2 million
(2020: $914.6 million). This is in line with
our expectations and previous guidance,
as a result of planned reductions in
our US broker channel. We have now
exited over $100 million of large cyber,
stand-alone general liability and other
broker channel business which is no
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Hiscox London Market
Gross premiums written
Net premiums written
Underwriting profit
Investment result
Profit before tax
Combined ratio (%)
2021
$m
1,171.4
711.5
89.6
15.8
104.8
89.1
2020*
$m
1,109.7
649.9
94.8
60.5
155.2
89.2
* Numbers have been re-presented to reflect reclassification of the Special Risks division.
See note 4 to the financial statements.
longer within our appetite. This number
is slightly higher than originally indicated,
as we successfully accelerated our exit
plans in certain portfolios. Excluding the
effect of the course correction actions in
2021, Hiscox USA underlying portfolio
grew by 9.2%.
Our US digital partnerships and direct
business continues to deliver excellent
performance, with the top line growing
25.5% to $424 million, continuing the
excellent growth rate achieved the
year before. In the first half of the
year US DPD grew at 30%, above
our expectations, as the business
benefitted from the pent-up demand,
with the second half more in line with
the sustainable growth rate. We have
added around 90,000 customers in
2021 with approximately 520,000 now
insured. Over 80% of our new customers
accessed us digitally and over 90% of
new policies were auto-underwritten.
The US digital partnerships business
is growing particularly well, as we are
benefitting from distribution relationships
with over 140 partners. As our business
matures and our brand strengthens,
more and more of our premium is
coming from larger producing partners,
which contribute over a million of
revenue per annum to Hiscox. Over
the last three years the number of
these large partners almost doubled
to 41 today. One example of such
partnership is with Amazon. In August,
Hiscox joined a small network of
insurance providers to offer general
liability insurance to businesses selling
in Amazon’s marketplace through our
existing platform integrations with Bold
Penguin and Simply Business.
The US DPD business started 2022
with continued strong growth, however,
this is expected to moderate through
the third quarter as we take deliberate
action to limit new business to facilitate
the migration of our partners and existing
policyholders from our legacy policy
administration system to our modernised
next-generation platform. The new
technology will offer a wider product
portfolio, improved data collection,
better underwriting analytics, upgraded
pricing capability and enhanced digital
experience for agents and customers.
An expanded business owners’ policy
(BOP) and new cyber product are being
launched as part of the new technology
roll-out. The migration requires the
deliberate slowdown of growth, as we
bed in new systems, appetite, products
and rating, we expect to complete the
process by the end of the year and begin
to realise the full benefits of this multi-year
technology investment as we head into
2023. In 2022, we still expect full-year US
DPD growth of between 15% to 20%.
Hiscox Asia
Despite the challenges of Covid-19
lockdowns in its two Asian markets
alongside lower customer demand
and aggressive discounting by
competitors, DirectAsia delivered
gross premiums written of $47.7 million
(2020: $48.2 million), broadly in line
with 2020, as the fourth quarter saw
a recovery in revenues. DirectAsia
launched brand enhancements
campaigns in Singapore and Thailand
in November which will continue to
run throughout 2022. A reduced
claims frequency during the lockdowns
together with the continued focus on
profitability has resulted in an improved
underwriting result.
Hiscox London Market
Hiscox London Market uses the
global licences, distribution network
and credit rating of Lloyd’s to insure
clients throughout the world.
Hiscox London Market delivered a
strong performance in 2021, despite
the above-mean natural catastrophe
losses. Our underwriters have been
working tirelessly to deliver 13%
average portfolio rate growth in 2021,
with 16 of our 17 lines enjoying price
rises and 11 lines benefitting from
double-digit rate increases. Gross
premiums written grew 5.6% to
$1,171.4 million (2020: $1,109.7 million),
as we continued to execute course
correction actions in the property binder
portfolios, and build a more balanced
and resilient portfolio. Importantly, net
premiums written grew by 9.5%, almost
two times faster than top line, as the
strong rate momentum made retaining
more premium attractive. Hiscox
London Market incurred $68.1 million
of natural catastrophe losses in 2021
net of reinstatement premiums, mainly
from Hurricane Ida, US tornadoes and
Storm Uri. In contrast, non-catastrophe
experience in London Market was
favourable in the first three quarters of
the year, albeit several large cyber and
casualty losses occurred in the last two
months of 2021.
It is particularly pleasing that Syndicate
33, our flagship Lloyd’s syndicate,
achieved a 82.5% combined ratio
in 2021 calendar year, the best result
since 2016.
We are making good progress on digital
distribution and underwriting. Hiscox
London Market’s digital strategy started
in 2016 with the launch of FloodPlus
which offers flood cover to commercial
and residential properties in the USA
across 49 states as an alternative to the
National Flood Insurance Program (NFIP)
Hiscox Ltd Report and Accounts 2021
27
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Hiscox Re & ILS
Gross premiums written
Net premiums written
Underwriting profit/(loss)
Investment result
Profit/(loss) before tax
Combined ratio (%)
2021
$m
807.8
274.2
91.1
8.8
98.5
68.0
2020
$m
743.4
192.7
(67.7)
33.6
(35.1)
131.8
product. In 2020, we further expanded
our product range by launching FloodPlus
Excess, offering additional cover in
excess of the NFIP. In the five years
since inception, FloodPlus has grown
to form the majority of our $100 million
flood book with 70,000 customers.
Twenty-eight of our coverholder partners
are seamlessly connected to our
FloodPlus API service that uses advanced
algorithms to deliver bindable quotes in
less than ten seconds and it is currently
averaging 17,000 quotes per week.
FloodPlus has advanced risk management
capability, allowing the control of
aggregate exposure to an extremely
granular level. This approach combined
with the ability to adjust prices in real time
allows the generation of optimal spread
of risk through the portfolio.
reinstatement premiums, premiums
are down 0.4% year on year, as an
improved rating environment has been
offset by re-underwriting actions in risk
and pro-rata and aggregate books.
Importantly, net premiums written grew
by 42.3% as we deployed more capital
into an improving rating environment,
which will build earnings power into
2022. Hiscox Re & ILS made a profit of
$98.5 million and achieved combined
ratio of 68.0%; this is an excellent result.
Hiscox Re & ILS business delivered
$91.1 million of underwriting result, as a
strong non-catastrophe loss experience
and favourable prior-year movements
in our Japan and risk books more
than offset the elevated net natural
catastrophe losses of $122.0 million net
of reinstatement premiums in the period.
In 2020, we launched BindPlus Residential
which offers private property insurance
with coverage for wind, earthquakes,
wildfires and any other perils. In March
2021 we extended our BindPlus
API offering by launching BindPlus
Commercial, supplementing the flood
and the household products already
on the platform. Our plan for 2022 is to
streamline the platform technology and
scale it to meet the growth ambition we
have for this business.
In February 2022, Helen Rose assumed
her role as Chief Financial Officer of
Hiscox London Market and Hiscox
Syndicates Limited. With more than a
decade in the insurance industry, Helen
held a number of roles with Aspen Group,
including Insurance CFO, UK CFO and
most recently Chief Accounting Officer.
Since 2016, Hiscox Re & ILS has
non-renewed $378 million of
non-profitable business, having fully
exited casualty and healthcare and
significantly reduced risk exposure.
In property, we have reduced the
aggregate and bottom layer exposures
on North American catastrophe
business, most notably in Florida, and
our Japanese typhoon exposure is 23%
less than it was three years ago. In cyber,
ahead of the market, we exited some
low attaching risks to reduce exposures
to increasing ransomware attacks while
our core stop loss product continued
to benefit directly from the significant
improvements in the underlying rate
adequacy. In short, we have rebalanced
the book to align to our expertise and
create more resilience while also driving
rate improvement and margin expansion.
2022 ($1.4 billion at 31 December 2021),
supporting gross premiums written
growth into 2022.
Matthew Wilken joined the business as
our new Chief Underwriting Officer in
January 2022. He joins from MS Amlin
Underwriting Ltd, where he held the Head
of Reinsurance role. Matthew spent his
early career at Kiln Syndicate, Argo Re and
Ariel Re. With his underwriting acumen
and a strong market reputation, we are
delighted to be further strengthening our
underwriting and executive teams.
Dividend, capital and
liquidity management
The Group remains strongly capitalised
against both regulatory and rating
agency requirements. The Hiscox
Group Bermuda solvency capital
requirement (BSCR) ratio is estimated
at 31 December 2021 at 200%, a
13 percentage point improvement on
the prior year. The 11 percentage point
impact of the final stage of strengthening
of the formula (an industry-wide basis
strengthening implemented by our
Group regulator, the Bermuda Monetary
Authority) was more than offset by a
combination of strong organic capital
generation and 13 percentage points
of benefit from proactive capital
management through loss portfolio
transfer (LPT) transactions executed in
the period. On an S&P basis we remain
well capitalised to maintain an A rating.
S&P are in the process of updating their
capital model, as a result of this Hiscox is
expected to benefit from recognition of
risk diversification benefit in our business
model and conservative reserve margin.
Hiscox Re & ILS
Gross premiums written increased
by 8.7% to $807.8 million (2020:
$743.4 million), however, excluding
Our ILS proposition has attracted new
inflows, $190 million in 2021 and a
further $217 million in January 2022.
AUM stands at $1.6 billion at 1 January
During 2021 and into 2022, we have
continued to proactively take action to
limit profit volatility from the back-book,
in particular where we have decided
28
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Strategic focus
Total Group controlled income for 2021
100% = $4,795 million
Big-ticket business
Larger premium, globally traded, catastrophe-exposed
business written mainly through Hiscox London Market
and Hiscox Re & ILS.
Retail business
Smaller premium, locally traded, relatively less volatile business
written mainly through Hiscox Retail.
Reinsurance
19%
Large property
10%
Casualty
8%
Specialty – terrorism, product recall
6%
Marine and energy
6%
Small commercial
28%
Tech and media casualty
7%
Art and private client
10%
Specialty – kidnap and ransom,
contingency, personal accident
4%
Small property
2%
Hiscox Ltd Report and Accounts 2021
29
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Portfolio – asset mix
Investment portfolio $7,290 million as at 31 December 2021
75.9
17.8
6.3
16.4
11.4
9.6
28.0
28.7
5.9
70.4
17.3
8.4
3.9
Asset allocation (%)
Debt and fixed income holdings
Cash and cash equivalents
Equity and investment funds
Debt and fixed income holdings credit quality (%)
Gvt
AAA
AA
A
BBB
BB and below
Debt and fixed income holdings currency split (%)
USD
GBP
EUR
CAD and other
30
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
The Board believes that
paying a dividend is
one important indicator
of the financial health
of the Group. Having
carefully considered the
capital requirements of
the business, the Board
has recommended to
shareholders for approval
the payment of the final
dividend at 23.0 cents
per share.”
to exit the business. In the first half
of 2021, the Group undertook two
LPT transactions, covering legacy
healthcare claims in Bermuda and
the selected lines of Hiscox Syndicate
3624, including the majority of Hiscox
USA’s surplus lines broker business.
The two transactions cover 15% of
2019 and prior years’ gross reserves,
and will remove potential reserve
volatility from longer tail lines which
we have mostly exited in the coming
years, thus allowing management to
focus on the opportunities presented
by the good trading conditions we have
ahead of us. This together with the
substantial reserve margin above the
actuarial best estimate demonstrates
our resilient foundations.
The Board believes that paying a
dividend is one important indicator
of the financial health of the Group.
Having carefully considered the capital
requirements of the business, the Board
has recommended to shareholders
for approval the payment of the final
dividend at 23.0 cents per share.
This brings our total dividend for the
year to 34.5 cents per share. The
record date for the dividend will be
6 May 2022 and the payment date will
be 13 June 2022. The Board proposes
to offer a Scrip alternative, subject to the
terms and conditions of Hiscox’s 2019
Scrip Dividend Scheme. The last date
for receipt of Scrip elections will be
20 May 2022 and the reference price will
be announced on 30 May 2022. Further
details on the dividend election process
and Scrip alternative can be found on the
investor relations section of our corporate
website, www.hiscoxgroup.com.
Investments
We manage our investment portfolio with
two main objectives in mind:
providing sufficient liquidity to pay
claims and providing capital to
support the underwriting business,
while generating strong risk-adjusted
returns. Given the depressed yield on
our short-dated bond portfolio at the
start of the year, and the rising rate
environment during 2021 driving
mark to market losses, investment
returns were subdued at $51.2 million
(2020: $197.5 million) after investment
expenses, a return of 0.7% (2020: 2.8%).
Assets under management at
31 December 2021 were $7.3 billion
(December 2020: $7.6 billion).
Despite global supply chain pressures
and intermittent pandemic-driven
lockdowns, the strong global economic
recovery saw equity markets deliver
strong returns over the year. While
bond markets were initially calmed by
reassurance from central banks that
inflationary pressures were temporary,
the latter part of 2021 saw sharper
increases in bond yields as central
banks started to scale back asset
purchases and indicate that they
would implement tighter interest
rate policy going forwards.
Government bond yields increased
over the period, however, they remain
depressed relative to historical levels
and credit spreads for high-quality
bonds remain near their historical
lows. The yield to maturity on the
bond portfolio improved in 2021,
but remained modest at 1.0% at end
December 2021 (December 2020: 0.4%).
Central banks have started to tighten
monetary policy since the year end,
and markets are pricing in several rate
rises through 2022 and government
bond yields have shifted sharply higher
at shorter maturities. The resulting
Hiscox Ltd Report and Accounts 2021
31
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
temporary mark to market losses on
our short-dated bond portfolios will
make a considerable dent in 2022
investment returns, but we are pleased
that the interest rate environment
has started to normalise, markedly
improving reinvestment opportunities
in the longer term.
Year to date, our bond portfolio yield
has risen to 1.7%, up from 1.0% at end
December 2021. The short-dated
nature of our investment portfolio means
we will be able to reinvest maturities
at higher rates to capitalise on the
higher yield environment during 2022,
however, this will be partly offset by
mark to market losses in the short term.
The outlook for 2023 is now looking
brighter with respect to investment
income and we continue to look through
ongoing volatility to steadily invest into
diversifying positions where valuations
present attractive long-term risk and
capital-adjusted outcomes.
People
Hiscox could not have become
the business it is today without the
contribution of its dedicated, resourceful
and talented people; our future success
fully rests on our people. It is a key
competitive advantage that we have and
I am fully committed to nurturing and
investing in our people. I am also pleased
to welcome new world-class talent to the
Group. In December, we announced
Paul Cooper was appointed as Group
Chief Financial Officer, subject to
regulatory approval. Paul has over 25
years of financial services experience
across both the retail and Lloyd’s
insurance markets and his broad
commercial acumen as well as his
audit, regulatory and capital markets
experience will help us capture the
many opportunities ahead.
32
Hiscox Ltd Report and Accounts 2021
In February 2022, Jon Dye was
appointed to become the new UK Chief
Executive Officer, effective September
2022, subject to regulatory approval. Jon
has held a number of senior roles within
the industry, most recently as CEO of
Allianz UK for eight years. He also served
as Chair of the ABI between 2019 and
2021, and as such has driven industry
collaboration on issues including the
industry’s response to the pandemic,
FCA fair pricing review and climate
change. Jon is a recognised industry
leader with solid CEO experience and
I look forward to working with him as
part of our Group Executive Team.
Hiscox has always had a differentiated
culture and we are keen to preserve
its unique nature, such as a sense of
proprietary ownership, entrepreneurial
spirit, empathy for each other, customers
and partners. At the same time, we are
entering a new stage of our journey, so
our culture will evolve as we become a
larger business. I am keen for our people
to be clear about the role they play in the
overall Group strategy and how they are
contributing to our joint future success.
With this in mind I have created a single
Group Executive Committee, with five
business unit CEOs complemented by
five functional leaders, including the new
role of a Group Chief Operating Officer.
Our new executive leadership team will
ensure increased collaboration between
business units and Group functions and
will steer coordinated execution of the
Group strategy.
Environmental, social and governance
ESG matters at Hiscox; it is why we were
a founding member of ClimateWise, a
public supporter of the Task Force on
Climate-related Financial Disclosures
(TCFD) and a signatory to the 2015 Paris
Hiscox could not have
become the business
it is today without
the contribution of its
dedicated, resourceful
and talented people;
our future success fully
rests on our people.”
Agreement. We made good progress on
ESG issues in 2021, but of course there is
more still to do.
On the environmental side, we made
new greenhouse gas (GHG) emission
reduction commitments, using
Science Based Targets initiative (SBTi)
methodologies, that align with a
1.5°C net-zero world by 2050. These
include reducing our Scope 1 and 2
emissions by 50% by 2030; reducing
our operational Scope 3 emissions by
25% per FTE by 2030; and transitioning
our investment portfolios to net zero by
2050. The aim is that more than 25% of
our corporate bond portfolio by invested
value will have net-zero/Paris-aligned
targets by 2025, and more than 50%
by 2030. Our new commitments also
include engaging with our suppliers,
brokers and reinsurers on our net-zero
targets as well as their own, and
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Chief Executive’s report
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
monitoring emerging standards around
underwritten emissions so we can
align with best practice as it emerges.
We will share periodic updates on our
progress towards accomplishing these
ambitions, and remain operationally
carbon neutral through offsetting, as
we have been since 2014.
In addition, our ESG exclusions policy
– which sets out our ambition to reduce
steadily and eliminate by 2030 our
insurance, reinsurance and investment
exposure to coal-fired power plants and
coal mines; Arctic energy exploration,
beginning in the Arctic National
Wildlife Refuge region; oil sands; and
controversial weapons – officially
came into force on 1 January 2022. Our
big-ticket risks are now categorised by
ESG status and we have developed new
underwriting dashboards that provide
live views of our exposure to excluded
sectors; steps that enabled us to start
declining out-of-scope risks ahead of
time. In investments, we have been
embedding a range of ESG requirements
in segregated investment manager
mandates and have already eliminated
all direct exposures outside of appetite.
This, alongside the semi-annual ESG
reviews we have established with our
managers, has enabled our investment in
sustainable and impact assets including
green bonds to reach over $250 million.
When it comes to social, I think of this
in three parts: customers, colleagues
and communities. We paid $1.25 billion
in claims during the year, but we also
helped our customers to actively manage
risk through tools such as our CyberClear
Training Academy. For colleagues, we
continue to focus on improving diversity
at all levels. Our 15 employee network
chapters – encompassing Latino and
Pan-African communities, WeMind,
Pride, and parents and caregivers –
play an important part in this, but so
too does our diversity reporting. 2021
marked our fifth year of UK gender pay
reporting and although our gender pay
gap has been steadily reducing since
2017, it continues to be predominantly
driven by more men than women holding
more senior roles. I am pleased to see
our current Board diversity reach 55%
men and 45% women, and my newly
formed Group Executive Committee
comprises 40% men and 60% women,
but equally I recognise we have more to
do here. And finally, our communities,
where the combination of Hiscox Gives
(our fundraising and volunteering arm),
the Hiscox Foundation (our charitable
foundation) and our employee-led
green teams continue to drive a range
of socially responsible initiatives – from
beach clean-ups in Bermuda to plastic
fishing on the River Thames. In 2021,
this work resulted in $1.5 million
donated to good causes and over
1,000 volunteering hours.
In governance, we boosted our existing
commitments by becoming members
of the Principles for Responsible
Investment (PRI) – both as an asset
owner and asset manager – and the
Principles for Sustainable Insurance
(PSI). We also strengthened our existing
ESG oversight structure with the
formation of our Sustainability Steering
Committee (SSC), bringing new senior
expertise to our activities. The SSC
is responsible for executing our ESG
strategy across our operations, driving
actions and delivery at a Group level,
tracking our sustainability performance
over time, and identifying relevant risks
and opportunities – with an initial focus
on climate change. I am pleased to chair
the SSC and personally contribute to our
sustainability agenda.
Outlook
I am optimistic about the outlook
for 2022. Cumulative rate increases
over a number of years in our big-
ticket businesses have created the
opportunity to build balanced portfolios
with improved margins and resilience
and the profit outlook is positive. Our
Retail business is very well placed to
drive significant growth into large and
underserved markets. With much of the
course correction complete, I expect
this to lead to strong headline growth,
improving profitability and we remain
on track to achieve the 90% to 95%
combined ratio target in 2023.
While the recent extreme weather
events are a stark reminder that we
live in an unpredictable world, the
re-underwriting actions we have
undertaken mean our business
portfolio is less volatile and more
resilient; and we are strongly capitalised
with sufficient financial flexibility to
support our growth ambitions.
Finally, I would like to thank our
employees, business partners and
shareholders for their continued support.
Aki Hussain
Group Chief Executive Officer
2 March 2022
Hiscox Ltd Report and Accounts 2021
33
Q&
A:
with Robert Dietrich
Chief Executive Officer, Hiscox Europe
Euro vision
Hiscox Europe is
transforming its core
system through
Project Leap and has
developed a strong
vision for the future.
In 1997, when Robert
Dietrich joined Hiscox as
an administration manager,
he was the business’s fifth
employee in Germany.
Sixteen years ago, after
a stint as European
Underwriting Director,
he became Managing
Director of Germany. In
2021, he was made Chief
Executive Officer of Hiscox
Europe, overseeing eight
countries and more than
600 employees.
Q: In your 25 years with
Hiscox, how dramatically
has the European
operation changed?
A: When we started in Germany
nobody knew us. Nobody.
They couldn’t even pronounce
Hiscox. There was an orange
juice in Germany that had a
similar name, so everybody
here thought we made orange
juice. Hiscox didn’t have any
brand; now we have a very
good brand. Almost everything
has changed. The only thing
that hasn’t changed is that
start-up mentality, that feeling
that you haven’t achieved it yet,
that you’ve just started the first
chapter of an exciting book
and there’s so much more to
do. People are really motivated
to be here. It’s fun to build
something. We always say:
“Next year is going to be super
exciting”, and it’s true every
year. Next year is going to be
super exciting, we’re going to
do something completely new
and challenging. I have not
been bored one single day at
Hiscox, not one single day.
Q: How does it work,
running a business across
an entire continent?
A: We’re taking care of eight
countries, and we’ve got
over 600 people. It can be
complicated, having different
nationalities, different sizes
of operation, different
evolution stages, but we
believe that we’re greater
together. We exchange
so many ideas – that’s the
fascinating part of being so
international, that you can
get the best ideas from all the
different countries. Our vision
is that we want to become
the most recommended
insurer in Europe. That’s
the common goal.
34
Hiscox Ltd Report and Accounts 2021
Q: Looking back at 2021,
what are the achievements
that stand out for you?
A: The thing that I’m most
happy about is how we
managed to respond to
Covid-19. At the start of the
crisis, we said: “We’ll look after
our people, we’ll look after our
clients, and we’ll make sure
we don’t stop the big strategic
initiatives”. In Europe, I think we
accomplished all three goals.
The business results have
been very good – we’ve grown
and we’re profitable – but the
bigger accomplishment has
been in the culture and the
spirit, and how that’s survived
the pandemic.
Beyond that, the thing
I’m most proud of is that in
2020, right at the beginning
of lockdown, we started a
technology project called
Leap. There was a big
question: can we manage a
big project like that remotely,
with people from Germany, the
UK, Israel, Portugal, India, all
working together to achieve
something? The team did so
well. We did it on time and
within budget. This wasn’t
just a job, this was a mission.
It’s something we will benefit
from for years to come.
Q: What is Project Leap
seeking to achieve?
A: It’s about rebuilding our
core system. At an insurance
company, the core system
is the most complex thing
to change – it underpins
everything. For 23 years,
we’ve worked with a system
we created ourselves. I’m quite
proud of what we built, but
with it we wouldn’t be able to
achieve our vision. The new
platform will make it possible
for our business to really scale
up, get better connectivity
to the market, increase
automation and set the
foundations for gathering and
using data. We started with
Germany as a pilot, and now
we’re moving on to France.
This is where this idea of
‘greater together’ comes in: no
country in isolation could afford
a system change like that,
but combined we can do it.
Q: Are there any other
changes happening
in parallel?
A: On the front end, working
with brokers, we’re continuing
to move into digitisation.
That’s also the case with
direct-to-consumer,
because buying behaviour
is changing so quickly.
If you’re a 28-year-old
consultant and you want
to buy insurance on a
Sunday evening, you don’t
want to go via a broker.
New partnerships and new
platforms are emerging all
the time. It’s not just brokers
and end consumers, either. In
France, for example, smaller
clients often go via banks, so
we need to partner with those
banks. These models are
changing, and we need
to play a role in all of them.
Q: How do you see the
human value being
applied at Hiscox?
A: For me, it’s not necessarily
always the big things. It’s
lots of small things. It’s about
being a decent person. It’s
about saying please and
thank you and well done,
no matter what position
you’re in. It’s about helping a
colleague who needs a hand,
supporting someone who
feels a bit down, just being
there when you’re needed.
It’s how we treat clients if
they have a claim. It’s how
we deal with a complaint.
It’s about trying to feel a bit of
what other people are going
through. That’s what being
human means.
Q: During the lockdowns
of the past two years, what
did you miss most about
being around other people?
A: For me, the office is like a
cultural shower. It’s refreshing.
Every person you meet, you
have a chat, you have a laugh,
you discuss something, you
have a creative idea together.
I think we did a pretty good job
in trying to be connected, but
just having an unscheduled
chat and a laugh, a bit of
camaraderie, I think that’s
the bit that I missed most.
Hiscox Ltd Report and Accounts 2021
35
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Capital
The Board monitors the Group’s
capital strength, ensuring Hiscox
remains suitably capitalised for
regulatory and rating purposes, and
to fund future growth opportunities.
Monitoring of the Group’s capital
requirements is based on both external
risk measures, set by regulators and
rating agencies, and our own internal
guidelines for risk appetite.
The Group measures its capital
requirements against its available
capital, which is defined by the Group
as the total of net tangible asset
value and subordinated debt. The
subordinated debt issued by the
Group is hybrid in nature, which
means it counts towards regulatory
and rating agency capital requirements.
At 31 December 2021, available capital
was $2,599 million (2020: $2,431 million),
comprising net tangible asset value of
$2,226 million (2020: $2,055 million)
and subordinated debt of $373 million
(2020: $376 million).
The Group can source additional
funding from its borrowing facilities
which comprise a revolving credit and
Letter of Credit facility, as well as a
Tier 1 Funds at Lloyd’s facility. Standby
funding from these sources comprised
$941 million (2020: $946 million), of
which $331 million was utilised as at
31 December 2021 (2020: $524 million).
Our key rating agencies, A.M. Best,
S&P and Fitch, calculate capital
adequacy by measuring available
capital, after making various balance
sheet adjustments, and comparing
it with required capital, which
incorporates charges for catastrophe,
premium, reserve, investment and
credit risk. Our interpretation of
the results of each of these models
indicates that we are comfortably able
to maintain our current A ratings. In
December 2021, S&P published details
of significant proposed changes to
the model used to assess our capital
adequacy for consultation. We expect
these changes to be introduced
during 2022. We will be looking at any
consequences for our capital position
very closely and will factor this into our
capital management plans. Being an
A-rated business is important to us,
and our intention is to maintain our
current strong ratings.
The Group manages the underwriting
portfolio so that, in a 1-in-200 aggregate
bad year across all major risk types, it
will still be able to meet its regulatory
capital commitments. A market loss of
this magnitude would be expected to
bring about increases in the pricing of
risk, and the Group’s capital strength and
financial flexibility following this scenario
means we would be well positioned to
take advantage of any opportunities
that might arise as a result.
The Group is regulated by the Bermuda
Monetary Authority (BMA) under
the Bermuda Group Supervisory
Framework. The BMA requires Hiscox
to monitor its Group solvency and
provide a return in accordance with the
Group Solvency Self Assessment (GSSA)
framework, including an assessment
of the Group’s Bermuda Solvency
Capital Requirement (BSCR). The BSCR
model applies charges for catastrophe,
premium, reserve, credit and market
risks to determine the minimum capital
required to remain solvent throughout
the year.
The GSSA is based on the Group’s own
internally-assessed capital requirements
We continue to
manage our capital
proactively, leading
to a robust position
which will enable us to
seize the underwriting
opportunities that
lie ahead.”
Craig Martindale
Group Head of Capital Management
36
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Capital
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
167
The Hiscox businesses are rated
‘A’ by A.M. Best and S&P and A+
by Fitch. Read more in note 3 to
the financial statements.
Read more about our financial condition
in our financial condition report
hiscoxgroup.com/about-hiscox/
group-policies-and-disclosures
and is informed by the Group-wide
Hiscox integrated capital model (HICM)
that, together with the BSCR, forms
part of the BMA’s annual solvency
assessment. The HICM provides a
consistent view of capital requirements
for all segments of the business and at
Group level.
3.0
2.5
2.0
The Group’s estimate for the year-end
2021 BSCR solvency coverage ratio is
200%, which includes the final stage of
changes to the BSCR standard formula
phased in by the BMA over a three-year
period, which began in 2019. These
changes since last year-end have
been effectively offset by our proactive
approach to capital management in
the form of two loss portfolio transfer
transactions. The first relates to legacy
healthcare claims in Bermuda, while
the second covers selected lines of
Hiscox Syndicate 3624, including the
majority of Hiscox USA’s surplus lines
broker business. Both transactions are
designed to remove reserve volatility in
the coming years, allowing us to focus on
the opportunities presented by the good
trading conditions we have ahead of us.
1.0
1.5
0.5
The Group continues to operate with a
robust solvency position and expects
to maintain an appropriate margin of
solvency going forward. In addition, each
of the respective insurance carriers holds
appropriate capital positions on a local
regulatory basis.
0.0
Projected capital requirement
$2.60 billion available capital
$2.52 billion available capital (post-final dividend)
Economic
Regulatory
A.M. Best
S&P
Fitch
Hiscox
integrated
capital model
(economic)
Hiscox
integrated
capital model
(regulatory)
Bermuda
enhanced
solvency
capital
requirement
Rating agency assessments shown are internal Hiscox assessments of the agency capital requirements
on the basis of projected year-end 2021. Hiscox uses the internally developed Hiscox integrated capital
model to assess its own capital needs on both a trading (economic) and purely regulatory basis. All capital
requirements have been normalised with respect to variations in the allowable capital in each assessment
for comparison to a consistent available capital figure. The available capital figure comprises net tangible
assets and subordinated debt.
Hiscox Ltd Report and Accounts 2021
37
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Risk management
The Group’s core business is to take
risk where it is adequately rewarded,
guided by a strategy that aims to
maximise return on equity within a
defined risk appetite. The Group’s
success is dependent on how well
we understand and manage our
exposures to principal risks.
Risk strategy
Our robust risk strategy positions us to
capture the upside of the risks we pursue
and effectively manage the downside of
the risks to which we are exposed. It is
based on three key principles:
— we maintain underwriting discipline;
— we seek balance and diversity
through the underwriting cycle;
— we are transparent in our approach
to risk, which allows us to
continually improve awareness
and hone our response.
Risk management framework
The Group takes an enterprise-wide
approach to managing risk. The risk
management framework provides
a controlled system for identifying,
measuring, managing, monitoring
and reporting risk across the Group.
It supports innovative and disciplined
underwriting across many different
classes of insurance by guiding our
appetite and tolerance for risk.
Exposures are monitored and
evaluated both within the business
units and at Group level to assess
the overall level of risk being taken
and the mitigation approaches being
used. We consider how different
exposures and risk types interact,
and whether these may result in
correlations, concentrations or
dependencies. The objective is to
optimise risk-return decision-making
while managing total exposure, and in
doing so remain within the parameters
set by the Board.
The risk management framework is
underpinned by a system of internal
control, which provides a proportionate
and consistent system for designing,
implementing, operating and
assessing how we manage our key
risks. This framework is regularly
reviewed and enhanced to reflect
evolving practice on risk management
and governance. During 2021, we
continued to embed and strengthen
our system of internal control.
Risk appetite
The risk appetite sets out the nature and
degree of risk the Group is prepared to
take to meet its strategic objectives and
business plan. It forms the basis of our
exposure management and is monitored
throughout the year.
Our risk appetite is set out in risk
appetite statements, which outline the
level of risk we are willing to assume,
both by type and overall, and define
our risk tolerances: the thresholds
whose approach would represent a
‘red alert’ for senior management and
the Board.
Risk appetites, which are set for each
of our insurance carriers and for the
Group as a whole, are reviewed
annually, enabling us to respond to
internal and external factors such as
the growth or shrinkage of an area of
the business, or changes in the
underwriting cycle that may have an
impact on capacity and rates. In 2021,
we continued to enhance and refine
our risk appetite statements across
the Group.
Our risk management
strategies continue to
evolve with our business,
enabling us to adapt
our responses to
key emerging and
changing trends like
climate and cyber.”
Hanna Kam
Group Chief Risk Officer
38
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Risk management
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Risk management framework
Understanding and managing the
significant exposures we face.
Three lines of defence model
Hiscox Own Risk and Solvency
Assessment (ORSA) framework
The Group’s ORSA process is an evolution
of its long-standing risk management
and capital assessment processes.
Risk governance
First line of defence
Owns risk and controls
ORSA governance
Risk
definition
Risk
owner
Risk
reporting
R
O
S A proce
s
s
Responsible for ownership and
management of risks on a day-to-day
basis. Consists of everyone at every
level in the organisation, as all have
responsibility for risk management
at an operational level.
Risk
appetite
ORSA
documentation
Business
planning
Risk
monitoring
Risk
measurement
Risk
mitigation
Risk management across the business
The Group coordinates risk management
roles and responsibilities across three
lines of defence. These are set out
in the model to the right. Risk is also
overseen and managed by formal and
informal committees and working groups
across the first and second lines of
defence. These focus on specific risks
such as catastrophe, cyber, casualty,
sustainability, reserving, investments
and credit, as well as emerging risks.
The Group Risk and Capital Committee
and the Group Underwriting Review
Committee make wider decisions on risk.
Second line of defence
Assesses, challenges and advises
on risk objectively
Provides independent oversight,
challenge and support to the first line
of defence. Includes the Group risk
team and the compliance team.
Third line of defence
Provides independent assurance
of risk control
Provides independent assurance to
the Board that risk control is being
managed in line with approved policies,
appetite, frameworks and processes,
and helps verify that the system of
internal control is effective. Consists
of the internal audit function.
Assurance
Risk
assessment
Capital and
solvency
assessment
The Own Risk and Solvency
Assessment (ORSA) process
The Group’s ORSA process involves a
self-assessment of the risk mitigation
and capital resources needed to achieve
the strategic objectives of the Group
and relevant insurance carriers on a
current and forward-looking basis,
while remaining solvent, given their risk
profiles. The annual process includes
multi-disciplinary teams from across the
business, such as capital, finance and
business planning.
Hiscox Ltd Report and Accounts 2021
39
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Risk management
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
More information on our approach to
risk management can be found at
hiscoxgroup.com/about-hiscox/
risk-management
10
Read more about our key risks.
The role of the Board in risk
management and key
developments during 2021
The Board is at the heart of risk
governance and is responsible for
setting the Group’s risk strategy
and appetite, and for overseeing
risk management (including the risk
management framework). The Risk
Committee of the Board advises on
how best to manage the Group’s risk
profile by reviewing the effectiveness
of risk management activities and
monitoring the Group’s risk exposures,
to inform Board decisions.
The Risk Committee relies on frequent
updates from within the business and
from independent risk experts. At each
of its meetings during the year, the Risk
Committee reviews and discusses a
risk dashboard and a critical risk tracker
which monitors the most significant
exposures to the business, including
emerging risks and risks that have
emerged but continue to evolve. The
Risk Committee also engages in focused
reviews. Stress tests and reverse stress
tests (scenarios such as those shown
in the chart opposite, which could
potentially give rise to business failure
as a result of either a lack of viability or
capital depletion) are also performed
and reported on to the Risk Committee.
The Risk Committee also provided input
into a number of key risk management
developments during 2021.
— A structural review of the risk
appetite limits framework
was undertaken, taking into
consideration the changing nature
of the Group’s business mix. This
included an enhancement of the
risk limits calibration to reflect
the interdependent relationship
between underwriting risk (current
40
Hiscox Ltd Report and Accounts 2021
year volatility), reserve risk (prior
years) and reinsurance strategy.
Multiple workshops were held
with Board members providing
valuable feedback for the use of
risk limits and risk modelling.
For the Group, we formalised
an aggregate risk measure for
solvency monitoring at different
return periods.
— Enhancements were made to our
risk and control self-assessment
(RCSA) which is an annual
programme of work undertaken
across the Group to assess the key
risks and controls in our risk and
control register (RCR). The RCSA
ensures the business appropriately
reflects the key risks it currently
faces; appropriate key controls are
captured against each of these risks
and it enables the first line, as risk
and control owners, to better focus
attention on areas where additional
oversight is needed to further uplift
the control environment.
— A critical risk designation review
was conducted during the year
to ensure that those risks within
the RCR that are identified as
critical continued to reflect the
most significant exposures to
the business.
— Summary operational risk metrics
dashboard reports, aligned to
the RCR, were developed and
presented to the Risk Committee to
strengthen the visibility of existing
operating metrics utilised across
the Group, as well as to develop
additional metrics where areas for
enhancement were identified.
In light of these arrangements and the
key developments made in 2021, the
Directors are satisfied that a robust
assessment of the emerging and
principal risks facing the Company,
including those that would threaten its
business model, future performance,
solvency or liquidity, has been carried
out during the year and that no
material changes to the principal
risks are required.
The role of the Group risk team
The Group risk team is responsible
for designing and overseeing the
implementation and continual
improvement of the risk management
framework. The team is led by the
Group Chief Risk Officer who reports
to the Group Chief Executive Officer,
the Risk Committee of the Board and
of the relevant subsidiary boards.
The team works with the first-line
business units to understand how they
manage risks and whether they need
to make changes in their approach.
It is also responsible for monitoring
how the business goes about meeting
regulatory expectations around
enterprise risk management.
2021 has seen a continued focus on
improving the efficiency of the risk
management framework, mainly
through the streamlining and automation
of repeatable cycles. This drive for
efficiency allows for an increase in
risk deep-dives and for more support
to be available to the portfolio of
Group-wide change programmes,
as well as ensuring appropriate
support and challenge is provided to
the first line of defence in assessing,
understanding and responding to risks
that continue to emerge out of Covid-19.
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Risk management
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Property extreme loss scenarios
Boxplot and whisker diagram of modelled Hiscox Ltd net loss ($m) January 2022
700
600
500
400
300
200
100
0
Upper 95%/lower 5%
Modelled mean loss
Hiscox Ltd loss ($m)
700
600
500
400
300
200
100
0
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period and peril
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7
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1
JP
EQ
JP
WS
EU
WS
US
EQ
US
WS
JP
EQ
JP
WS
EU
WS
US
EQ
US
WS
JP
EQ
JP
WS
EU
WS
US
EQ
US
WS
JP
EQ
JP
WS
EU
WS
US
EQ
US
WS
JP
EQ
JP
WS
EU
WS
US
EQ
US
WS
5–10 year
10–25 year
25–50 year
50–100 year
100–250 year
Mean industry loss $bn
02
05
07
02
28
06
09
13
07
55
15
16
22
19
99
28
25
29
38 152
48
37
38
68 217
This chart shows a modelled range of net loss the Group might expect from any one catastrophe event.
The white line between the bars depicts the modelled mean loss.
The return period is the frequency at which an industry insured loss of a certain amount or greater is likely to occur.
For example, an event with a return period of 20 years would be expected to occur on average five times in 100 years.
JP EQ – Japanese earthquake, JP WS – Japanese windstorm, EU WS – European windstorm, US EQ – United States earthquake, US WS – United States windstorm.
Hiscox Ltd Report and Accounts 2021
41
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Stakeholder engagement
Shareholders
Our shareholders value our clear
strategy, strong underwriting discipline
and sound capital management, and
we maintain ongoing engagement
with them.
Employees
We want to build teams that are as
diverse as our customers and create
a vibrant work environment where all
employees can thrive.
Regular investor dialogue
We maintain regular dialogue with capital
markets stakeholders, predominantly
via our Group Chief Executive Officer,
Group Chief Financial Officer and Head
of Investor Relations, who meet with
existing shareholders, potential investors
and research analysts regularly to
discuss our strategy, trading conditions,
business performance and other
factors affecting our operations.
We run several comprehensive investor
roadshows a year in the UK and USA
and participate in a range of investor
conferences. During 2021, the Company
conducted over 350 meetings and met
with over 130 investors, representing
approximately 75% of our issued
share capital.
Financial reporting
We report to the market on Company
performance four times per year,
providing shareholders with an overview
of recent business performance and
trading conditions. These are available
on our corporate website and as an
email alert for subscribers.
Annual Report and Accounts
Our Annual Report and Accounts gives
shareholders a more detailed view of the
business and includes some additional
corporate governance disclosures
beyond our statutory requirements.
Annual General Meeting (AGM)
Our AGM provides another regular
investor touchpoint. At the 2021 AGM,
all resolutions were passed with a
significant majority.
Annual employee engagement survey
Our annual employee engagement
survey gives all our employees the
opportunity to provide honest feedback
on how they feel about Hiscox, with the
results discussed at all levels including
Board level and informing future plans.
Board-level Employee Liaison
Non Executive Director, Anne
MacDonald, also serves as the Group’s
Employee Liaison, working with the
Group’s employee engagement network
to ensure that workforce views are
considered in Board decision-making.
Employee networks
Many of our employees are actively
engaged in at least one of our 15
employee network chapters, including
WeMind, Pan-African, parents and
carers, and Pride. These networks
are supported by our Directors, who
contribute to panel debates and other
employee events.
Communication updates
Employees have access to
Company-wide ‘connected’ events,
annual ‘launch’ events and ‘box’
meetings, many of which are led or
attended by our Directors to share
news, align on strategy and objectives
and celebrate successes.
Partners’ meetings
Hiscox Partner is an honorary title given
to employees who make significant
contributions to the development and
profitability of the Group. Up to 5% of
the total workforce are Hiscox Partners,
and have the opportunity to influence the
direction of our business through regular
formal and informal Partners’ meetings,
which Directors also attend.
Engagement with our
stakeholders is critical
to our continued
success, so we place
real importance on
considering and
responding to our
stakeholders’ needs
at all levels, including
Board level.”
Marc Wetherhill
Group General Counsel and
Company Secretary
42
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
Stakeholder
engagement
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Brokers
The risks we write through brokers
account for around 85% of our business,
so it is essential that we build strong and
lasting relationships with those brokers
that share our values.
Customers
We have over 1.5 million retail customers
worldwide and providing each of them
with products they can rely on is what
we are here for.
Regulators
We are a global business with a
responsibility to engage with regulators
in all jurisdictions where we operate.
The Group is regulated in Bermuda and
has regulated subsidiaries worldwide.
Annual Hiscox broker events
We hold an annual preferred broker
summit for our UK brokers, to share
insight and expertise, and a London
Market broker academy to educate
and inform. These events are
supported and often attended by
our Executive Directors.
Broker satisfaction survey
Each year we measure broker
satisfaction with our products and
services. In 2021, this involved
interviewing over 700 UK- and
US-based brokers, with the results
shared and discussed at Board level
and informing future plans.
Attending key industry events
We participate in key industry events in
every part of our broker-facing business,
including at Executive Director level.
This includes: BIBA, a UK insurance
and broker conference; the CIAB, a US
marketplace meeting for commercial
property and casualty brokers and
insurers; and, in our big-ticket businesses,
Monte Carlo, Baden Baden, and RIMS.
Thought leadership
We produce thought leadership that
enhances our broker relationships
and our position as experts in our
chosen areas. In 2021, this included
cyber security trends to be aware of,
managing malicious attacks, the future
of event cancellation, rebuild costs and
under-insurance, as well as climate
change and the role of wind energy
in the transitioning economy.
Customer satisfaction
We talk to thousands of customers each
year, through surveys, focus groups and
other qualitative research – including
feedback after they have bought a
product or made a claim – which are
reviewed by our leadership teams and
help to continually improve our offering.
Consumer awareness
We also measure the health of our
brand through regular brand tracking
surveys which assess consumer brand
awareness and perception. These are
shared with senior management and
inform marketing and sales activities.
Contributing to product development
We have undertaken qualitative
research in the UK as we look to develop
products tailored to professions such as
fitness professionals, digital marketing
and graphic designers. Insights gained
from professionals in these fields helps
shape our insurance offering to their
particular needs.
Informing our marketing
and communications
Marketing and communications activity
across our markets is informed by the
qualitative and quantitative research
we carry out with both existing and
potential customers. For example, a
US segmentation study which explored
attitudes and behaviours among small
businesses with revenues of up to
$25 million is contributing to a future
US marketing campaign.
Regular dialogue
Our Chief Compliance Officer and central
compliance team lead our relationships
with regulators worldwide and maintain
regular dialogue with them, with
involvement from senior management
and the Board when required.
Regulatory dialogue includes the annual
supervisory college, hosted by the BMA
as our Group supervisor, which gives
an important annual opportunity for
us to present a consistent message to
our regulators on issues of common
interest, and in 2021 was attended
by six members of the Group’s senior
management team.
Regulatory change
We contribute to the regulatory change
process, both directly and through active
membership of trade associations, such
as the Association of Bermuda Insurers
and Reinsurers and the Association of
British Insurers. Our Executive Directors
are important contributors to this work.
Scenario analysis and stress testing
We maintain a regular cycle of stress
testing and scenario analysis to ensure
we manage risk well and evolve at
the same pace as the risks we cover.
In 2021, this included participation in
the Bank of England’s Climate Biennial
Exploratory Scenario (CBES) exercise.
Regulatory reporting
The Group and its subsidiaries met all
material regulatory reporting obligations
for 2021.
Hiscox Ltd Report and Accounts 2021
43
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Environmental, social and governance (ESG)
ESG exclusions policy. With semi-annual
ESG reviews of all segregated investment
managers now established, assets under
management (AUM) in sustainable and
impact assets including ESG-related
bonds at over $250 million, and senior
investment team members undertaking
ESG specific investment training, we
have good progress to build on in 2022.
Greenhouse gas (GHG)
reduction targets
Setting new GHG targets for the Group
during the year required extensive
stakeholder engagement, across
functions including HR, procurement
and property services, an awareness
of evolving expectations around
‘net zero’, and alignment to the Science
Based Targets initiative (SBTi) which
is increasingly considered the global
standard (see page 49). We will build
on this work in 2022 by developing and
publishing a supporting action plan that
outlines the steps we will take towards
achieving these targets.
ESG governance structure
and resource
We strengthened our existing ESG
governance structure during the
year with the formation of a new
Sustainability Steering Committee.
This has increased senior-level oversight
and accountability for ESG matters,
specifically climate, and brought new
expertise to our activities (see page 47).
2021 marked another
year of progress in our
ESG efforts across the
Group, particularly on
environmental issues,
where climate volatility
presents both risks
and opportunities.
Sustainable underwriting
We have made important developments
towards defining a sustainable
underwriting approach for Hiscox
over the last 12 months. This has
included the implementation of our
ESG exclusions policy, which is
supported by an ESG dashboard to
monitor exposures frequently and
consistently (see page 47); becoming
a Principles for Sustainable Insurance
(PSI) signatory; and contributing to
key industry taskforces via the
Sustainable Markets Initiative and
ClimateWise. We will go further in
2022 as we look to embed a sustainable
underwriting strategy across each of
our business areas.
Responsible investment
We have transformed our approach to
responsible investment over the last
12 months. This has included becoming
a Principles for Responsible Investment
(PRI) signatory, both as an asset owner
and an asset manager through our
ILS business; and embedding ESG
requirements (including ESG exclusions)
in all segregated investment manager
mandates – such that there are no longer
any direct exposures in breach of the
Our ESG ambition is
clear. We want to be
there for the long term,
for our customers,
communities and our
people, operating in
a sustainable way for
the future.”
James Millard
Chief Investment Officer
and ESG Executive Sponsor
44
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Hiscox ESG framework
ESG issues touch many different parts of our business and the Hiscox ESG framework helps us stay focused and make an
impact. It ensures we are pragmatic and consistent, teaming Group-wide themes with local market relevance. We also evolve
as regulation changes and public interest in emerging issues grows.
Core themes
i s k
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Hiscox Ltd Report and Accounts 2021
45
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
2021 activity highlights
s New Board-approved, SBTi-aligned
greenhouse gas (GHG) reduction
targets set for the Group (see
page 49).
s ESG exclusions policy established
and new tracking introduced to
classify risks by ESG status.
s New Sustainability Steering
Committee improving senior
oversight and accountability.
s Signing up to the PRI and the PSI.
s Working with our industry to define
sustainable underwriting through
ClimateWise and the Sustainable
Markets Initiative.
New commitments and partnerships
Principles for Responsible Investment
Principles for Sustainable Insurance
HRH The Prince of Wales’ Sustainable
Markets Initiative
46
Hiscox Ltd Report and Accounts 2021
2022 focus areas
s Embed our new Group-wide
net-zero aligned GHG reduction
targets, including a supporting
action plan.
s Further review and refine our
strategy for carbon emissions
offsetting, as we look to remain
operationally carbon neutral.
s Enhance our sustainable
underwriting strategy for
the Group.
s Integrate ESG considerations
more formally within our supplier
management activities, boosting
engagement with our suppliers,
brokers and reinsurers on their
plans to adopt Paris-aligned
climate targets.
s Continue to review and refine our
existing physical risks and casualty
exposure management processes
to ensure climate change remains
appropriately reflected, particularly
when it comes to stress testing and
scenario analysis.
s Further embed climate change
assessment in the business
planning process to ensure the
continued consideration of
potential climate change impact on
our underwriting, reinsurance and
investments strategies.
s Continued industry collaboration
to identify areas where we can
help our insureds and reinsurers
progress towards decarbonisation,
and to contribute to the
development of common
methodologies in areas such
as underwritten emissions.
s Embed ESG-specific objectives for
each Group Executive Committee
member to ensure they are
empowered to play an active
role in our ESG agenda.
s Prepare for PRI and PSI reporting.
ESG governance structure
How we manage and monitor ESG issues
to ensure appropriate accountability
and oversight.
Board
Board
s Oversight of long-term ESG vision, strategy, priorities and performance against agreed metrics and targets.
s Ensures governance and accountability in place with sufficient support.
s Minimum twice-yearly discussion on ESG strategy, trends, opportunities, vulnerabilities, and emerging issues.
Risk Committee
Risk Committee
s Advises Board on ESG strategy, key priorities, risk profile, risk exposures and opportunities.
s Recommends proposals for consideration by the Board as required.
Group Risk
and Capital
Committee
(GRCC)
Group Executive
Committee
(GEC)
Group Risk and Capital Committee (GRCC)
Group Executive Committee (GEC)
s Quarterly reporting on ESG matters from Sustainability
s Periodic ESG sessions.
Steering Committee.
s Sets high-level Group strategy, priorities and ensures
delivery across the Group.
and functions.
s Sets business unit or function ESG-related strategy,
priorities and drives delivery through business units
Sustainability Steering Committee
Sustainability Steering Committee (SSC)
ESG working group
ESG working group
s Sub-committee of the GRCC, responsible for execution of the agreed ESG strategy, driving actions and delivery at a
Group level.
s Meets quarterly and embeds sustainability risks and opportunities, with an initial focus on climate.
s Oversees effective use of resources and tracks Group and entity-level sustainability performance.
s Ensures senior management-level involvement and accountability for sustainability issues, with senior representation
from areas including underwriting, investments and operations.
s Operational body, providing central point of coordination and expertise for ESG-related activity across the Group.
s Manages ESG-related Group reporting, disclosures and communications.
s Meets monthly and provides input and recommendations to management on ESG matters.
s Focuses on ESG-related research, including external monitoring and expectations.
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
ESG governance structure
How we manage and monitor ESG issues
to ensure appropriate accountability
and oversight.
Board
s Oversight of long-term ESG vision, strategy, priorities and performance against agreed metrics and targets.
s Ensures governance and accountability in place with sufficient support.
s Minimum twice-yearly discussion on ESG strategy, trends, opportunities, vulnerabilities, and emerging issues.
Risk Committee
s Advises Board on ESG strategy, key priorities, risk profile, risk exposures and opportunities.
s Recommends proposals for consideration by the Board as required.
Group Risk and Capital Committee (GRCC)
s Quarterly reporting on ESG matters from Sustainability
Steering Committee.
s Sets high-level Group strategy, priorities and ensures
delivery across the Group.
Group Executive Committee (GEC)
s Periodic ESG sessions.
s Sets business unit or function ESG-related strategy,
priorities and drives delivery through business units
and functions.
Sustainability Steering Committee (SSC)
s Sub-committee of the GRCC, responsible for execution of the agreed ESG strategy, driving actions and delivery at a
Group level.
s Meets quarterly and embeds sustainability risks and opportunities, with an initial focus on climate.
s Oversees effective use of resources and tracks Group and entity-level sustainability performance.
s Ensures senior management-level involvement and accountability for sustainability issues, with senior representation
from areas including underwriting, investments and operations.
ESG working group
s Operational body, providing central point of coordination and expertise for ESG-related activity across the Group.
s Manages ESG-related Group reporting, disclosures and communications.
s Meets monthly and provides input and recommendations to management on ESG matters.
s Focuses on ESG-related research, including external monitoring and expectations.
Hiscox Ltd Report and Accounts 2021
47
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Environmental
CO2
Hiscox has set new
targets, using SBTi
methodologies, that
align with a 1.5°C
net-zero world by 2050.
We carefully manage our environmental
impact and work with our customers,
suppliers and business partners to
respond to the changing climate. This
includes looking at our operations and
finding ways to limit our consumption
of materials such as energy and
water, and reduce the amount of waste
we generate. It also means investing in
areas such as research, catastrophe
modelling and new technologies that
improve our underwriting capabilities
and ensure we are well placed to help
our customers when it comes to
managing the risks they face.
ESG exclusions policy embedded
Last year, we set out our ambition to
reduce steadily and eliminate by 2030
our insurance, reinsurance and
investment exposure to coal-fired power
plants and coal mines; Arctic energy
exploration, beginning in the ANWR
region; oil sands; and controversial
weapons such as landmines.
Since then, we’ve:
s made system changes to allow
us to categorise big-ticket risks
by ESG status;
s created new underwriting
dashboards that provide live
views of our exposure to
excluded sectors;
s started to decline underwriting
risks that fall outside of appetite;
s shared the policy with our fund
managers, to ensure it is considered
in relation to pooled funds;
s eliminated our investment exposure
within all directly held bonds that fall
outside of appetite.
We will develop on this work in 2022
and provide periodic updates on
our progress.
Growing appetite for sustainable
insurance products
While we carefully manage the
underwriting risks associated with
climate change, we also recognise the
new opportunities that exist to support
customers as the risks they face evolve.
Our US flood product, FloodPlus, is
one example of this; providing broader,
more attractive flood cover than the
government-backed alternative to both
homeowners and businesses who face
a growing risk of flood. Demand for
FloodPlus is such that we now serve
over 70,000 customers across 49 states
and we have ambitious plans to build
on this in 2022. For more information,
see page 92.
Industry collaboration through the
Sustainable Markets Initiative (SMI)
During 2021, we were heavily involved in
HRH The Prince of Wales’ Sustainable
Markets Initiative. The SMI is designed
to accelerate the transition to a more
sustainable future, and we have
contributed to a number of its big-ticket
and retail-focused workstreams. The
first step was to promote the array
of green products and services that
(re)insurers are already providing,
so our early work culminated in a
public, industry-wide showcase to
demonstrate that our industry is already
thinking about, and responding to, the
transitioning economy. The showcase
featured Hiscox contributions from
across our flood, nuclear and motor
products, as well as how we support
decommissioning projects. These are
areas we will build on as we continue to
focus on climate-conscious products and
services. An overview of the showcase
can be found at: https://a.storyblok.
com/f/109506/x/c0c3181f7e/smi-itf_
products-and-services-showcase.pdf.
Understanding climate
science is really the
starting point for lots
of our environmental
activities. We have internal
expertise, including
climate scientists, who
inform our underwriting
approach, but we also
have plenty of other
passionate people
thinking about our
climate impact in
other ways.”
Robert Caton
Director of Underwriting Risk
and Reinsurance
48
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
92
Read more about how we plan to achieve
our new GHG targets.
GHG emissions*
Scope
Scope 1
Scope 2 (market-based)
Total Scope 1 and 2
Scope 3 (operational)
Total operational footprint
Scope 3 (non-operational)
Investments
2021
(tCO2e)
678
866
1,544
17,116
18,660
8,458
125,156
2020
(tCO2e)
615
1,111
1,726
27,461
29,187
7,046
135,275
Year-on-year
change
10%
-22%
-11%
-38%
-36%
20%
-7%
New Board-approved, SBTi-aligned GHG reduction
targets set for the Group
Getting to net zero is a shared challenge, and we need to
play our part in achieving this global goal. As a Group,
Hiscox has had stretching GHG emission reduction targets
for a number of years but this year we set new targets,
using SBTi methodologies, that align with a 1.5°C net-zero
world by 2050.
As a result, we commit to:
s reducing our Scope 1 and 2 emissions by 50% by 2030,
against a 2020 adjusted baseline*;
s reducing our operational Scope 3 emissions by 25%
per FTE by 2030, against a 2020 adjusted baseline*;
s transitioning our investment portfolios to net-zero GHG
emissions by 2050. The aim is that more than 25% of
our corporate bond portfolio by invested value will have
net-zero or Paris-aligned targets by 2025, and more than
50% by 2030;
s engaging with our suppliers, brokers and reinsurers
on our net-zero targets and on their plans to adopt
Paris-aligned climate targets;
s monitoring emerging standards around underwritten
emissions and collaborate across our industry on their
development, aligning with best practice in this area as
it emerges.
We continue to focus on reducing the emissions we have
control over, and to work closely with our partners where
that control is shared. Where common standards and
methodologies do not yet exist – for example, in measuring
and assessing supply chain impacts, and underwritten
emissions – we want to help shape the solution.
We will share more information on how we plan to achieve
these targets in 2022, along with periodic updates on our
progress towards achieving them.
We will also continue to offset the emissions we generate
via accredited offset schemes, to ensure we remain
operationally carbon neutral as we have been since 2014.
* The 2020 baseline has been adjusted for Covid-19 to ensure it reflects
a more normal year with regards to office usage, business travel, etc.
Total GHG emissions inventory
We continue to focus on managing and minimising our carbon
footprint as a Group, and during 2021, our total operational
footprint decreased by 36%.
We experienced a year-on-year increase in natural gas usage,
driven by staff returning to our offices post-pandemic and
better quality data from a number of sites. When it comes to
electricity usage, we have benefitted from continued adoption
of renewable energy sources.
Business travel emissions, including travel in company-owned
vehicles, as well as staff travelling in their own vehicles, has
seen a significant drop due to the fact that 2021 was the first
full year of post-pandemic travel patterns. We expect to see
a rebound in travel emissions as work patterns normalise.
* GHG emissions are calculated according to the Greenhouse Gas Protocol:
A Corporate Accounting and Reporting Standard (revised edition). Hiscox
uses market-based Scope 2 emissions for reporting in line with its new
GHG reduction target. Operational Scope 3 emissions cover operational
suppliers (office and other related services), capital purchases, fuel and
energy related activities, waste generated in operations, business travel,
employee commuting and remote working. Non-operational emissions are
those that do not directly contribute to the emissions associated with daily
business activity, including non-operational purchased goods and services
and transportation and distribution.
The investment emissions are calculated using the Enterprise Value Including
Cash (EVIC-based) method of attributing financed emissions to investors,
and calculations use MSCI’s carbon data† as the ultimate source. Our 2020
operational emissions baseline for business travel has been restated to
project pre-Covid travel patterns. Note some emissions totals may not
tally due to rounding.
A copy of our SECR GHG emissions table can be found on page 57.
† Although Hiscox’s information providers, including without limitation, MSCI
ESG Research LLC and its affiliates (the ‘ESG Parties’), obtain information
(the ‘information’) from sources they consider reliable, none of the ESG Parties
warrants or guarantees the originality, accuracy and/or completeness, of
any data herein and expressly disclaim all express or implied warranties,
including those of merchantability and fitness for a particular purpose. The
information may only be used for your internal use, may not be reproduced or
redisseminated in any form and may not be used as a basis for, or a component
of, any financial instruments or products or indices. Further, none of the
information can in and of itself be used to determine which securities to buy or
sell or when to buy or sell them. None of the ESG Parties shall have any liability
for any errors or omissions in connection with any data herein, or any liability
for any direct, indirect, special, punitive, consequential or any other damages
(including lost profits) even if notified of the possibility of such damages.
Hiscox Ltd Report and Accounts 2021
49
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Social
Social accreditations
Insuring Women’s Futures
Race at Work Charter
Race at Work Charter signatory
UK Living Wage employer
We strive to be a good employer, a
trusted insurer and a good corporate
citizen. Our social responsibilities help
to inform our customer and claims
philosophies, our strategy for charitable
giving and our employment practices.
In 2021 this included:
s new multi-year charity partnerships.
The Hiscox Foundation, which we
have had since 1987, continues to
support a raft of good causes and
in 2021 formed new partnerships
with social mobility programmes
including Social Ark and Dress
for Success, and environmental
champions such as the London
Wildlife Trust;
s a continued focus on improving
our gender pay gap. 2021 marked
our fifth year of UK gender pay
reporting and showed that on a
mean basis this gap has been
steadily reducing since 2017
to now reach 19.1%. Diversity
and inclusion action plans,
gender-focused KPIs, tailored
training and development,
networking and peer support,
and the targeting of diverse talent
pools are all making a difference
here. More information on this
can be found in our 2021 gender
pay report: hiscoxgroup.com/
gender-pay-report-2021;
s conducting our annual employee
engagement survey, which was
completed by 85% of employees,
with 90% saying they believe in
our corporate values and 73%
saying they are proud to work for
Hiscox. These results, and the
plans developed to further improve
employee engagement in the year
ahead, were shared and discussed
at both the Group level and
subsidiary boards.
I’m proud of how we
support our customers,
our communities
and each other. It’s
something I see as a
business unit CEO and
as Executive Sponsor of
Diversity and Inclusion,
and it’s something I feel
as a Hiscox employee
every day.”
Kate Markham
Chief Executive Officer,
Hiscox London Market
50
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Gender diversity
at 31 December 2021
Ethnic diversity
at 31 December 2021
Board
Group Executive
Committee
Direct reports
to the Group
Executive
Committee
All employees
Male
55%
40%
Female
45%
60%
Board
Group Executive
Committee
Members with ethnic
minority background
9%
20%
52%
50%
48%
50%
Supporting our customers
Supporting our communities
Supporting our colleagues
$1.25 billion paid out
in claims worldwide
in 2021.
$1.5 million donated
to good causes in 2021.
15 employee
network chapters –
encompassing Latino
and Pan-African
communities, WeMind,
Pride, Women,
Parents and Caregivers
and Generations.
20+ vulnerable
customer champions
to support those
requiring additional
support when
accessing our
products and services.
Tools to manage the
risks they face – from
our CyberClear Training
Academy to our cyber
exposure calculator.
Over 1,000 hours
spent volunteering
by our teams.
Over 43,500 hours
spent on training and
talent development.
Our three strategic pillars
for charitable giving
60+ mental health
first aiders.
Social mobility
and entrepreneurship
Protecting and preserving
the environment
Causes our people are
passionate about
Hiscox Ltd Report and Accounts 2021
51
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Governance
Active climate risk management
During 2021, we tested the potential
impact to our assets and liabilities from
physical and transition risks as a
result of climate change on some of our
big-ticket portfolios across a 30-year
horizon. This exercise involved
cross-function teams including
underwriting, investments, exposure
modelling, strategy and risk, and
resulted in the identification of a
number of new focus areas for the
Group in 2022 (see page 46). These
actions will be driven at a functional
and/or business unit level, with progress
monitored by the Sustainability Steering
Committee, in accordance with the
ESG governance structures we
have embedded.
Climate training for Directors
In 2021, we completed an externally
facilitated climate training session
to boost existing understanding and
awareness of climate-related matters.
This training was available to our Board
Directors at both Group and subsidiary
level, and was designed to establish
a new baseline of climate knowledge
post-COP26; brief Board members on
the latest climate-related developments
they should be aware of; and introduce
the concept of a climate-competent
board. We will look to build on this
work further in 2022.
As a global insurer, good governance
practices are essential to our
day-to-day business of serving
customers and paying claims. That
means having appropriate internal
controls, policies and procedures,
and structures and oversight, but it
also means ensuring all employees
are accountable for their actions
and empowered to raise their hand
if something goes wrong. As a
Bermuda-domiciled, UK-listed
business, we comply with the
Bermuda Companies Act, the
UK listing rules and local country
laws in each of the locations where
we operate.
In 2021, this meant:
s updating our Board diversity
policy to reflect more clearly the
underlying ethos of the Company,
the ongoing delivery of a diverse
Board, and to formalise the
Committee’s oversight of the
Group’s wider D&I programme
(see pages 84 to 87);
s the continuation of our employee
engagement network which
ensures workforce views
are considered in Board
decision-making;
s eleven modules of mandatory
training for all employees, on
issues including information
security, financial crime, and
data privacy;
s establishing a new Sustainability
Steering Committee to boost
senior-level oversight and
accountability of ESG matters
and, in particular, climate change;
s boosting our existing ESG
disclosures by signing up to
the Principles for Responsible
Investment (PRI) and the Principles
for Sustainable Insurance (PSI).
Our governance
structures and processes
are taken seriously at
all levels. We evolve our
governance practices
in line with our strategy
and business model
and, as you would
expect, the relevant
laws and regulations
where we operate.”
Marc Wetherhill
Group General Counsel and
Company Secretary
52
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
74
84
Read more about Board activities and
matters approved by the Board in 2021.
Read more about our D&I policies,
including our updated Hiscox Ltd
Board D&I policy.
Latest ESG disclosure scores
Five years of progress – key ESG milestones
2021: B- grade
2020: C grade
2021: 72%
2020: 66%
2021: 40/100
2020: 35/100
2021: 3.3/5
2020: 4.1/5
2021: A grade
2020: A grade
2021: 27.0
2020: 25.6
2021
s Board-approved ESG exclusions policy published.
s Sustainability Steering Committee established.
s Board-approved, SBTi-aligned, greenhouse gas targets for the Group.
s Became PRI and PSI signatories.
2020
s Board-approved responsible investment policy introduced.
s Senior Management Functions (SMFs) with responsibility for climate appointed
within our UK subsidiaries.
2019
s Hiscox ESG framework published, showcasing the Group’s ESG strategy.
s Became a public TCFD supporter.
s Boosted existing disclosures with Dow Jones Sustainability Index.
2018
s ESG Executive Sponsor appointed to spearhead ESG activities Group-wide.
s ESG working group established to drive action at an operational level.
2017
s Hiscox-led industry ‘dry run’ event to test market resilience
hiscoxgroup.com/london-market-looks-ahead.
Hiscox Ltd Report and Accounts 2021
53
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Task Force on Climate-related Financial Disclosures (TCFD)
Reporting against the Financial Stability
Board’s Task Force on Climate-related
Financial Disclosures will become
mandatory in the UK from 2025, and
the Financial Conduct Authority (FCA)
requires TCFD disclosure for UK
premium-listed firms on a ‘comply
or explain’ basis – effective from
accounting periods beginning on
or after 1 January 2021.
We have been reporting against the
TCFD-aligned ClimateWise Principles
since 2019 and are public supporters
of TCFD. Our annual climate report sets
out our approach to climate-related
matters in every part of our business:
governance, risk management,
operations, underwriting, investments,
marketing and so on. It is our richest
source of climate-related information
and expands on the information set out
below, so for more information go to:
hiscoxgroup.com/2021climatereport.
Governance
We have an established and
embedded governance structure for
climate-related matters, with robust
and rigorous processes for identifying,
measuring, monitoring, managing
and reporting climate-related matters
across the Group. This spans from
an operational level up to the newly
established Sustainability Steering
Committee, the Risk Committee of the
Board, and the Board itself.
Within this structure, there are clear
roles and responsibilities. In our UK
legal entities, this structure is bolstered
by the appointment of senior managers
with overall regulatory responsibility
for managing the financial risks from
climate change, in line with the
UK’s Senior Managers Certificate
Regime (SMCR).
54
Hiscox Ltd Report and Accounts 2021
In 2021, we strengthened our existing
Group-wide governance structures
around climate with a new Sustainability
Steering Committee, which has
increased senior-level oversight and
accountability. The Committee is chaired
by the Group Chief Executive Officer
and members include the Group Chief
Underwriting Officer, Chief Risk Officer,
Chief Investment Officer, Chief Executive
Officer or Chief Underwriting Officer
business unit representatives, Chief HR
Officer, Group General Counsel, and
Head of Investor Relations.
An overview of our governance structure
for climate-related matters is detailed
on pages 46 to 47. This includes the
frequency of climate-related meetings
at each level, along with each group’s
particular role in monitoring, managing,
reporting and escalating climate-related
matters. While this structure also covers
broader ESG matters, climate-related
matters are an important component of
this and as such are regularly debated
and discussed.
Within this structure we also consider
the training and development
requirements of those with oversight
responsibilities and accountability
for climate matters to ensure we have
appropriate awareness and expertise
to drive progress. In 2021, this included
an externally facilitated climate training
session, available to our Board Directors
at both Group and subsidiary level,
to establish a new baseline of climate
knowledge post-COP26; brief Board
members on the latest climate-related
developments they should be aware
of; and introduce the concept of a
climate-competent board.
The governance structure we have
embedded for climate issues is also
supported by a range of relevant policies
and processes that we expect both our
staff and our third-party providers to
adhere to. These include the following.
s The Hiscox Group ESG exclusions
policy, which sets out our aim to
reduce steadily and eliminate by
2030 our insurance, reinsurance
and investment in thermal
coal-fired power plants and
thermal coal mines, Arctic energy
exploration projects (beginning
with the ANWR region), oil sands
and controversial weapons.
Oversight of this policy belongs
to the Sustainability Steering
Committee, with implementation
of it driven at a business unit
and function level across both
underwriting and investments.
s The Hiscox Group responsible
investment policy, which outlines
our expectations of both our
in-house investment team and
our external asset managers.
This includes our investment
processes and stewardship
activities as we look to invest in
companies that have sound ESG
practices; how we evaluate our
managers’ ESG integration; and
our approach to impact investing.
This policy is owned by the Group
investment team with oversight
from both the Sustainability
Steering Committee and the
Group Investment Committee.
s The Hiscox Group environmental
policy, which outlines our approach
to managing the environmental
impact of our business activities
and those that arise from our
ownership and occupation of
office premises. We actively
manage and aim to minimise our
environmental impacts, due to
the resources we consume and
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Task Force on Climate-
related Financial
Disclosures (TCFD)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
41
46
See an overview of our modelling
of extreme natural catastrophe
loss scenarios.
See an overview of our governance
structure for climate-related matters.
the amount of waste our activities
produce, as well as complying with
relevant environmental legislation
and other external requirements.
While the policy is owned by
our property services teams, its
effective implementation relies
on Group-wide adherence to the
environmental principles we wish
to live by.
s The Hiscox Group ethical guide
for suppliers, which outlines
how our corporate values and
commitments to doing business in
a socially responsible way extends
to our relationships with suppliers.
It covers our supplier selection
process; fairness and recognition;
supplier diversity; engagement;
our expectations of how our
suppliers behave as well as their
obligations in adhering to laws
and regulations regarding
employment, health and safety,
the environment and anti-bribery
and corruption. It is owned by our
Group procurement team, shared
with suppliers during the tender
process and suppliers are
reminded of it periodically.
These governance policies and
processes are complemented by our
long-standing active risk management
practices, which include climate-related
stress testing and scenario analysis
(see page 41). Examples of the outputs of
this work, such as the property extreme
loss scenarios detailed on page 41,
show the potential financial impact to
the Group of events including Japanese
earthquake, Japanese windstorm,
European windstorm, US earthquake
and US windstorm.
Our governance work culminates in
regular, repeatable climate-related
public reporting and disclosures.
This includes owned reports such as
our annual climate report, as well as
global standards that provide a means
of peer comparison: CDP, ClimateWise,
ISS, MSCI and Sustainalytics. An
overview of our 2021 performance
can be found on page 53.
Strategy
Climate change is considered to be an
emerging risk with the potential to impact
each existing risk type. It could have a
material impact on the Group, by altering
the frequency and severity of extreme
weather events. It could also present an
opportunity, driving greater demand for
cover against changing weather trends
and creating a need for innovative new
products that meet emerging needs.
In addition to the physical impacts of
a changing climate, the Group is also
aware that the transition to a low-carbon
economy, necessary to limit the worst
physical impacts of global warming, also
presents significant business challenges
as well as opportunities. One example of
this is litigation risk, where one party may
seek to recover climate-change-related
losses from another who they believe
may have been responsible.
The governance and risk management
structures we have in place ensure a
coordinated approach to climate across
the Group. They are supported by
investments in technology – to ensure the
right modelling and data are available to
support our pricing and exposure –
and in-house expertise – to combine
off-the-shelf climate views with our
own claims expertise and insight.
We consider the potential impact
from climate-related issues over short-,
medium- and long-term time horizons.
Near-term climate risks and
opportunities (0-5 years)
s Higher claims are likely to result
from more frequent and more
intense natural catastrophes,
such as floods and storms, due
to climate change. These claims
will not only come from damage
to property but also from other
knock-on effects, such as global
supply chain disruption or scarce
resources. However, given the
majority of the policies we write
are annual (re)insurance policies,
we regularly consider our
exposures to climate-related risks
which gives us the opportunity
to adjust pricing and appetite
accordingly. An overview of our
modelling of extreme natural
catastrophe loss scenarios can
be found on page 41.
s There are also the financial
risks which could arise from
the transition to a lower-carbon
economy, such as a slump in the
price of carbon-intensive financial
assets. Our ESG exclusions policy,
which will see us reduce our
exposures to the worst carbon
emitters in both underwriting and
investments, prepares us for this
– as do our new greenhouse gas
(GHG) emission reduction targets.
For more information, see page 48.
s In terms of opportunities, we have
significant expertise in areas such
as flood, where we have a suite
of products and considerable
risk experience; renewable
energy where we are supporting
a number of major wind and
solar energy projects; and in the
decommissioning of offshore
carbon assets which is an area
we insure. These are just some
examples of lines of business
Hiscox Ltd Report and Accounts 2021
55
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Task Force on Climate-
related Financial
Disclosures (TCFD)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
More information on our approach
to ESG and, in particular,
climate can be found at
hiscoxgroup.com/responsibility
132
Hear more from our catastrophe
modelling and research lead.
GHG emissions are calculated according to the
Greenhouse Gas Protocol: A Corporate Accounting
and Reporting Standard (revised edition) and
UK government SECR guidelines. Note some
emissions totals may not tally due to rounding.
A copy of our total GHG emissions inventory can be
found on page 49.
where we could see increased
opportunity over time, and in some
cases we are already benefitting
from changing customer trends.
An example of this is US flood,
where demand is growing and our
product offering, use of data and
technology means we are well
placed to serve more customers
with flood cover. More information
on our approach to US flood can be
found on page 92.
Medium- to long-term climate risks
and opportunities (5+ years)
s Climate-related risks have the
longer-term potential to impact
regulatory risk, credit risk,
legal risk, reputational risk, and
technology risk. We have several
emerging risks forums across the
organisation which are designed
to identify emerging, longer-term
risks and opportunities, including
climate-related risks and
opportunities. Alongside our
in-house modelling and research
expertise, these groups ensure
our work takes into account
climate-related issues over a
range of business planning
time frames.
s There is also the longer-term risk
that those who have suffered loss
from climate change might then
seek to recover those losses from
others who they believe may have
been responsible. Where such
claims are successful, those
parties against whom the claims
are made may seek to pass
on some, or all, of the cost to
insurance firms through policies
such as professional indemnity or
directors and officers’ insurance.
s While in the long term as a property
casualty insurer, Hiscox is certainly
56
Hiscox Ltd Report and Accounts 2021
exposed to climate-related risks,
we believe our exposures can be
managed through time as a result
of how we conduct our business.
For example, through the flexibility
we have in our predominantly
annual underwriting contracts,
and through the liquidity of our
investment portfolio which lends
itself to constant adjustment. This
flexibility is our key tool for managing
the multi-decade challenge of
climate risks holistically.
As climate risks and opportunities
evolve, so too does our strategy. We are
working to improve our assessment and
disclosures regarding the resilience of
the organisation’s strategy, taking into
consideration different climate-related
scenarios. We are leveraging work done
to date in developing scenarios and
participating in wider industry initiatives
such as the Bank of England’s Climate
Biennial Exploratory Scenario (CBES)
exercise for Hiscox Syndicate 33. The
objective of the CBES industry exercise
was to test the resilience of current
business models within the largest
UK banks, insurers and the financial
system to the physical and transition
risks from climate change. The CBES
exercise was designed to progress
climate thinking across the industry
and establish an initial aggregate view
of the risk exposures that the market
may be facing over the next 30 years,
the resilience of the financial system
as a whole to these risks, and the
adjustments and management actions
that may be required. Through our
participation in this exercise, we have
gained new insights in relation to stress
testing in a 2oC or lower scenario, which
we will use to further develop our
thinking in this area and boost our
climate risk preparedness.
These insights will contribute to our
future plans to assess our resilience
taking into consideration different
climate-related scenarios, including a
2°C or lower scenario. In order to meet
future disclosures in this area, we intend
to review a range of scenario impacts
through internal workshops, from which
potential management actions can
be identified and our strategy and risk
management approach can be further
refined. This work will be a focus for
2022 and an update on our progress
against it will be provided in our 2022
Annual Report.
Risk management
Climate-related risks, among other
major exposures, are monitored and
measured both within our business
units and at Group level, so we
understand how much overall risk
we take and what is being done to
manage it. We look at how different
risks interact and whether these may
result in correlations or concentrations
of exposure that we need to know about,
monitor and manage.
While there are certain nuances to
climate risk, we consider it to be a
cross-cutting risk with potential to
impact each existing risk type,
rather than a stand-alone risk. By
design, our Group risk management
framework provides a controlled and
consistent system for the identification,
measurement, mitigation, monitoring
and reporting of risks (both current
and emerging) and so is structured
in a way that allows us to continually
and consistently manage the various
impacts of climate risk on the risk profile.
For example, relevant climate
considerations are included in our risk
and control register and our risk and
control self-assessment process,
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Task Force on Climate-
related Financial
Disclosures (TCFD)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Streamlined Energy and Carbon Reporting (SECR) GHG emissions
2021
energy
(kWh)
Activity
Scope 1 total
Natural gas
Company cars
Refrigerants
Scope 2 (market-based) total
Electricity (location-based)
Electricity (market-based)
District heating
Scope 3 total
Personal vehicles
Total (market-based)
–
2,342,644
377,056
5,603,303
5,603,303
108,999
66,085
8,498,087
2021
emissions
(tCO2e)
678
441
87
150
866
1,484
847
19
15
15
1,559
2020
energy
(kWh)
–
1,710,200
560,441
5,176,116
5,176,116
119,942
899,189
8,465,888
2020
emissions
(tCO2e)
615
315
151
149
1,111
1,565
1,090
21
231
231
1,957
% change
emissions
(tCO2e)
10%
40%
-42%
1%
-22%
-5%
-22%
-10%
-93%
-93%
-20%
as well as in our risk policies. This
means that climate-related risk drivers
are assessed and recorded against the
risks on our risk and control register, and
ensures that we do not consider any
single climate risk factor in isolation.
the latest observations and
scientific knowledge, which models
should be used for each peril, and,
if necessary, how they should be
adapted to reflect our best view of
the risk. They also identify new areas
of risk research.
Our Risk Committee has the main
responsibility for assessing the
climate-related risks and opportunities
we face. It advises the Board on
how best to manage the Group’s
risks, by reviewing the effectiveness
of risk management activities and
monitoring the Group’s actual risk
exposure. The Risk Committee relies
on frequent updates from within the
business and from independent risk
experts for its understanding of the
risks facing both our business and
the wider industry.
This includes:
s underwriting – exposure radar
in casualty exposure
management group (EMG);
s enterprise view – risk team
emerging risk;
s compliance – regulatory
horizon scanning;
s indemnity – claims and
actuarial reserving;
s market – strategic and
business planning.
We also review natural catastrophe
risk at least quarterly, through our
Natural Catastrophe Exposure
Management Group (NCEMG),
which is chaired by the Group Chief
Underwriting Officer and attended by
other Hiscox senior managers with
responsibility for catastrophe-exposed
business. This group looks at the risk
landscape, exposure monitoring and
capital modelling for climate-related
perils, and recommends, based on
All changes to modelling policy and
all of our research prioritisations and
results are signed off and authorised
by this group, decisions are recorded,
and models are adapted to reflect
policy. Their work not only enables us
to continuously refine our models (using
data to make better decisions): it also
supports future product development.
For example, we have calibrated and
delivered a loss model that will improve
the pricing capabilities for one of our
flood insurance products, FloodPlus.
We also included the use of additional
model sources for location-level pricing.
In addition, we are working with data
providers to augment FloodPlus with
first-floor elevation data, and are
exploring the use of machine learning
to augment the information we receive
from vendor floodhazard maps.
The risk management processes we
have established and embedded for
climate-related matters feed into
the annual review of the operating
plan, the long-term strategy planning
process, as well as forward-looking
assessment scenarios and stress
tests and reverse stress test scenarios.
Metrics and targets
The cornerstone of our climate-related
metrics and targets is our GHG emission
reduction targets. In 2021, we set
new Board-approved targets to 2030
which have been created using SBTi
methodologies that align with a 1.5°C
net-zero world by 2050.
This is in keeping with our commitments
as a signatory to the 2015 Paris
Climate Agreement.
GHG targets
Our new targets commit us to:
s reduce our Scope 1 and 2
emissions by 50% by 2030,
against a 2020 adjusted baseline;
s reduce our Operational Scope 3*
emissions by 25% per FTE
by 2030, against a 2020
adjusted baseline;
s transition our investment
portfolios to net-zero GHG
emissions by 2050;
s engage with our suppliers,
brokers and reinsurers on our
net-zero targets and on their
plans to adopt Paris-aligned
climate targets;
s monitor emerging standards
around underwritten emissions
and collaborate across our
industry on their development,
aligning with best practice in
this area as it emerges.
* Operational Scope 3 emissions predominantly
consist of business travel (air, rail and car travel).
Interim targets and actions
We recognise that achieving these
targets will take collective, consistent
effort. While we will further define our
supporting action plan during 2022,
there are areas where we already have
a glide path, or where work is already
underway, as follows.
s In addressing our Scope 1 and 2
targets, we are already engaging
with our facilities managers across
the Group to continue to transition
our offices to renewable electricity
contracts. Where we have total
control over our utility providers,
this is easier to do, but where
that control is shared, or where it
Hiscox Ltd Report and Accounts 2021
57
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Task Force on Climate-
related Financial
Disclosures (TCFD)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
belongs to our landlords, we will
petition for change. We are also
reassessing our existing use of
company cars, which is currently
limited to a small fleet in some
of our European operations.
We are already making progress
here, having retired our fleet
of company cars in Germany
during 2021, and in those
areas where it is not possible
to eliminate the fleet entirely,
we intend to transition
to electric vehicles over time.
s On operational Scope 3, which
is dominated by business travel,
we are currently focused on
improving the consistency of
travel data across the Group to
enhance our understanding of
both volume and class of travel,
to ensure our action plan is
appropriately targeted.
s On Scope 3 more broadly, where
emissions are dominated by
our investments, the Board has
agreed that we will aim for more
than 25% of our corporate bond
portfolio by invested value to have
net-zero/Paris-aligned targets by
2025 and that we will target an
additional 25% by AUM coverage
every five years as we aim to be
on a linear path to 100% portfolio
coverage by 2040.
Progress against these targets will
be driven by our ESG working group
and overseen by our Sustainability
Steering Committee, with at least
annual updates to the Board.
Progress will also be recorded through
our annual carbon reporting cycle,
and we will seek to remain operationally
carbon neutral through offsetting,
as we have been since 2014.
58
Hiscox Ltd Report and Accounts 2021
Disclosures have been made against the TCFD recommendations. Where additional information outside of this report aids
our TCFD disclosure, links to this information have been provided, and where we have not yet disclosed fully against the
recommended TCFD disclosure, we have outlined why this is and the actions already being taken towards meeting the
disclosure requirements within the timeframe given.
More information on our 2021 carbon
emissions can be found on page 49.
TCFD disclosure mapping
compliance statement
Other metrics and targets we
consider include:
s the monitoring and measurement
of underwriting and investment
exposure to carbon-heavy
sectors including coal-fired
power plants and coal mines,
oil sands and Arctic energy
exploration (beginning with the
Arctic National Wildlife Refuge),
in line with our Group ESG
exclusions policy;
s annual investment portfolio
sustainability reviews, taking into
account climate-related issues,
in line with our responsible
investment policy;
s the growth and exposure of
sustainable underwriting products
such as flood and renewable
energy products.
These activities are owned by the
relevant business areas, from
underwriting to investments, with
progress reported through the
embedded ESG governance structures.
These metrics and targets are
complemented by external key
performance indicators, such as our
public ESG disclosure scores (see
page 53) and our annual climate report,
which assess our progress against
climate-related activities during the
prior year and outlines our plans for
climate-related action in the year ahead.
Theme
Recommended disclosure
Status
Reference
Governance
Disclose the organisation’s
governance around climate-related
risks and opportunities.
Strategy
Disclose the actual and potential
impacts of climate-related risks and
opportunities on the organisation’s
businesses, strategy, and financial
planning where such information
is material.
Risk management
Disclose how the organisation
identifies, assesses, and manages
climate-related risks.
Metrics and targets
Disclose the metrics and targets
used to assess and manage relevant
climate-related risks and opportunities
where such information is material.
Describe the organisation’s governance around
Disclosed.
2021 climate report* pages 9, 10 and 11.
climate-related risks and opportunities.
CDP climate questionnaire 2021.
Describe management’s role in assessing and
Disclosed.
2021 climate report* pages 14 and 15.
managing climate-related risks and opportunities.
CDP climate questionnaire 2021.
Describe the climate-related risks and opportunities
Disclosed.
2021 climate report* pages 5 and 22.
the organisation has identified over the short,
CDP climate questionnaire 2021.
medium, and long term.
Describe the impact of climate-related risks and
Disclosed. CDP climate questionnaire 2021.
opportunities on the organisation’s businesses,
strategy, and financial planning.
Describe the resilience of the organisation’s strategy,
Plan to
2021 climate report* page 12.
taking into consideration different climate-related
disclose in
More information on how we intend to
scenarios, including a 2°C or lower scenario.
the next
two years.
meet this disclosure requirement, and
steps already being taken towards it,
are outlined on page 56.
Describe the organisation’s processes for identifying
Disclosed.
2021 climate report* pages 9, 11, 27-29.
and assessing climate-related risks.
CDP climate questionnaire 2021.
Describe the organisation’s processes for managing
Disclosed.
2021 climate report* pages 14-15.
climate-related risks.
CDP climate questionnaire 2021.
Describe how processes for identifying, assessing,
Disclosed.
2021 climate report* page 9.
and managing climate-related risks are integrated
into the organisation’s overall risk management.
CDP climate questionnaire 2021.
Disclose the metrics used by the organisation to
Disclosed.
2021 climate report* pages 39-40.
assess climate-related risks and opportunities in line
with its strategy and risk management process.
CDP climate questionnaire 2021.
See Hiscox Group website.
Disclose Scope 1, Scope 2 and, if appropriate,
Disclosed.
2021 climate report* pages 39-40.
Scope 3 GHG emissions and the related risks.
CDP climate questionnaire 2021.
See Hiscox Group website.
Describe the targets used by the organisation to
Disclosed.
2021 climate report* pages 39-40.
manage climate-related risks and opportunities
CDP climate questionnaire 2021.
and performance against targets.
* Our 2021 climate report was published in August 2021 and covers our
climate-related activities between July 2020 and July 2021. Where we
reference information from that report, that information remains correct
at 2 March 2022.
Chapter 1
Performance
and purpose
4
16
Chapter 2
A closer look
Task Force on Climate-
related Financial
Disclosures (TCFD)
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Read more in our CDP climate
questionnaire 2021
hiscoxgroup.com/cpddisclosure2021.
Read more about our approach to
climate change in our 2021 climate
report, available online at
hiscoxgroup.com/2021climatereport.
TCFD disclosure mapping
compliance statement
Theme
Governance
Disclose the organisation’s
governance around climate-related
risks and opportunities.
Strategy
Disclose the actual and potential
impacts of climate-related risks and
opportunities on the organisation’s
businesses, strategy, and financial
planning where such information
is material.
Risk management
Disclose how the organisation
identifies, assesses, and manages
climate-related risks.
Metrics and targets
Disclose the metrics and targets
used to assess and manage relevant
climate-related risks and opportunities
where such information is material.
Disclosures have been made against the TCFD recommendations. Where additional information outside of this report aids
our TCFD disclosure, links to this information have been provided, and where we have not yet disclosed fully against the
recommended TCFD disclosure, we have outlined why this is and the actions already being taken towards meeting the
disclosure requirements within the timeframe given.
Recommended disclosure
Status
Reference
Describe the organisation’s governance around
climate-related risks and opportunities.
Disclosed.
2021 climate report* pages 9, 10 and 11.
CDP climate questionnaire 2021.
Describe management’s role in assessing and
managing climate-related risks and opportunities.
Disclosed.
2021 climate report* pages 14 and 15.
CDP climate questionnaire 2021.
Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium, and long term.
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy, and financial planning.
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario.
Disclosed.
2021 climate report* pages 5 and 22.
CDP climate questionnaire 2021.
Disclosed. CDP climate questionnaire 2021.
Plan to
disclose in
the next
two years.
2021 climate report* page 12.
More information on how we intend to
meet this disclosure requirement, and
steps already being taken towards it,
are outlined on page 56.
Describe the organisation’s processes for identifying
and assessing climate-related risks.
Disclosed.
2021 climate report* pages 9, 11, 27-29.
CDP climate questionnaire 2021.
Describe the organisation’s processes for managing
climate-related risks.
Disclosed.
2021 climate report* pages 14-15.
CDP climate questionnaire 2021.
Describe how processes for identifying, assessing,
and managing climate-related risks are integrated
into the organisation’s overall risk management.
Disclosed.
2021 climate report* page 9.
CDP climate questionnaire 2021.
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy and risk management process.
Disclosed.
Disclose Scope 1, Scope 2 and, if appropriate,
Scope 3 GHG emissions and the related risks.
Disclosed.
2021 climate report* pages 39-40.
CDP climate questionnaire 2021.
See Hiscox Group website.
2021 climate report* pages 39-40.
CDP climate questionnaire 2021.
See Hiscox Group website.
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Disclosed.
2021 climate report* pages 39-40.
CDP climate questionnaire 2021.
* Our 2021 climate report was published in August 2021 and covers our
climate-related activities between July 2020 and July 2021. Where we
reference information from that report, that information remains correct
at 2 March 2022.
Hiscox Ltd Report and Accounts 2021
59
Q&
A:
with Kathleen Reardon
Chief Executive Officer, Hiscox Re & ILS
Re birth
After a difficult period
in a soft market,
Hiscox Re & ILS has
new leadership and
a new mission: getting
back to greatness.
Kathleen Reardon was
appointed Chief Executive
Officer of Hiscox Re & ILS in
January 2021, after a highly
successful six-year tenure
as Chief Executive Officer of
Hamilton Re. She is a former
chair of the Reinsurance
Association of America, and
co-founder of the Women in
Reinsurance organisation.
Q: What brought you to
Hiscox Re & ILS?
A: It’s been a 20-year
attraction. The underwriting
acumen, the technical
expertise: that’s always
been appealing to me. So
too is the leadership. At
events and conferences,
there was always something
interesting happening with
Hiscox, always a crowd
gathering. Bronek would be
out there, saying things that
needed to be said: climate,
rate change, attachment
point. We were early starters
of ILS, early starters of
our quota share strategy.
I like that punchiness, that
audacity. When the role
became available, I knew I’d
be working for a leadership
team with conviction and
compassion. These are
people who truly want
Hiscox to succeed. They
are ‘all in’ and truly invested
in the business.
Q: What were your first
impressions when
you arrived?
A: Because it wasn’t an
unknown entity to me, I was
able to hit the ground running.
What was nice when I looked
at the stats, was that about
a third of our underwriters
have been with Hiscox for
more than 18 years and a third
have arrived in the past two
years. I like that balance of
‘been there, done that, have
the experience to show for
it’ versus ‘I’m coming with a
different perspective’. What
also didn’t disappoint is that
Hiscox Re & ILS really is an
analytical shop. Underwriters
are more technical than
most and that makes a
real difference.
Q: What do you see as your
task here?
A: We have a really strong
heritage, especially on the
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Hiscox Ltd Report and Accounts 2021
big-ticket side of our business,
and now that the market is
turning, I want Hiscox Re &
ILS to get back to the type of
greatness which I believe it is
known for. That’s an awesome
challenge, and I’m proud
to say we’re starting with a
solid foundation.
We refreshed our strategy
for Hiscox Re in 2021, which
included an element of
‘getting to yes’. We can’t
stay out on the sidelines all
the time; we have to come
in and be decisive. We were
retreating, rightfully so, in
a soft market, but this is an
improving marketplace, so
now we need to lean in to
the sales element of what
we do. We need to be going
in, saying: ‘how can I solve
your problems?’. And for
that, we need to dial up the
inquisitiveness and create
a more holistic view of the
client. You might still say no
a lot, but not without coming
to the table with other
solutions. It’s just a shift.
On the underwriting side
specifically, it’s a ramping up
of something that’s already
there; it’s just brushing off
the cobwebs, given the
market conditions.
Q: Is there a need to shift
perceptions of Hiscox Re
among brokers and clients?
A: We ran a broker survey
early last year and we had
some good, pure, heartfelt
feedback. I think there’s a
general acceptance that
we were retreating, but they
really do want Hiscox to be
great. They want us back with
a louder voice and in a lead
position. So, what can we do
for people to wholeheartedly
say: ‘they’re back’? We’re
enhancing client service,
which means ensuring quotes
remain relevant and timely,
sharing climate change and
inflation views, and continuing
to pay claims swiftly. It also
means staying focused on
our core areas of expertise
and using smart underwriting
and analytics in new areas,
as well as optimised capital
management, and of course
having the client at the core of
everything we do. With that,
we’ll be back to greatness in
no time.
Q: What are your main
priorities for 2022?
A: Our strategic priorities
will be to continue to build a
better portfolio, mature our
model, engage our people,
and nail the business plan.
This year, we’re going to have
fewer big projects happening
on technology. It’s all going
to be more bite-sized, and
we’re going to balance that
with maturing our model.
So, what does that mean?
We need to define our roles
more clearly, so it’s easier for
people to take ownership and
be accountable. We also need
to build out our knowledge
hub as a single source of
processes, research and
insight. There’s an awesome
entrepreneurial culture at
Hiscox, which has served
us well for many years,
but as we go from being a
‘big-small company’ to a
‘small-big company’ we need
to make sure our processes
evolve with us. It also means
assessing those processes
for complexity. For example,
in our ILS offering, all of the
work in the value chain, from
submission to release of
collateral, are we actually
doing it in an efficient way?
Q: How do you see the
human value being
applied at Hiscox?
A: It’s that sense that every
voice is heard. It’s making
sure that you acknowledge
different personalities and
perspectives. Some people
are forthright with their
ideas, some people are more
conservative. Over the past
year, I met with every team
and I made sure everybody
at the table said something.
It’s about increasing the
confidence of people to share
an opinion, to have a say.
I think it’s important to have
that open door and I’m proud
to see that is a philosophy that
runs throughout Hiscox.
Hiscox Ltd Report and Accounts 2021
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Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Board of Directors
Non Executive Chairman
Robert Childs (Aged 70)
Appointed Chairman: February 2013
Appointed to the Board: September 2006
Executive Director
Aki Hussain (Aged 49)
Group Chief Executive Officer
Appointed to the Board: September 2016
Executive Director
Joanne Musselle (Aged 51)
Group Chief Underwriting Officer
Appointed to the Board: March 2020
Relevant skills, experience and contribution
s Considerable experience of
Relevant skills, experience and contribution
s Considerable underwriting expertise,
Relevant skills, experience and contribution
s Extensive knowledge of Hiscox, having
worked for the Group for over 30 years.
s Significant expertise in insurance cycle
management, having worked through
unprecedented large loss events
such as 9/11 and Hurricanes Katrina,
Rita and Wilma.
providing strategic, financial and
commercial management and
in-depth knowledge of the regulatory
and compliance environment.
s Significant experience of driving
business change.
Robert joined Hiscox in 1986 and has held a
number of senior roles across the Group, including
Active Underwriter for Syndicate 33 and Group
Chief Underwriting Officer, before becoming Non
Executive Chairman in February 2013. Robert is
also Chair of the Nominations and Governance
Committee, the Investment Committee, and the
Hiscox Syndicates Limited Board. He joined the
Council of Lloyd’s in 2012 and served as Deputy
Chairman of Lloyd’s from 2017 to 2020.
Aki joined Hiscox in 2016 as Group Chief Financial
Officer and became Group Chief Executive
Officer in 2022. Aki also sits on the Board of a
number of Hiscox subsidiary companies. Prior to
Hiscox, Aki held a number of senior roles across
a range of sectors, including Chief Financial
Officer of Prudential’s UK and Europe business,
and Finance Director for Lloyds Banking Group’s
consumer bank division. Aki is a Chartered
Accountant, having trained with KPMG.
External board appointments
None.
External board appointments
Visa Europe Limited.
including experience of managing
underwriting portfolios in our key markets.
s Significant knowledge of Hiscox,
particularly Hiscox Retail, having
worked for the Group for 19 years.
Joanne joined Hiscox in 2002 and has held a
number of roles across the Group, including
Head of UK Claims, Chief Underwriting Officer
for Hiscox UK & Ireland, and Chief Underwriting
Officer for Hiscox Retail. Joanne also sits on
the Board of a number of Hiscox subsidiary
companies. Prior to Hiscox, Joanne spent
almost ten years working in a variety of actuarial,
pricing and reserving roles at Axa and Aviva in
both the UK and Asian markets.
External board appointments
Realty Insurances Ltd.
Senior Independent Director
Colin Keogh (Aged 68)
Appointed to the Board: November 2015
Independent Non Executive Director
Donna DeMaio (Aged 63)
Appointed to the Board: November 2021
Independent Non Executive Director
Caroline Foulger (Aged 61)
Appointed to the Board: January 2013
Relevant skills, experience and contribution
s Valuable financial services experience.
s Significant knowledge of how to run an
international financial business.
Colin has spent his career in financial services,
principally at Close Brothers Group plc where
he worked for 24 years and served as CEO for
seven years until 2009. Colin is also Chair of
the Remuneration Committee and of the
Hiscox Insurance Company Limited Board.
External board appointments
Ninety One Plc; Ninety One Ltd ; Premium
Credit Limited.
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Hiscox Ltd Report and Accounts 2021
Relevant skills, experience and contribution
s Extensive financial services experience,
Relevant skills, experience and contribution
s Extensive accounting and financial
s Proven expertise in overseeing global
s Deep understanding of Bermuda as a
particularly in the USA.
auditing activities.
reporting expertise.
reinsurance centre.
Donna has over 35 years’ financial services
experience, gained across banking and
insurance. She was AIG Global Chief Operating
Officer, General Insurance and also served as
their Global Chief Auditor. Donna was Chief
Executive and Chair of the Board at United
Guaranty, CEO and Chair of the Board at
MetLife Bank and was a PwC Financial Services
Partner. Donna will also serve as Chair of the
Audit Committee following Caroline Foulger’s
retirement at the 2022 Annual General Meeting.
External board appointments
Azure.
Caroline is a resident of Bermuda and led
PwC’s insurance and reinsurance practice in
Bermuda until her retirement in 2012. With a
strong background in accounting, she is a Fellow
of the Institute of Chartered Accountants in
England and Wales, a member of the Institute
of Chartered Accountants of Bermuda and a
member of the Institute of Directors. Caroline
also serves on the Hiscox Insurance Company
(Bermuda) Limited and Hiscox Syndicates
Limited boards as a Non Executive Director
and is Chair of the Audit Committee.
External board appointments
Oakley Capital Investments Limited; Catalina
Holdings Bermuda Ltd; Atlas Arteria International
Limited; Ocean Wilsons Holdings Ltd.
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Board of Directors
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Member of the Audit Committee
Member of the Nominations and
Governance Committee
Member of the Remuneration Committee
Member of the Risk Committee
Member of the Investment Committee
Chair of Committee is highlighted in solid.
Independent Non Executive Director
Michael Goodwin (Aged 63)
Appointed to the Board: November 2017
Independent Non Executive Director
Thomas Hürlimann (Aged 58)
Appointed to the Board: November 2017
Independent Non Executive Director
Anne MacDonald (Aged 66)
Appointed to the Board: May 2015
Relevant skills, experience and contribution
s Significant knowledge of the Asian
Relevant skills, experience and contribution
s Considerable experience of leading a
s Deep understanding of risk management
s Extensive knowledge of the European
insurance market.
as a trained actuary.
global business.
insurance market.
Michael has over 25 years’ experience in the
insurance industry, having worked in Australia
and the Asia Pacific region for QBE Insurance
Group for over 20 years. Michael started
his career as an actuary, is a Fellow of the
Institute of Actuaries of Australia and served
as Vice President of the General Insurance
Association of Singapore between 2006 and
2012. Michael also serves on the DirectAsia
Board as a Non Executive Director.
External board appointments
Partner Reinsurance Asia Pte Ltd; Steadfast
Distribution Services Pte Ltd; NCI Brokers (Asia)
Pte Ltd; Galaxy Insurance Consultants Pte Ltd;
Enya-Lea Pte Ltd; Werombi Pte Ltd.
Thomas has 30 years’ experience in banking,
reinsurance and insurance. He was CEO
Global Corporate at Zurich Insurance Group,
a $9 billion business working in over 200
countries. Prior to that, he held senior positions
at Swiss Re Group and National Westminster
Bank. Thomas also serves on the Hiscox SA
Board as a Non Executive Director.
External board appointments
None.
Relevant skills, experience and contribution
s Extensive marketing expertise,
particularly in the USA.
s Sizable experience in developing
well-known global brands.
Anne has served as Chief Marketing Officer
at four Fortune 100 companies, and been in
charge of some of the most recognised brands
in the world, including Citigroup, Traveler’s,
Macy’s and Pizza Hut. Anne also serves as
the Employee Liaison for Hiscox.
External board appointments
Boot Barn Holdings, Inc.; IGNITE National;
Visiting Nurse & Hospice of Litchfield County.
Independent Non Executive Director
Constantinos Miranthis (Aged 58)
Appointed to the Board: November 2017
Independent Non Executive Director
Lynn Pike (Aged 65)
Appointed to the Board: May 2015
Group General Counsel and
Company Secretary
Marc Wetherhill (Aged 49)
Relevant skills, experience and contribution
s Deep understanding of Bermuda’s
Relevant skills, experience and contribution
s Strong background in the US financial
(re)insurance industry.
s Senior leadership experience in the
reinsurance sector.
Costas served as President and CEO of
PartnerRe Ltd, one of the world’s leading
reinsurers, until 2015 and prior to that was a
Principal of Tillinghast-Towers Perrin in London,
where he led its European non-life practice.
He is a Fellow of the UK Institute and Faculty
of Actuaries and a resident of Bermuda.
Costas also serves on the Hiscox Insurance
Company (Bermuda) Limited Board as a
Non Executive Director.
External board appointments
Argus Group Holdings Limited; Pacific Life Re;
Gatland Holdings Jersey Limited.
services sector.
s Significant knowledge of providing
commercial solutions for small
businesses, particularly in the USA.
Lynn worked in the US banking industry for
nearly four decades, most recently as President
of Capital One Bank. Before that, she was
President of Bank of America’s small business
banking division, a multi-billion-Dollar business
with 110,000 clients and over 2,000 employees.
Lynn also serves on the Hiscox Insurance
Company Inc. Board as a Non Executive
Director and is Chair of the Risk Committee.
External board appointments
American Express Company (NYSE: AXP);
American Express National Bank;
CareerWork$; California State University
Channel Island Foundation.
Marc has significant legal and governance
experience, and is the Principal Representative
to the Bermuda Monetary Authority for the
Hiscox Group. He previously served as
Chief Legal Counsel and Chief Compliance
Officer at PartnerRe Ltd, having trained as a
solicitor in London, and is a member of the
Bermuda Bar.
Hiscox Ltd Report and Accounts 2021
63
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Board of Directors
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Departures and appointments
Retired Director
Executive appointments
Aki Hussain to Group Chief Executive Officer
(effective 1 January 2022)
Paul Cooper to Group Chief Financial Officer
(effective first half of 2022)
Non Executive appointments
Donna DeMaio
(effective 18 November 2021)
Executive retirements
Bronek Masojada
(effective 31 December 2021)
Non Executive retirements
None.
Director duties
As a company incorporated under the laws
of Bermuda, Hiscox complies with Bermuda
Company Law and as such the UK Companies
Act 2006 and associated reporting regulations
do not apply. Although there is no prescription
of statutory duties in Bermuda, Directors are
bound by fiduciary duties to the Company and
statutory duties of skill and care. This includes
exercising care, diligence, and skill that a
reasonably prudent person would be expected
to exercise in a comparable circumstance.
The Directors act in a way that they consider in
good faith would be most likely to promote the
success of the company for the benefit of its
members as a whole.
Bronek Masojada (Aged 60)
Group Chief Executive Officer
Appointed to the Board: October 2006
Bronek joined Hiscox in 1993 as Group
Managing Director and became Chief Executive
in 2000. Prior to that he worked with McKinsey
& Company, where he advised Lloyd’s on its
renowned Reconstruction and Renewal plan.
Bronek also previously served as Deputy
Chairman of Lloyd’s and Chairman of the
Lloyd’s Tercentenary Research Foundation,
and currently serves as a City of London
Alderman. Bronek retired as Group Chief
Executive Officer at the end of 2021 but
continues to be an employee of Hiscox,
providing strategic advice as a Director for
key subsidiaries.
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Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Board statistics
Board statistics
Board diversity at 2 March 2022
Gender
Female
Male
5
6
Age
46-55
56-65
66-75
2
6
3
Location
USA
Bermuda
Europe
Asia
3
2
5
1
Tenure
0-3 years
3-6 years
6-8 years
8+ years
2
4
3
2
Nationality
British
Bermudian*
American
Swiss
Australian
4
2
3
1
1
* Includes those Directors who hold
a Permanent Residency Certificate.
Hiscox Ltd Report and Accounts 2021
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Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Group Executive Committee (GEC)
The combination of
business unit CEOs
and functional leaders
that we have on our
newly formed Group
Executive Committee
drives accountability
and ensures effective
progress in all areas.”
Aki Hussain
Group Chief Executive Officer
Liz Breeze
Interim Group Chief Financial Officer
Joined Hiscox: May 2012
Amanda Brown
Chief Human Resources Officer
Joined Hiscox: October 2006
Relevant skills, experience and contribution
s Significant experience of financial
and commercial management
within a complex regulatory and
compliance environment.
s Qualified Chartered Accountant, with
significant knowledge of the UK and
Bermuda (re)insurance markets.
Liz joined Hiscox in 2012 and has held a number
of senior finance roles across the Group,
including Group Technical Accountant, Head
of Finance for Hiscox UK, and Chief Financial
Officer for Hiscox Re & ILS. As interim Group
Chief Financial Officer, she leads our team
of 400 finance experts around the world to
ensure robust financial systems and continued
capital efficiency.
Robert Dietrich
Chief Executive Officer, Hiscox Europe
Joined Hiscox: June 1997
Relevant skills, experience and contribution
s In-depth knowledge of the European
insurance market.
s Significant experience of bringing niche
insurance products to market.
Relevant skills, experience and contribution
s Deep expertise in developing and
implementing HR strategy across
multiple geographies.
s Global compensation management
including executive compensation
policy and shareholder consultation.
Amanda leads our team of 90 HR professionals
around the world, overseeing our HR policies
and procedures, employee rewards and
benefits, recruitment, learning and development,
and our approach to remuneration to ensure
our continued ability to attract and retain talent
at all levels.
Stéphane Flaquet
Chief Transformation Officer and
Interim Chief Executive Officer, Hiscox UK
Joined Hiscox: March 2010
Relevant skills, experience and contribution
s Strong financial services background.
s Sizable insurance industry
experience gained within a range
of European territories.
Stéphane originally joined Hiscox as Chief
Operating Officer for Europe, and has also
served as the Group’s Chief Information Officer
and latterly as Chief Executive Officer of Hiscox
Europe. In 2021, he took on the newly created
role of Chief Transformation Officer, driving
critical change programmes across the Group,
and is also Interim Chief Executive Officer for
Hiscox UK.
Robert served as Managing Director for Hiscox
Germany for many years, driving disciplined
expansion and building it into the flagship
European business it is today. In 2021, he took
on wider responsibility for Hiscox Europe, whose
operations span eight countries, overseeing
critical cross-country systems transformation
and redefining its long-term vision.
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Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Group Executive
Committee (GEC)
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Aki Hussain
Group Chief Executive Officer
Joined Hiscox: September 2016
Hanna Kam
Group Chief Risk Officer
Joined Hiscox: February 2015
Kevin Kerridge
Chief Executive Officer, Hiscox USA
Joined Hiscox: December 1996
Relevant skills, experience and contribution
s Considerable experience of
providing strategic, financial and
commercial management and
in-depth knowledge of the regulatory
and compliance environment.
s Significant experience of driving
business change.
Relevant skills, experience and contribution
s Qualified actuary with in-depth
enterprise risk management and
insurance expertise.
s International property and casualty
insurance industry experience gained
within corporates and consultancies
across the UK and Australia.
Aki joined Hiscox in 2016 as Group Chief Financial
Officer and became Group Chief Executive
Officer in 2022. Aki also sits on the Board of a
number of Hiscox subsidiary companies. Prior to
Hiscox, Aki held a number of senior roles across
a range of sectors, including Chief Financial
Officer of Prudential’s UK and Europe business,
and Finance Director for Lloyds Banking Group’s
consumer bank division. Aki is a Chartered
Accountant, having trained with KPMG.
Hanna leads our global team of risk and
compliance experts, located in our key
geographies and jurisdictions. She has
Group-wide responsibility for Hiscox’s
enterprise risk management and regulatory
compliance, and manages our relationships
with regulators.
Relevant skills, experience and contribution
s Significant expertise in developing
customer-focused eCommerce solutions.
s Multi-market, ground-up experience of
building retail businesses.
Kevin has held a number of strategic planning
and operational roles across the Group and was
an early pioneer of our eCommerce approach.
He set up and ran our UK Direct business before
relocating to establish our direct-to-consumer
operations in the USA. With our US Digital
Partnerships and Direct (DPD) business now an
important growth driver, Kevin was appointed
to lead Hiscox USA in 2021.
Kate Markham
Chief Executive Officer, Hiscox London Market
Joined Hiscox: June 2012
Joanne Musselle
Group Chief Underwriting Officer
Joined Hiscox: April 2002
Kathleen Reardon
Chief Executive Officer, Hiscox Re & ILS
Joined Hiscox: January 2021
Relevant skills, experience and contribution
s Strong experience of building
customer-focused businesses.
s Track record of establishing
operational and digital infrastructures
that support growth.
Kate originally joined Hiscox to run our UK
Direct business, and was promoted to
Chief Executive Officer of Hiscox London Market
in 2017. She leads our team of 300 London
Market underwriters, analysts and support
functions in the UK, Guernsey and the USA.
In addition, Kate is the Group’s Executive
Sponsor for Diversity and Inclusion.
Relevant skills, experience and contribution
s Considerable underwriting expertise,
including experience of managing
underwriting portfolios in our key markets.
s Significant knowledge of Hiscox,
particularly Hiscox Retail, having
worked for the Group for 19 years.
Joanne joined Hiscox in 2002 and has held a
number of roles across the Group, including
Head of UK Claims, Chief Underwriting Officer
for Hiscox UK & Ireland, and Chief Underwriting
Officer for Hiscox Retail. Joanne also sits on
the Board of a number of Hiscox subsidiary
companies. Prior to Hiscox, Joanne spent
almost ten years working in a variety of actuarial,
pricing and reserving roles at Axa and Aviva in
both the UK and Asian markets.
Relevant skills, experience and contribution
s Extensive experience of building
reinsurance businesses throughout
the cycle.
s In-depth knowledge of the Bermuda
reinsurance market.
Kathleen joined Hiscox in 2021 from Hamilton
Re, where she was Chief Executive Officer.
She leads our reinsurance and ILS business,
based in London and Bermuda, and is
responsible for ensuring the team takes
advantage of the hardening market and
opportunities as they present themselves.
Hiscox Ltd Report and Accounts 2021
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Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Chairman’s letter to shareholders
Dear Shareholder
During 2021, we announced a change
of leadership of the Group. It gives me
great pleasure that such is the strength
of the talent within Hiscox that we were
able to make an appointment from within
our ranks – Aki Hussain, who previously
served as the Group’s Chief Financial
Officer. We then needed to fill the Group
Chief Financial Officer role, and here
we have made an appointment from
outside of the Group. Paul Cooper, who
served as Finance Director for Hiscox UK
and Europe from 2006 to 2011, comes
back to us having gained significant
experience of financial services and in
particular insurance at a high level. We
have also appointed a new Independent
Non Executive Director to the main
Board, Donna DeMaio, who will chair
our Audit Committee following Caroline
Foulger’s departure during 2022.
Other themes remained a constant: ESG
and in particular, climate change; and our
focus on culture and the role of the Board
in employee engagement. In these areas,
I can report solid progress.
Group Chief Executive Officer and
Group Chief Financial Officer succession
The Board and Nominations and
Governance Committee’s focus in recent
years was to ensure that there were strong
internal succession options for the Group
Chief Executive Officer. This process
involved articulating the key qualities for a
Group Chief Executive Officer successor;
engaging professional advisors to evaluate
both internal and external talent against
these qualities; and the contribution of
a leading independent search firm in
reviewing external candidates.
This process resulted in the Board
appointing Aki Hussain as Group
Chief Executive Officer, effective from
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Hiscox Ltd Report and Accounts 2021
1 January 2022. His experience, skills and
values align to those which we sought
in a Group Chief Executive Officer, as
demonstrated in his five years with Hiscox
as Group Chief Financial Officer. In his
new role, the Group will also benefit from
his significant experience gained prior to
Hiscox, which bring valuable and fresh
perspective, as well as his clear thinking
and drive to continue to build the business.
With Aki’s appointment, the Board
and Nominations and Governance
Committee focused on Group Chief
Financial Officer succession, a process
which resulted in the Board appointing
Paul Cooper to succeed Aki Hussain as
Group Chief Financial Officer. Paul will
join the business in the first half of 2022,
at which point he will join the Board
of Directors and the Group Executive
Committee. I would like to personally
thank Liz Breeze, Chief Financial Officer
for Hiscox Re & ILS, for stepping in as
Interim Group Chief Financial Officer.
New Independent Non
Executive Director
The Board and Nominations and
Governance Committee also oversaw
the appointment of a new Independent
Non Executive Director during the year.
Following a robust process, Donna
DeMaio was appointed to succeed
Caroline Foulger both as Independent
Non Executive Director and Chair of the
Audit Committee when Caroline retires
at the 2022 AGM. We will benefit from
Donna’s significant financial services
and US market expertise.
Group-level and subsidiary boards
We continually review our existing
structures to ensure the knowledge and
expertise we have within our Group-level
and subsidiary boards is shared. Many
of the Independent Non Executive
Directors on our Group-level Board also
serve on one or more of our subsidiary
boards, and during the year Colin Keogh,
our Senior Independent Director, took
over from me as Chairman of the Hiscox
Insurance Company Limited Board, the
subsidiary board for our UK entities.
Task Force on Climate-related
Financial Disclosures (TCFD)
Last year I talked about our annual climate
report, which we have produced for many
years and which since 2019 has been
structured around a set of TCFD-aligned
principles. This year we have boosted
our long-standing disclosures with more
information on our compliance with TCFD,
in line with the new FCA requirements,
which can be found on pages 54 to 59.
Culture and employee engagement
The employee engagement network we set
up in 2019, chaired by our Independent
Non Executive Director, Anne MacDonald,
is now fully embedded and proving to be an
effective means of workforce engagement,
ensuring workforce views are considered in
Board decision-making. Anne was chosen
to carry out this role due to her relevant
experience in her professional career and
people skills. The network convenes twice
a year and their contributions are shared
with both Group-level and subsidiary
boards. Their inputs have contributed to
ongoing thinking in areas including how we
communicate across the business, and
future ways of working as hybrid working
becomes the new normal.
I trust that the information set out in this
report will give you a strong understanding
of our corporate governance arrangements
and assurance that Hiscox continues to be
focused on the importance of maintaining
a robust corporate governance framework.
Robert Childs, Chairman
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Corporate governance
Corporate governance framework
The corporate governance framework
throughout Hiscox supports the delivery
of our values, culture, strategy and
business objectives.
The Board’s formal corporate
governance framework includes the
Board, the Hiscox Group subsidiaries
and the Executive internal governance
structures, which together ensure
the governance requirements for the
Group are robust and fit for purpose.
As a company listed on the London
Stock Exchange, the UK Corporate
Governance Code (the Code) is
applicable to Hiscox, and an overview
of the Company’s compliance with the
Code is detailed on pages 76 to 81.
The Board has a formal schedule
of matters reserved for the Board’s
determination that covers areas
including: setting the Group’s purpose
and strategic vision; monitoring
performance of the delivery of the
strategy; approving major investments,
acquisitions and divestments; risk
oversight and setting the Group’s risk
appetite; and reviewing the Group’s
governance. The Group governance
manual (the manual) details the wider
corporate governance framework
including the overall legal entity structures
and relationship with the business units,
the division of responsibilities between
Group and principal subsidiary boards,
Board process and procedures for
issues such as Non Executive Director
appointments, diversity requirements
and Board evaluations, and the principles
to be applied to the wider subsidiary
management. The manual is approved
by the Board and regularly reviewed.
The Company also benefits from a
strong governance framework at a
subsidiary level. The manual and the
supporting subsidiary governance
manuals ensure that the underlying
processes throughout the subsidiary
boards follow consistent and effective
governance practices. The division of
responsibility between the Group Board
and the boards of the Group’s principal
subsidiaries is understood throughout
the Group and is visually represented
in the Hiscox Group governance
model (available at hiscoxgroup.com/
investors/corporate-governance).
The model shows the relationship
between the Board exercising strategic
direction and oversight of the Hiscox
Group, and the subsidiary boards’
delivery of their respective entity’s
responsibilities. This is further translated
into explicit terms of reference and
governance manuals for the principal
subsidiaries – ensuring alignment to
the overall Group approach to values,
purpose, culture of risk awareness,
ethical behaviour and Group controls.
Informal interaction, information flows
and collaboration between Group
and the principal subsidiaries are also
delivered by Group Board Non Executive
and Executive Director representation
on the boards of the principal insurance
carrier entities.
The Executive’s internal governance
structures support decision-making
at the Executive level between the
Group Executive Committee, the
business units and the functional
departments. Membership of the Group
Executive Committee was refreshed
in January 2022 following a review of
existing leadership structures by the
incoming Group Chief Executive Officer,
and the resulting Group Executive
Committee members are detailed
on pages 66 to 67.
Supporting policies and processes
The corporate governance framework
complements the Company’s internal
controls framework and its supporting
framework of policies and processes.
Key policies for the Group are published
online and available to view at
hiscoxgroup.com/about-hiscox/
group-policies-and-disclosures.
In particular, the internal control and risk
management systems relating to the
financial reporting process are strong,
with the Audit Committee and the Risk
Committee forming the central points
of review and challenge. Further detail
can be found in the Audit Committee
report on pages 89 to 91 and in the risk
management section on pages 38 to 41.
In addition, the Board and the Audit
Committee – whose Chair also serves
as the Group’s whistleblowing champion
– have oversight of whistleblowing
matters and receive reports arising
from its operation. The Company’s
whistleblowing policy ensures that the
workforce feel empowered to raise
concerns in confidence and without
fear of unfair treatment. The structures
and processes in place allow for
the proportionate and independent
investigation of any such matters, and
for appropriate follow-up action to be
taken where necessary.
Board composition
The Board has responsibility for the
overall leadership of the Group and its
culture. The operations of the Board
are underpinned by the collective
experience of the Directors and the
diverse skills which they bring. The Board
comprises the Non Executive Chairman,
two Executive Directors, and eight
independent Non Executive Directors
including a Senior Independent Director.
Hiscox Ltd Report and Accounts 2021
69
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Corporate governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Notable changes in the reporting
period include the appointment of Aki
Hussain as Group Chief Executive
Officer, effective from 1 January 2022
following Bronek Masojada’s retirement
on 31 December 2021, the appointment
of Paul Cooper into the Group Chief
Financial Officer role in the first half
of 2022, and Donna DeMaio’s
appointment on 18 November 2021
as Independent Non Executive Director
and Audit Committee Chair designate,
which ensures an orderly transition
in preparation for Caroline Foulger’s
retirement at the AGM in 2022, following
the conclusion of her nine-year term
with the Company. Biographical details
for each member of the Board are
provided on pages 62 to 63.
In accordance with the Company’s
Bye-laws and the Code, all Directors
will seek re-appointment at the 2022
Annual General Meeting, with the
exception of Caroline Foulger who
will retire at the 2022 AGM. No issues
have arisen that would prevent the
Chairman from recommending the
re-appointment of any individual
Director. In addition, the Senior
Independent Director has reviewed
the position of the Chairman with
the Non Executive Directors, and
recommends the re-appointment
of Robert Childs, confirming that
the Chairman continues to show
the independence of character and
judgement necessary to chair the
Board effectively. The Board is satisfied
that it has the appropriate balance of
skills, experience, independence,
and knowledge of the Company to
enable it to discharge its duties and
responsibilities effectively, and that
no individual or group dominates the
Board’s decision-making. Additional
details on board composition and
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Hiscox Ltd Report and Accounts 2021
succession planning can be found
in the Nominations and Governance
Committee report on pages 82 to 88.
Board independence and
Director duties
The Nominations and Governance
Committee review the independence
of each Non Executive Director, taking
into account, among other things, the
circumstances set out in the Code that
are likely to impair, or could appear
to impair, their independence. The
Committee remains of the view that the
most important factor is the extent to
which they are independent of mind.
As noted in the 2020 report, the Board
approved that Caroline Foulger (Audit
Committee Chair) could continue
in office until May 2022, to allow for
the completion of the 2021 financial
statement process.
Each Director has undertaken to
allocate sufficient time to the
Group in order to discharge their
responsibilities effectively. Each
Non Executive Director’s letter of
appointment outlines the commitments
expected of them throughout the
year and this is further detailed in
the manual. Executive Directors are
prohibited from taking more than one
additional Non Executive directorship
in a FTSE 100 company. Each year as
part of the Director review process,
the Directors are required to provide
a complete list of all third-party
relationships that they maintain. This
is analysed to determine if there is any
actual or potential conflict of interest
and that appropriate time continues to
be available to devote to the Company.
The Nominations and Governance
Committee review the findings and
determine if there is any conflict
of interest.
With respect to 2021, the Committee
determined that there were no
relationships which could cause an
actual or potential conflict. Additionally
there were no concerns regarding
overboarding and all Directors had
adequate time available to carry
out their duties. Where Directors took
on additional Board positions during
the year, these were reviewed as part
of our corporate governance processes
and were not deemed to be significant
to the extent that they would overburden
that Directors’ time. This has been
demonstrated throughout 2020 and
2021 where all Directors have given
additional time to the Company due
to increased meetings caused by
the pandemic. Approval occurs prior
to a Director undertaking additional
external appointments.
Onboarding and board training
On joining the Board, all Non Executive
Directors take part in a full, formal
induction programme which is tailored
to their specific requirements. More
information on this, including the
recent induction of Donna DeMaio
on her appointment as Independent
Non Executive Director, can be found
in the Nominations and Governance
Committee report on pages 82 to 88.
The Board also has an ongoing training
programme with regular items on
topical issues. In 2021, this included
sessions on underwriting through the
cycle, developments in D&I, climate
change and the disclosure landscape
including TCFD and IFRS 17. Items
for training are identified in the Board,
Committee and Director reviews, as well
as through specific requirements and
individual requests, and can be delivered
via the frequent programme of Board
informational sessions.
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Corporate governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
The role of the Board
The Board as a whole is collectively responsible for the success of Hiscox Ltd and the Group. Its duties are to:
• set the Group’s strategic direction, purpose and values and align these with its culture;
• oversee competent and prudent management of internal control, corporate governance and risk management;
• determine the sufficiency of capital in light of the Group’s risk profile and business plans;
• approve the business plans and budgets.
This structure is supported by the Group Executive Committee, Investment Committee and a number of other
management committees.
Certain administrative matters have been delegated to a committee comprising of two Directors and the Company Secretary.
Audit Committee
• Advises the Board on
financial reporting.
• Oversees the
relationship with internal
and external audit.
• Oversees internal
controls including
reserving and claims.
The Audit Committee report
can be found on pages 89
to 91.
Nominations and
Governance Committee
• Recommends Board
appointments.
• Succession planning.
• Ensures an appropriate
mix of skills and
experience on
the Board.
• Promotes diversity.
• Manages any potential
conflicts of interests.
The Nominations and
Governance Committee
report can be found on
pages 82 to 88.
Remuneration Committee
Risk Committee
• Establishes
remuneration policy.
• Oversees alignment
of rewards, incentives
and culture.
• Sets Chairman,
Executive Director and
senior management
remuneration.
• Oversees workforce
remuneration-related
policies and practices
across the Group.
The remuneration report can
be found on pages 100 to 113.
• Advises the Board on
the Group’s overall risk
appetite, tolerance
and strategy.
• Provides advice,
oversight and challenge
to embed and maintain
a supportive risk culture
throughout the Group.
More information on risk
management can be found
on pages 10 and 38 to 41.
To ensure that the Board operates efficiently, each Director has distinct role responsibilities.
Chairman
Senior Independent
Director (SID)
Chief Executive
Independent Non
Executive Directors
• Leadership of the Board.
• Ensuring effective
relationships exist
between the Non
Executive and
Executive Directors.
• Ensuring that the views
of all stakeholders
are understood and
considered appropriately
in Board discussions.
• Overseeing the annual
performance evaluation
and identifying any
action required.
• Leading initiatives to
assess the culture of the
Company and ensure
that the Board leads
by example.
• Advisor to the Chairman.
• Leading the Chairman’s
performance evaluation.
• Proposing and delivering
the strategy as set by
the Board.
• Serving as an
intermediary to
other Directors
when necessary.
• Being available to
shareholders and other
stakeholders if they
have any concerns
which are unable to
be resolved through
normal channels, or if
contact through these
channels is deemed
inappropriate.
• Facilitating an effective
link between the
business and the Board
in support of effective
communication.
• Leading the Group
Executive Committee,
which delivers
operational and financial
performance.
• Representing Hiscox
internally and externally
to stakeholders,
including shareholders,
employees, government
and regulators, suppliers
and contractors.
• Active participation in
Board decision-making.
• Advising on key
strategic matters.
• Critiquing and
challenging proposals
and activities, and
approving plans
where appropriate.
Hiscox Ltd Report and Accounts 2021
71
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Corporate governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Board structure and decision-making
The Board operates within an
established structure which includes
clear responsibilities at Board level,
transparent, well-informed and balanced
decision-making, and appropriate
onward delegations to effectively
deliver the Company’s purpose,
values and strategy.
The Board has delegated a number of its
responsibilities to its Audit, Nominations
and Governance, Remuneration and Risk
Committees. Each Board Committee
operates within established written terms
of reference and each committee Chair
reports directly to the Board. The formal
schedule of matters reserved for Board
decision and the Committee terms of
reference were reviewed in late 2021
as part of the annual review of terms of
reference, and copies of each can be
found at hiscoxgroup.com/investors/
corporate-governance. To ensure
that the Board operates efficiently, the
role of the Chairman, Senior Independent
Director and Chief Executive are
distinct to demonstrate the segregation
of responsibilities.
Board cycle
The Board receives appropriate and
timely information to enable Directors
to review business strategy, trading
performance, business risks and
opportunities. Executive Directors and
senior management from the business
are invited to present on key items,
allowing the Board the opportunity
to debate and challenge initiatives
and proposals directly.
The Board agenda is set by the
Chairman following discussion with the
Chief Executive Officer and Company
Secretary, and taking into consideration
feedback from the individual Directors.
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Hiscox Ltd Report and Accounts 2021
Board agendas focus on strategically
important issues, key regulatory items
and regular reports from key business
areas. Board papers are circulated in
advance of each meeting to ensure
Directors have appropriate time to review
them, and to seek clarification where
necessary. The management reports
follow a short standard format which
aids discussion and understanding.
The quality of Board papers is kept
under regular review. At each meeting
the Board receives an update from
the Committee Chairs to keep them
abreast of the items discussed, the
outcomes agreed, and to summarise
recommendations for Board approval
from the Committees.
The scheduled meetings follow an
agreed format; agendas are developed
from the Board’s annual plan of
business, with flexibility built in to ensure
the agendas can accommodate relevant
upcoming issues. Each quarterly cycle
typically covers a series of decisions,
discussions and regulatory items
either at the Board, during Committee
discussions, or during informal
informational sessions, depending
on the nature of the matter. Items for
discussion may be identified from
actions from previous meetings, issues
escalated from management, items
requested either formally or informally
by Non Executive Directors, ongoing
regulatory topics throughout the Group,
and horizon scanning including review
of the competitive landscape. Agendas
are built to ensure that the most
appropriate method of progressing
an item is utilised. The Chairman and
Non Executive Directors usually meet
at the start or end of each Board meeting
without the Executive Directors, creating
an opportunity for Non Executive
Directors to raise any issues privately.
Owing to this system, the Group has an
effective Board which supports a culture
of accountability, transparency and
openness. Executive and Non Executive
Directors continue to work well together
as a unitary Board and debate issues
freely. The Board culture is congenial;
however, both Non Executive Directors
and Executive Directors continually
challenge each other in order to deliver
our shared aim. In the context of unitary
Boards, Non Executive Directors provide
Executive Directors with support and
guidance, not just challenge, and our
Non Executive Directors are close
enough to the business to do this.
Board attendance in 2021
In line with the agreed meeting schedule,
the Board held four comprehensive
meetings in 2021 (these meetings
comprise meetings of the Board and of
each of the Committees of the Board).
In keeping with the practices developed
during the early stages of the pandemic,
there were an additional ten informational
calls between Board meetings. These
informational calls provided an opportunity
to ensure the Board was kept informed of
any business developments and allowed
the Directors to monitor exposures,
emerging issues and opportunities.
There were also four additional sessions
held in 2021 in relation to the appointment
of the Group Chief Executive Officer.
The Company’s Bye-laws prohibit any
Director who is in the UK or the USA from
counting towards the quorum necessary
for the transaction of business at a Board
meeting. This restricts the ability of the
Company’s Directors based in the UK or
USA to participate in Board meetings
by telephone or other electronic means.
This year, a number of Board meetings
were held during periods where
government-imposed Covid-19-related
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and purpose
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Chapter 2
A closer look
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Chapter 3
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Corporate governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
travel restrictions and guidance were in
place. As a result, it was not possible in
many instances for our UK- and
USA-based Directors to travel to
Bermuda or join all Board meetings.
Informational calls were held to allow
for the continued sharing of information
and ensured that all Directors had an
opportunity to be apprised of all Board
issues, even when, through no fault of
their own, they were not able to attend
the comprehensive Board meetings in
person or, as a result of the prohibition
in the Bye-laws, by telephone.
All Directors were able to fulfil their
fiduciary responsibilities during 2021
and attended all Board and Committee
meetings that they were eligible to
attend (that is, those Board and
Committee meetings that they were not
precluded from attending as a result of
Covid-19-related travel restrictions and
guidance, and the Company’s Bye-laws).
With respect to the four comprehensive
Board meetings in 2021, the Directors’
attendance (and the number of meetings
that they were eligible to attend) was
as follows: Caroline Foulger, Michael
Goodwin, Thomas Hürlimann, Costas
Miranthis, Joanne Musselle, Aki Hussain,
Bronek Masojada (4/4); Robert Childs,
Colin Keogh (3/3); Anne MacDonald,
Lynn Pike (2/2). Donna DeMaio was
appointed following the final Board
meeting of 2021 and as such was not
eligible to attend Board and Committee
meetings during 2021.
There were also four meetings of each of
the Committees of the Board during 2021.
All of the Company’s Independent Non
Executive Directors are members of each
of the Audit Committee, Nominations and
Governance Committee, Remuneration
Committee, Risk Committee and
Investment Committee and their
attendance (and the number of meetings
that they were eligible to attend) was
as follows: Caroline Foulger, Michael
Goodwin, Thomas Hürlimann, Costas
Miranthis (4/4); Robert Childs, Colin
Keogh (3/3); Anne MacDonald, Lynn
Pike (2/2). Robert Childs is a member
of the Nominations and Governance
Committee, Risk Committee and
Investment Committee and he attended
all three of the meetings that he was
eligible to attend. Aki Hussain and
Joanne Musselle are members of the
Investment Committee and attended all
four meetings, as did Bronek Masojada.
Outside of the formal Board and
Committee meetings and informational
calls, Non Executive Directors have
unfettered access to employees at all
levels of the business, regularly liaise
with management on activities aligned
to their key skills, and attend appropriate
management strategy and training
events. They also have the opportunity
to attend briefings with Group Executive
Committee members and senior
management, to understand key issues
and conduct ‘deep dives’ on specialist
subjects. In 2021, among other things,
this included marketing and branding;
strategic assessment; workforce
engagement; and digitisation. Specific
sessions are held for succession
planning and strategy.
Board engagement with stakeholders
A key element of the corporate
governance framework is open and
transparent communication with
stakeholders at all levels including
Board level. As such, the Board regularly
discusses stakeholder matters including
shareholder matters, employee
engagement, customers, and the
Group’s impact on, and relationship
with, wider society.
The Board is kept abreast of stakeholder
feedback and issues through reports
from a variety of sources, including
the Chairman, Group Chief Executive
Officer, Group Chief Financial Officer,
senior management and external
consultants. This feedback loop is
complemented by the regular dialogue
that the Board maintains with the Group’s
key stakeholders, with the support of
Executives and senior management.
While the nature and format of this
dialogue has adapted throughout the
year to ensure that communication was
sustained during periods of lockdown
restrictions, it has remained a consistent
feature. More information on how the
Board engages with key stakeholders
can be found on pages 42 to 43.
Board evaluation 2021
The Board encourages a culture of
continuous improvement, and an
important part of this is the annual review
of the Board, its Committees and each
Director. The Board evaluation in 2021
was internally facilitated, the details of
which can be found in the Nominations
and Governance Committee report on
pages 82 to 88.
Board remuneration
The remuneration of Independent Non
Executive Directors is determined by
the Nominations and Governance
Committee and is regularly benchmarked
to ensure it reflects the time commitment
and responsibilities of each role; there are
no performance-related elements. The
Chairman’s remuneration is determined
under the remuneration policy.
Hiscox Ltd Report and Accounts 2021
73
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Corporate governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Board activity
The Board factored the needs and concerns of our key stakeholders into its discussions and decisions throughout the year.
In addition to business as usual reviews, the Board’s key activity and decisions for the reporting period are detailed below.
The table demonstrates the different stakeholders the Board took into account when these activities and decisions were taken.
Shareholders
Workforce
Brokers
Customers
Regulators
Values/culture/strategy
• Ongoing review of the values and strategy.
• Initiation of the strategy refresh following the change
of Chief Executive Officer.
• Ongoing review of business unit strategies.
• Loss portfolio transfers and adverse development cover
implemented to reduce reserve uncertainty and bolster
capital ratios.
• Continued focus on simplifying our operating model.
Succession/workforce
• Appointment of Aki Hussain as Group Chief Executive
Officer, effective 1 January 2022 following Bronek
Masojada’s retirement, effective 31 December 2021.
• Appointment of Donna DeMaio as Independent Non
Executive Director and Audit Committee Chair designate
on 18 November 2021, facilitating an orderly transition
ahead of Caroline Foulger’s retirement at the 2022 AGM.
• Oversight of the development of a robust and open culture
including further embedding of the Board Employee
Liaison role.
• Review of senior management succession plans, Group
talent management initiatives and Group diversity and
inclusion initiatives.
• Review of the employee engagement survey and approval
of a shift to a more regular rhythm of review.
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Hiscox Ltd Report and Accounts 2021
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and purpose
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Chapter 2
A closer look
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Chapter 3
Governance
Corporate governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Shareholders
Workforce
Brokers
Customers
Regulators
Performance
• Approval of the 2022 business plan.
• Ongoing review of the Company’s financial results, going
concern status and viability and open and transparent
reporting of the same.
• Ongoing review of operational risk reviews of the Group
and business units.
• Ongoing examination of the Covid-19 underwriting
impact, reserve position and reinsurance recoveries.
• Approval of the final dividend payment.
Governance, compliance and internal controls
• Updates on key underwriting exposures.
• Delivery of a Group-wide programme to ensure contract
certainty and further identify any potential systemic risks.
• Approval of the updated risk limits framework.
ESG
• Increased focus on the risks associated with climate
change and embedding a Group-wide approach to
this following a detailed exercise carried out in one of
our UK subsidiaries.
• Introduction of the clear documentation of individual
climate risk assessments for the big-ticket business.
• Approval of new greenhouse gas targets for the Group.
• Approval of the ESG exclusions policy for the Group.
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94
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information
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Chapter 6
Financial
summary
134
Compliance with the UK Corporate Governance Code 2018
of the Chairman and the robustness of
the Non Executive Director succession
plan; the results of which were positive.
A similarly positive result was found in
the 2021 Board evaluation as detailed
on pages 87 to 88. The Board therefore
retains complete confidence in the
Chair’s ability to act independently, and
unanimously supports his re-election at
the AGM.
The Company complies with all of
the Provisions in Section 3 (audit, risk
and internal control) except for part of
Provision 25, as the Chair of the Board
sits on the Risk Committee. The Board
considers that this brings value to
that Committee.
As a company listed on the London
Stock Exchange, the UK Corporate
Governance Code (the Code) is
applicable to Hiscox. The Board is
pleased to report that the Company
has applied the principles and complied
with the provisions of the Code as
issued by the Financial Reporting
Council in July 2018 for its financial
year 2021 (as applicable to a
Bermuda-registered entity), except
in relation to Provision 9 on Chair
independence; Provision 19 on
Chair tenure (as explained below) and
Provision 25 regarding the Chairman’s
membership of the Risk Committee.
The corporate governance statement
(pages 69 to 75), the remuneration
report (pages 100 to 113) and the
shareholder information contained on
pages 128 to 131, together with the cross
references to other relevant sections of
the Annual Report and Accounts, explain
the main aspects of the Company’s
corporate governance framework and
seek to give a greater understanding
as to how the Company has applied
the Principles and reported against the
Provisions of the Code. The Code itself
can be found at frc.org.uk.
the Chair appointment and the Board set
out its reasons for his appointment.
The Board continues to believe that the
Chairman’s experience and expertise
in underwriting and risk management
remain a valuable asset in the
performance of its functions. In 2019,
following the introduction of the new
provision of the Code, a more robust
annual process was introduced which
allows the question of the Chairman’s
independence and Board tenure to be
discussed in a specific session with the
Non Executive Directors (without the
Chairman being present). This process
is now in its third year of execution
and is led by the Senior Independent
Director. The meeting took place in
November 2021 and, having also
considered the views of the Executive
Directors, the meeting determined that
the Directors continue to highly value
the Chair’s skills and experience, and
that he demonstrates independence,
constructive challenge and engagement
in the Board as well as valuable guidance
to senior management. The Board
is therefore satisfied that the Chair
continues to show the independence
of character and judgement necessary
to chair the Board effectively.
Chair independence and tenure
The Company complied with all of the
Provisions of section 2 with the exception
of Provision 9 and 19 regarding Chair
independence and tenure respectively.
As previously disclosed, the Chair,
Robert Childs, was not deemed to be
independent upon his appointment as
Chair in 2013. The Chair has been in post
since 2013, and has served less than
nine years as Chair, however, the Chair
has served as an Executive Director
(Chief Underwriting Officer) prior to
that. At the time of appointment major
shareholders were consulted ahead of
Separately, there are a number of further
measures to ensure the robustness of
these arrangements including: a strong
Senior Independent Director in place;
an annual review of independence of
mind as part of the effectiveness review,
and oversight of this at the Nominations
and Governance Committee; the Chair
is not a member of the Remuneration
Committee or the Audit Committee;
and a majority of Board Directors are
independent Directors. A key focus of
the 2020 externally facilitated Board
evaluation was an assessment of the
independence of the Board, the role
76
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Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
62
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Requirements
Operation and practices
Additional detail on provisions:
Compliance
1
Section 1
of the Code:
Board leadership
and Company
purpose
The Company
applied all of the
principles and
complied with
the provisions
of section 1.
Provision 5 refers
to S172 of the UK
Companies Act
which is not
applicable to Hiscox
as a Bermuda-
incorporated
company, therefore
compliance is against
Bermudian Director
duties, as detailed
on page 64.
A: Board’s role
Code: A successful company is led by an effective and entrepreneurial
board, whose role is to promote the long-term sustainable success of the
company, generating value for shareholders and contributing to wider society.
Hiscox: The Board is collectively responsible for the stewardship and
long-term success of the Company. There is a robust decision-making
process in place with constructive challenge and debate. Pages 20 to
33 demonstrate the Company’s strong performance and position. In the
corporate governance overview on pages 69 to 75, we detail the governance
structure and how this contributes to the delivery of the Company’s strategy.
B: Purpose and culture
Code: The board should establish the company’s purpose, values and
strategy, and satisfy itself that these and its culture are aligned. All directors
must act with integrity, lead by example and promote the desired culture.
Hiscox: The Company’s purpose and values were last reviewed in 2019.
Having a clear purpose and strong set of values has always been important
at Hiscox as they act as a culture barometer by which the Board and wider
workforce can hold each other to account (see pages 6 to 7). Procedures
for regulation of Board conduct are detailed in the Group governance
manual and individual appointment letters, and is overseen by the Chair
of the Board.
C: Resources and controls
Code: The board should ensure that the necessary resources are in
place for the company to meet its objectives and measure performance
against them. The board should also establish a framework of prudent and
effective controls, which enable risk to be assessed and managed.
Hiscox: One of the key roles of the Board is to oversee the delivery of
strategy and annual operating plans, holding management to account on
their delivery of those plans. This is assisted by a robust internal control
and risk management framework (see pages 38 to 39). The Board and
its Committees have unfettered access to the resources they deem
necessary to fulfil their obligations.
D: Stakeholder engagement
Code: In order for the company to meet its responsibilities to shareholders
and stakeholders, the board should ensure effective engagement with,
and encourage participation from, these parties.
Hiscox: The Board regularly considers the Group’s relationship with
various stakeholder groups including shareholder matters, employee
engagement, customers, and the Group’s impact on, and relationship
with, wider society as highlighted in the overview of Board decisions on
pages 74 to 75. Further stakeholder engagement measures are detailed
on pages 42 to 43. The Board continues to engage with the workforce
through the pre-existing infrastructure and via the employee engagement
network. This ensures Hiscox is motivating and engaging employees
in an effective way. The Employee Liaison is responsible for providing a
summary of findings at Board meetings.
E: Workforce engagement
Code: The board should ensure that workforce policies and practices are
consistent with the company’s values and support its long-term sustainable
success. The workforce should be able to raise any matters of concern.
Hiscox: Comprehensive and robust policies and procedures are in place.
Having a supportive and inclusive culture is important to us and we track
how employees feel about working at Hiscox through our annual global
employee engagement survey. More information on our 2021 results
can be found on page 6. The overview of Board decisions on pages
74 to 75 highlights where the Board took account of the workforce in
decision-making.
Provision 1:
pages 38 to 41
(risk management),
pages 8 to 9
(business model)
Provision 2:
pages 74 to 75
(Board activity),
pages 94 to 125
(chapter 4,
remuneration).
Provision 3:
pages 42 to 43
(shareholder
engagement).
Provision 4:
No AGM votes
below 80%.
Provision 5:
pages 42 to 43
(stakeholder
engagement)
pages 74 to 75
(Board activity).
Provision 6:
page 69
(corporate
governance
framework).
Provision 7:
pages 69 to 73
(Non Executive
Director time,
corporate
governance
framework).
Provision 8:
Group governance
manual and Director
appointment letters.
Hiscox Ltd Report and Accounts 2021
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Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
62
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Requirements
Operation and practices
Additional detail on provisions:
Compliance
2
Section 2
of the Code:
Division of
responsibilities
The Company
applied all of the
principles and
complied with
the provisions of
section 2 except for
Chair independence
within Provision 9
(see page 76).
F: Role of the Chair
Code: The chair leads the board and is responsible for its overall
effectiveness in directing the company. They should demonstrate objective
judgement throughout their tenure and promote a culture of openness and
debate. In addition, the chair facilitates constructive board relations and
the effective contribution of all non-executive directors, and ensures that
directors receive accurate, timely and clear information.
Hiscox: The Chair is responsible for the leadership and overall effectiveness
of the Board. The Chair drives a boardroom culture which encourages
openness and debate and ensures constructive relations between Executive
and Non Executive Directors, see Board cycle on page 72. The Chair,
with the support of the General Counsel and Company Secretary,
delivers high-quality information to the Board to enable a strong basis
for decision-making. Pages 69 to 75 detail the corporate governance
structures in place.
G: Composition of the Board
Code: The board should include an appropriate combination of executive
and non-executive (and, in particular, independent non-executive)
directors, such that no one individual or small group of individuals
dominates the board’s decision-making. There should be a clear division
of responsibilities between the leadership of the board and the executive
leadership of the company’s business.
Hiscox: There is a clear division of responsibilities between the Chair,
Chief Executive Officer and Senior Independent Director (see page 71).
No individual or small group has unfettered powers of decision. The Board
has a majority of independent Directors. As noted in the 2020 report, the
Board approved that Caroline Foulger could continue in office until May
2022, to allow for the completion of the 2021 financial statement process,
and the Board considers that she continues to demonstrate independence
of thought and judgement to fulfil her role as Audit Committee Chair effectively.
Donna DeMaio’s appointment as independent Non Executive Director and
Audit Committee Chair designate on 18 November 2021 ensures an orderly
transition in preparation for Caroline’s retirement following the conclusion of
her nine-year term with the Company.
H: Role of Non Executive Directors
Code: Non-executive directors should have sufficient time to meet their
board responsibilities. They should provide constructive challenge, strategic
guidance, offer specialist advice and hold management to account.
Hiscox: The Group governance manual and the Directors’ letters of
appointment detail the requirements for the Non Executive Directors
regarding their role and time expectations. These factors are subject
to ongoing review, which is overseen by the Chair of the Board, and
is formally reviewed in the annual Director reviews conducted by the
Nominations and Governance Committee (see page 82). The duties of the
Board are detailed in our Matters reserved for the Board policy, which aligns
to the requirements of this principle and includes the key role of appointing
and removing Executive Directors. The Matters reserved for the Board is
available in the Board terms of reference at hiscoxgroup.com/investors/
corporate-governance.
I: Role of the Company Secretary
Code: The board, supported by the company secretary, should ensure
that it has the policies, processes, information, time and resources it
needs in order to function effectively and efficiently.
Hiscox: The Group General Counsel and Company Secretary acts as
a trusted advisor to the Board and its Committees, and ensures there
are appropriate interactions between senior management and the Non
Executive Directors. He is responsible for advising the Board on all
governance matters and all Directors have access to him for advice.
Provision 9:
see explanation
left, (Chair
independence
and tenure),
page 71
(CEO and Chair
separate roles).
Provision 10:
pages 62 to 63
(Board of Directors).
Provision 11:
pages 62 to 63
(Board composition).
Provision 12:
pages 62 to 63
(Board composition),
pages 87 to 88
(Board evaluation).
Provision 13:
page 72
(Board cycle).
Provision 14:
page 71
(structure of Board
decision-making),
pages 72 to 73
(Board attendance
in 2021).
Provisions 15 and 16:
Group governance
manual and Director
appointment letters.
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Chapter 1
Performance
and purpose
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Chapter 2
A closer look
16
62
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Requirements
Operation and practices
Additional detail on provisions:
Compliance
3
Section 3
of the Code:
Composition,
succession
and evaluation
The Company
applied all of the
principles and
complied with
the provisions of
section 3 except
for Chair tenure
within Provision 19
(see page 76).
J: Appointment to the Board and succession planning
Code: Appointments to the board should be subject to a formal, rigorous
and transparent procedure, and an effective succession plan should be
maintained for board and senior management. Both appointments and
succession plans should be based on merit and objective criteria and,
within this context, should promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
Hiscox: The Group governance manual details the commitment to
a formal, rigorous and transparent procedure for appointments to
the Board and effective succession planning for Board and senior
management, both of which are based on merit and promote diversity.
This is also detailed within the Matters reserved for the Board as part
of the Board terms of reference and the terms of reference of the
Nominations and Governance Committee, available at
hiscoxgroup.com/investors/corporate-governance.
The Board diversity and inclusion policy was updated in 2021 and
republished as detailed on pages 84 to 87. It details the parameters for
appointments and succession planning, as well as oversight of Board
and workforce diversity and inclusion policies and programmes. The
Nominations and Governance Committee lead on the delivery of this
principle on behalf of the Board as detailed on pages 82 to 88.
K: Skills, experience and knowledge of the Board
Code: The board and its committees should have a combination of skills,
experience and knowledge. Consideration should be given to the length
of service of the board as a whole and membership regularly refreshed.
Hiscox: The current composition of the Board is set out on pages 62 to 63
and is considered to be an appropriate size for the business, with the right
balance of Executive and Non Executive Directors with a wide range of
skills and experience that contribute to the Board’s performance. Length
of service is considered as part of the succession planning process and
this is delivered by the Nominations and Governance Committee on behalf
of the Board as detailed on pages 82 to 88.
L: Board evaluation
Code: Annual evaluation of the board should consider its composition,
diversity and how effectively members work together to achieve
objectives. Individual evaluation should demonstrate whether each
director continues to contribute effectively.
Hiscox: The Board, Committee and Director evaluation process is a robust
annual process which ensures that a thorough evaluation is completed
each year. This internal evaluation process is supported by external
evaluations, which are completed every three years, with the next external
review scheduled for 2023 (see pages 87 to 88).
Provision 17:
page 82
(key responsibilities
and membership,
Nominations
and Governance
Committee report).
Provision 18:
pages 62 to 63
(Board composition).
Provision 19:
See explanation above
(Chair independence
and tenure).
Provision 20:
pages 82 to 84
(talent review and
Board composition
and succession,
Nominations
and Governance
Committee report).
Provisions 21 and 22:
page 82 to 88
(Board evaluation,
Nominations
and Governance
Committee report).
Provision 23:
pages 82 to 88
(Nominations
and Governance
Committee report).
Hiscox Ltd Report and Accounts 2021
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Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
62
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Requirements
Operation and practices
Additional detail on provisions:
Compliance
4
Section 4
of the Code:
Audit, risk and
internal control
The Company
applied all of the
principles and
complied with
the provisions
of section 4, except
for Provision 25 as
the Risk Committee
membership includes
the Board Chairman.
M: Internal and external audit
Code: The board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of internal and
external audit functions and satisfy itself on the integrity of financial and
narrative statements.
Hiscox: The Audit Committee oversees the relationships with the
internal and external audit functions ensuring their independence and
effectiveness. The Committee also has oversight of the relationship
with the actuarial function. The three parties work together to provide
assurances to the Audit Committee and Board on the integrity of the
financial statements, with external audit also providing assurances in
relation to the narrative statements. The Audit Committee report for 2021
can be found on pages 89 to 91.
The Directors’ responsibilities statement, going concern and viability
statements are set out on pages 128 to 131.
N: Fair, balanced and understandable assessment
Code: The board should present a fair, balanced and understandable
assessment of the company’s position and prospects.
Hiscox: The Board is responsible for the preparation of the Annual Report
and Accounts and for stating whether it considers the Annual Report and
Accounts, taken as a whole, to be fair, balanced and understandable, and
provides information necessary for shareholders to assess the Company’s
position, performance, business model and strategy. The Audit Committee
details how this is achieved on pages 89 to 91.
O: Risk management and internal control framework
Code: The board should establish procedures to manage risk, oversee
the internal control framework, and determine the nature and extent of
the principal risks the company is willing to take in order to achieve its
long-term strategic objectives.
Hiscox: The Board is ultimately responsible for our risk management and
internal controls, and for ensuring that the systems in place are robust and
take into account the principal and emerging risks faced by the Company.
An overview of risk management can be found on pages 38 to 41. The Risk
Committee leads detailed discussions on the principal and emerging risks
of the Company on behalf of the Board, and recommends to the Board
the appropriate risk management framework including risk limits, appetite
and tolerances. The Risk Committee also oversees the independence and
effectiveness of the risk and compliance functions.
Provisions 24 and 26:
pages 89 to 91
(Audit Committee
report).
Provision 25:
Audit Committee
terms of reference
are available at
hiscoxgroup.com/
investors/corporate-
governance. Risk
Committee terms of
reference are also
available. The Chair of
the Board sits on the
Risk Committee as the
Board considers that
this brings value to
that Committee.
Provisions 27, 30
and 31:
pages 128 to 131
(going concern and
viability statements,
Directors’ report).
Provisions 28, 29
and 31:
pages 38 to 41
(risk management).
80
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
62
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
A full copy of the Corporate Governance
Code 2018 can be found at frc.org.uk.
Requirements
Operation and practices
Additional detail on provisions:
Compliance
5
Section 5
of the Code:
Remuneration
Provisions 32 and 33:
pages 94 to 96
(annual statement
from the Chair of
the Remuneration
Committee).
The Company
applied all of the
principles and
complied with
the provisions
of section 5.
Provision 34:
pages 105 and 109,
(Non Executive
Director fees,
Chair remuneration).
Provisions 35:
page 110
(consultants are
highlighted in
chapter 4:
remuneration).
Provisions 36, 37,
38, 39:
pages 114 to 125
(remuneration policy).
Provisions 40 and 41:
pages 94 to 125
(chapter 4:
remuneration).
P: Remuneration policies and practices
Code: Remuneration policies and practices should be designed
to support strategy and promote long-term sustainable success.
Executive remuneration should be aligned to company purpose and
values, and be clearly linked to the successful delivery of the company’s
long-term strategy.
Hiscox: Our remuneration policy and practices are developed by the
Remuneration Committee in consultation with our shareholders. They are
designed to support the Company’s strategic aims, promote the long-term
sustainable success of the Company, and attract and retain talent, while
also being aligned with the Company’s purpose, values and culture (see
pages 6 to 7).
Q: Executive remuneration
Code: A formal and transparent procedure for developing policy on
executive remuneration and determining director and senior management
remuneration should be established. No director should be involved in
deciding their own remuneration outcome.
Hiscox: The Remuneration Committee is responsible for setting the
remuneration for all Executive Directors and senior management. The
remuneration report contains details of the procedures that have been
established for developing the Company’s policy on Executive pay and
determining Director and senior management remuneration outcomes.
No Director is involved in deciding their own remuneration outcome. The
Remuneration Committee receives information on broader workforce
remuneration policies and practices during the year which informs its
consideration of the policy (see page 112).
The remuneration policy was reviewed in May 2020, and changes were
made to rebalance the weighting of incentives towards the long term
in order to encourage an ownership culture and increase the focus on
long-term performance. Shareholders’ views on proposed changes to the
policy were sought and shareholders were supportive of this approach.
In 2021, the Employee Liaison facilitated a discussion with respect to the
content of the remuneration policy and how this aligns to wider Company
pay policy, and shared feedback on this with the Board.
R: Remuneration outcomes and independent judgement
Code: Directors should exercise independent judgement and discretion
when authorising remuneration outcomes, taking account of company
and individual performance, and wider circumstances.
Hiscox: The Remuneration Committee leads on this area of work on
behalf of the Board. Details of the composition and the work of the
Remuneration Committee are detailed on pages 94 to 128. The
Remuneration Committee comprises of Independent Non Executive
Directors only. The remuneration of Independent Non Executive Directors
is determined by the Nominations and Governance Committee and is
regularly benchmarked to ensure it reflects the time commitment and
responsibilities of each role; there are no performance-related elements.
The Board Chair’s remuneration is determined in line with the remuneration
policy and reviewed by the Remuneration Committee. The Remuneration
Committee terms of reference can be found at hiscoxgroup.com/
remuneration-committee-tor.
Hiscox Ltd Report and Accounts 2021
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Performance
and purpose
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Chapter 2
A closer look
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Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Nominations and Governance Committee report
Key responsibilities and membership
The Nominations and Governance
Committee (the Committee) leads
in the delivery of formal, rigorous
and transparent procedures on
appointments and succession, ensuring
the development of a diverse pipeline of
Board members and senior managers.
This includes an annual review of
succession plans for Executives and
Non Executives, a process which
is guided by the appointment and
succession principles set out in the
Group governance manual for
Non Executive Directors and by our
Group HR policies for Executive Directors
and senior management. The Committee
also reviews the Board evaluation
process, Company strategy relating to
diversity and inclusion, and the gender
balance of both the Board and senior
management. In addition, the Committee
carries out several other Group activities,
including a review of intra-Group
conflicts of interest and the approval
of Group policies.
The Committee is comprised of
eight members, of which seven are
Independent Non Executive Directors.
The Chair of the Board is the Chair
of the Nominations and Governance
Committee; the Senior Independent
Director leads on matters relating to
the Chair. The Committee’s terms of
reference are reviewed and approved
annually and are available on the
Company’s website at hiscoxgroup.
com/investors/corporate-governance.
Key activities of the Committee:
The Committee’s key priorities in 2021
were as follows.
• Group Chief Executive Officer
succession, a process which
resulted in the recommendation
to the Board of the appointment
of Aki Hussain as Group Chief
Executive Officer.
• Group Chief Financial Officer
succession, a process which
resulted in the recommendation
to the Board of the appointment
of Paul Cooper to succeed
Aki Hussain as Group Chief
Financial Officer.
• Appointment of a new Audit
Committee Chair, Donna DeMaio,
with a transition period involving
the outgoing Audit Chair to ensure
an orderly transition.
• Review of the Board diversity
and inclusion policy and ongoing
diversity monitoring of the
Board and senior management.
• Review of the Board
evaluation outcomes.
Talent reviews
The Nominations and Governance
Committee leads on Executive
succession planning via an established
and robust talent review process.
This process reviews key talent plans
throughout the Group across three time
horizons: zero-to-two years; two-to-five
years; and the watch list. The Group
review focuses on the Group Executive
Committee, and their direct reports, and
the Company Secretary. The main focus
of the talent reviews in 2021 and into 2022
was the succession and appointment
of the Group Chief Executive Officer
and the transition plans following Aki
Hussain’s promotion to Group Chief
Executive Officer, along with other senior
management changes. The outputs of the
talent review process contribute to senior
management performance development
plans and include relevant diversity
actions. This process is replicated at a
business unit level to ensure a sufficient
pipeline of talent in each area. Talent plans
are also reviewed when vacancies arise.
It has been a busy
year for the Committee,
but achieving a smooth
Group CEO transition was
particularly rewarding.”
Robert Childs
Chair of the Nominations and
Governance Committee
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Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Nominations and
Governance
Committee report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Summary of the Group Chief Executive Officer succession process
The Board and Committee’s focus
over the last number of years was to
ensure that there were strong internal
succession options for the Group Chief
Executive Officer.
The Committee articulated the key
qualities for a CEO successor, and
engaged professional advisors to
evaluate both internal and external
talent against these qualities. This
process was supported by a leading
independent search firm, Russell
Reynolds Associates, who conducted a
thorough review of external candidates
and presented these to the Committee.
The firm was appointed due to its strong
credentials, international reach and
participation in the voluntary code of
conduct to address gender and ethnic
diversity on UK-listed company boards
of directors. The search firm used was
deemed to be independent as it does
not have any connection with the
Company or its individual Directors other
than in its engagement in this capacity.
The Committee considered input from
all of the external advisors, in addition
to conducting its own evaluation of
candidates. Following this rigorous
review process Aki Hussain was
selected as new Group Chief Executive
Officer, effective from 1 January 2022,
due to:
• his experience, skills and values,
which align with those which were
sought in a Group Chief Executive
Officer, as demonstrated in
his five years with Hiscox as Group
Chief Financial Officer;
• the benefit of vast experience
gained prior to Hiscox which
brought a valuable and
fresh perspective;
• his clear thinking and drive to
continue to build the business.
More information on Aki and his vision
can be found on page 2.
Following the announcement of Aki
Hussain’s appointment to Group
Chief Executive Officer, effective
1 January 2022, a transitional plan was
put in place to address the resulting
Group Chief Financial Officer vacancy.
A search process was initiated in the
summer of 2021 for a replacement
Group Chief Financial Officer with the
appointment of an independent search
agency, Spencer Stuart, which had
strong credentials, international reach
and participation in the voluntary code of
conduct to address gender and ethnicity
diversity on UK-listed company boards
of directors. The search firm used was
deemed to be independent as it does not
have any connection with the Company
or its individual Directors other than in
its engagement in this capacity. This
process resulted in the announcement
on 21 December 2021 of Paul Cooper
as the new Group Chief Financial Officer.
Paul has over 25 years of financial
services experience across both the
retail and Lloyd’s insurance markets.
As such, the Group will benefit from both
his insurance market knowledge and
his audit, regulatory and capital markets
experience. He will join the Group in
the first half of 2022, at which point he
will also become a Board and Group
Executive Committee member. In the
meantime, Liz Breeze, Chief Financial
Officer for Hiscox Re & ILS, has been
appointed Interim Group Chief Financial
Officer, effective 1 January 2022.
Board composition and succession
As part of the annual Board succession
planning process, the Nominations
and Governance Committee reviewed
the composition of the Board in 2021.
This included a skills and experience
review – encompassing independence,
length of service, the balance of skills
and experience, diversity, and the
Hiscox Ltd Report and Accounts 2021
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Performance
and purpose
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Chapter 2
A closer look
16
Chapter 3
Governance
Nominations and
Governance
Committee report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
capacity required to oversee the delivery
of the Company’s strategy – and Board
succession planning on an immediate
and longer-term basis for the Chair and
all members of the Board. The review
focuses on Non Executive succession
and aligns to the talent reviews for the
Executive Directors. Following these
formal reviews, the Board remain
confident that the current skills and
expertise are in place to deliver value to
the Company and its shareholders. This
formal annual process is augmented by
ongoing open dialogue between the Non
Executive Directors on succession and
the skills required to deliver the strategy.
Pages 62 to 63 demonstrate the nature
and breadth of each Director’s relevant
skills and experience. Additionally, all
Directors have demonstrated that they
have adequate capacity to address their
duties, evidenced by all Non Executive
Directors having been able to lead the
Company through the challenges of
the pandemic which, as detailed in last
year’s Annual Report and Accounts
and continued in 2021, included more
frequent informal interactions with
the Executive Directors and senior
management as well as attendance at
more sessions than in a standard year.
As part of this Board review, an
appointment process was initiated for
the replacement of Caroline Foulger as
Independent Non Executive Director
and Chair of the Audit Committee. This
was the main Non Executive Director
succession focus for 2020 and 2021.
An early appointment was sought to
ensure that an orderly transition could
take place with the outgoing Chair, and
to give sight to the new Chair of the 2021
financial review cycle. The appointment
process is detailed in the table on page
85, and resulted in the appointment of
84
Hiscox Ltd Report and Accounts 2021
Donna DeMaio. Donna’s induction is
ongoing and, while she will formally take
over as Chair of the Audit Committee
following Caroline’s retirement at the
2022 AGM, Donna has been a key
participant in the review of the 2021
Annual Report and Accounts.
Following the appointment of the Audit
Committee Chair, a further review was
undertaken on the composition of the
Board. As part of the discussions on
the requirements of new Directors,
the Committee determined that the
Company has a strong Board which
is sufficiently capable to meet the
demands of the Group and future
strategy, but that it would be useful to
investigate how the Board could be
further bolstered in certain areas and
in the continued delivery of a diverse
Board. This was also central to the
Board effectiveness review.
Diversity and inclusion (D&I)
D&I has been a strategic priority for a
number of years and remains critical
to our development as a sustainable
organisation. Hiscox operates in a
global market and the success of our
business is dependent on our people,
which is why we want to build teams
that are as diverse as the customers
and communities we serve, with a
working environment where all our
people can thrive. Our belief is that
diverse perspectives and different ways
of thinking help us anticipate and meet
market needs in new ways. This diversity
of thought allows us to look at problems
differently, and helps make us more
innovative and a stronger partner for
our customers.
We have a Global Head of D&I and a
D&I Executive Sponsor for the Group
who together drive our D&I strategy
and progress. This includes our
D&I approach to manager training,
alignment of HR policies with inclusion
requirements, amplifying efforts via
employee and broker networks, and
ensuring alignment to credible external
D&I commitments. In addition, each
business unit Chief Executive Officer
and functional leader has developed
an action plan for gender and ethnic
diversity which includes aspects such
as recruitment, career development,
education and awareness and
community engagement. These plans
are monitored centrally and also via
specific local reports to subsidiary
Boards. This approach is supported
by an annual report on D&I which this
Committee receives.
Board D&I policy
In 2021, the Committee reviewed the
existing Board diversity policy and
updated this to reflect more clearly the
underlying ethos of the Company, the
ongoing delivery of a diverse Board, and
to formalise the Committee’s oversight
of the Group’s wider D&I programme.
The new Board D&I policy builds on
the prior iteration, which focused on
key requirements for appointments
and links to the Board succession
planning process which monitors skills,
knowledge and experience in addition
to diversity (both gender and ethnicity).
The policy continues to recognise the
benefits of diversity in its broadest sense
and sets out the Board’s ambitions while
clarifying its qualitative objectives. The
Committee’s terms of reference were
updated to formally note the relevant
changes to the Board’s responsibilities
regarding D&I oversight.
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Nominations and
Governance
Committee report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Audit Committee Chair succession process
A formal and transparent process was deployed for the appointment of the Audit Committee Chair.
Requirements
Process
Interview and appointment
Induction
In 2020, as part of the
orderly succession plan
for the retirement of the
Audit Committee Chair, it
was agreed to target an
appointment to be in place
by late 2021.
The key requirements of
the role were agreed as
being recent audit and
finance experience.
It was agreed that a
diverse candidate with
these skills would also be
highly regarded.
A review was completed
by the Committee on the
geographical location of the
new Audit Chair, assisted by
an externally delivered market
map of available Directors.
A brief was prepared for the
role specifying the above.
The process was initiated with
the appointment of an agency.
Russell Reynolds was
engaged based on its market
reputation, and alignment
to our D&I objectives. The
search firm used was deemed
to be independent as it does
not have any connection with
the Company or its individual
Directors other than in its
engagement in this capacity.
The search firm identified
potential candidates
assessed against the role
specification, based on
merit, and with due regard
for the benefits of all forms
of diversity on the Board,
including gender and
ethnicity. This produced
a long list of high-quality
candidates from a broad
range of potential sources
of talent. Candidates
were then shortlisted for
interviews, which focused on
each candidate’s skills and
experience for the role.
A formal, multi-stage
interview process was used to
assess candidates. Following
interviews with the Chairman,
the Chair of the Audit
Committee and the incoming
Group Chief Executive Officer,
a number of candidates
progressed to meet other
Board members. All interview
candidates were deemed
appropriate for appointment
based on their skills and
experience, and subject
to a referencing process
and review of any potential
conflicts and time availability
(assessed against significant
time commitments).
The outstanding candidate for
the role was Donna DeMaio,
and the Nominations and
Governance Committee
agreed that she demonstrated
significant financial services
and US market expertise.
The position further assists
in the development of
our diverse Board. The
appointment was announced
on 22 November 2021.
Donna’s induction consisted
of a tailored induction
programme which allowed
her to become more familiar
with the working of the Board
and the Group, and to fully
understand the Company’s
operating environment
(internal and external).
This included meetings
with individuals from the
Board, senior management
and external auditors,
and was supported by
an induction pack. The
programme is tailored
to Donna’s appointment and
it was continually reviewed
to identify additional areas
where induction is required.
A key part of the orderly
transition from one Audit
Committee Chair to
another was Donna’s active
participation in the ongoing
review cycle for the 2021
Annual Report and Accounts.
Hiscox Ltd Report and Accounts 2021
85
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Nominations and
Governance
Committee report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Board D&I objectives and 2021 progress
Board objective
Implementation
Progress
1.
Ensure a
diverse1 and
effective Board
1 Diversity of gender,
social and ethnic
backgrounds,
cognitive and
personal strengths.
2.
Ensure that
all Board
appointments
are considered
on merit within
the context of
the strategy
requirements
and diversity
considerations
s At least annually review the
structure, size and composition of
the Board, including the balance of
skills, knowledge and experience
to assist in the development of a
diverse pipeline.
s Annually review Board diversity as
part of the Board evaluation process.
s Ensure the values of the
Company promote an open
and inclusive environment.
s At least annually review the
succession plans for the Board and
senior management and ensure the
talent review process is in place for
the wider workforce.
s Gender and ethnic diversity will
be taken into consideration when
evaluating the skills, knowledge and
experience desirable to fill each role
and when considering the methods
to attract diverse candidates.
s A search firm will normally be
engaged to assist in the review
of the market and they should be
committed to addressing gender
and/or ethnicity diversity.
s All appointments must be made
on merit as aligned to the needs
of the Board, the Company, and
its strategy and values.
3.
Ensure that the
overall workforce
is diverse and
inclusive
s Review the execution of the Group
diversity and inclusion policy2.
s Ongoing Board and Committee
review of matters relating to
employee retention, engagement
and culture.
2 hiscoxgroup.com/diversity-and-
inclusion-policy.
Page 65 of the report demonstrates the diversity of our Board
as at 2 March 2022.
Via the delivery of our Board diversity and inclusion policy,
we have:
s maintained a gender balance in line with the Davies
and Hampton-Alexander reviews since 2015;
s had one ethnic minority Director for five years.
Each June, the Board and Committee review the talent plans
for senior management and, each November, the Board
succession plans. Talent reviews are replicated throughout
the business.
In 2021, the Board made three permanent appointments:
s new Group Chief Executive Officer (Aki Hussain);
s new Group Chief Financial Officer (Paul Cooper);
s new Independent Non Executive Director and incoming
Chair of the Audit Committee (Donna DeMaio).
All appointments had gender and ethnic diversity considered
when evaluating the skills, knowledge and experience required,
with the respective search firms committed to addressing
gender and ethnic diversity. The best candidates for the roles
were selected against merit, the needs of the Board and
Company, and its strategy and values.
An Interim Group Chief Financial Officer appointment
(Liz Breeze) was also made from internal succession
plans while a longer-term appointment was sought.
The Committee has an annual report from the Global Head
of D&I. We have a Head of D&I and a D&I Executive Sponsor
for the Group, who together drive our progress and a key
commitment from every business unit and functional area
Chief Executive Officer to deliver on our employee D&I targets.
These plans are monitored centrally and also via specific local
reports to subsidiary boards. Further work is ongoing
to develop the next iteration of this strategy.
The tables on page 87 provide a breakdown of diversity
at Hiscox.
The Board and Committees receive reports relating to
key workforce matters on an ongoing basis, including
employee retention, engagement and culture.
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Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Nominations and
Governance
Committee report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Gender diversity
at 31 December 2021
Ethnic diversity
at 31 December 2021
Board
Group Executive
Committee
Direct reports
to the Group
Executive
Committee
All employees
Male
55%
40%
Female
45%
60%
Board
Group Executive
Committee
Members with ethnic
minority background
9%
20%
52%
50%
48%
50%
Group D&I policy
We have a Group D&I policy that applies
to the workforce and is reflective of
our Company values (see page 7).
Alongside this, the employee networks
we have established – covering topics
such as mental health and well-being,
and touching communities including
parents and carers, Pride, pan-African
and Latino – drive D&I progress
across our offices.
We will look to build on this good
work in 2022 and beyond, with a
Board-approved D&I strategy which
continues to focus on representing,
leading and guiding the D&I culture,
strengthening and leveraging data and
insights, inspiring with our story, and
embedding D&I into business as usual.
Together, these initiatives will strengthen
further the diversity measures in
place and build the maturity of the
D&I landscape at Hiscox.
The Hiscox Ltd Board D&I policy and
Group D&I policy are publicly available
on our website at hiscoxgroup.com/
about-hiscox/group-policies-and-
disclosures. Both reflect the ethos of the
Company in advocating that opportunity
should be limited only by an individual’s
ability and drive.
We have also fulfilled our UK obligations
to report our gender pay gap ratios with
respect to our UK subsidiaries, and
published our fifth annual gender pay
report during the year. This report
sets out in detail the D&I programmes
and initiatives we pursued during
2021, and can be viewed at hiscoxgroup.
com/gender-pay-report-2021.
In addition, we complied with the
provisions of the Hampton-Alexander
Review, which set a minimum target for
FTSE 350 companies to achieve 33%
representation of women on FTSE 350
boards and in the two layers of leadership
below the Board (the Group Executive
Committee and the direct reports to
the Group Executive Committee) by
the end of 2020. While the target for
compliance has now passed, our
ambition to achieve greater gender
diversity at all levels remains, which is
why we continue to track and report
our progress.
2021 Board and Committee
effectiveness review
Every third year, the Board evaluation is
undertaken by an external evaluator. This
was last undertaken in 2020 and is next
scheduled for 2023. In the interim years,
such as 2021, an internal evaluation is
carried out which also reviews each
Committee, the Board and individual
Directors. The evaluation also assesses
the completion of the prior year’s actions.
Each are addressed in turn below.
Equally, we complied with the provisions
of the Parker Review, which set a
minimum target of having at least one
ethnic minority Director on the Board by
2021, which we have had since 2016.
We are committed to improving our
ethnic diversity at all levels, to
ensure our workforce reflects the
customers and communities that we
serve. In some of the jurisdictions in
which we operate, current laws mean it
is not possible to collect ethnicity data
from employees, but where we can we
encourage employees to self-identify.
Improving the volume of voluntary
disclosure from employees remains
a focus area.
Board evaluation
The Board and its Committees have
a culture of continuous improvement
and as part of this undertake a formal
and rigorous annual evaluation of
Board and Committee performance;
the results of which help to inform
action and development. Board and
Committee effectiveness evaluations
are carried out each year and the
results are reviewed and discussed
at the Board and its Committees
– specifically the Nominations and
Governance Committee, with a
focus on Board composition.
2021 evaluation
Building on the work of prior years, the
interim year evaluation was carried out
using our improved evaluation process
of Board, Committee Chair and
individual Director performance.
The Board and Committee reviews
focused on, among other things: Board
oversight of strategy, risk management
performance and objective delivery;
Board accountability, focus and
priorities; Board composition and culture
of the Board including independence,
expertise, decision-making and dynamics,
and succession planning; Board
progress on diversity, climate change
approach and digitalisation; and Board
support. The format of the evaluation
was a confidential survey of the Board.
Individual Director reviews are an
opportunity to discuss individual skills,
training requirements, succession and
any other issues. Each Non Executive
Director completes a self-assessment
form which is followed by a detailed
discussion on performance with the
Chairman. The Senior Independent
Director carries out the Chairman’s
review and this supports the annual
review process of the Chairman.
Individual objectives and action
plans are agreed following each
meeting where appropriate.
Hiscox Ltd Report and Accounts 2021
87
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Nominations and
Governance
Committee report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
2021 Board review outcomes
The 2021 Board review continued to find
a strong and dynamic Board in place
which re-affirmed the independence of
the Board, the appropriate leadership
provided by the Chair, and the
robustness of the Non Executive
Director succession plans and
Executive Director talent reviews.
All Directors were fully engaged with the
Board, Committee and Director evaluation
process. The review was positive with
continued robust decision-making and a
Board culture which fosters constructive
discussion. The review also focused on
three areas: climate change, diversity
and digital. The evaluation revisited
the external reviewer’s findings in 2020
and were content to re-confirm that the
independence of the Board (as currently
composed) was deemed satisfactory;
the Chair was seen to continue to
demonstrate strong leadership; and
the Non Executive Director succession
plans were considered to be robust.
The Board continues to engage in
continuous improvements with the
annual review process being an explicit
point of reflection on ongoing actions
and new areas of focus. The Directors
determined to focus on the following
matters in 2022:
• strategy – continue to review
the Group’s strategy to further
address risk, operations and
competitor environment in a
fast changing world;
• management information – building
on new management information
to further increase the linkage
between objective setting
and monitoring;
• people and succession planning –
further focus on workforce
diversity and inclusion, employee
88
Hiscox Ltd Report and Accounts 2021
engagement, and key long-term
succession planning for senior
management, the Non Executive
Directors and the Chair. Additionally,
the Board will ensure a smooth
transition of the new Group Chief
Executive Officer, Group Chief
Financial Officer and Audit Chair;
• climate change/ESG – further
work on the Company’s strategic
response to climate change and
further deep dives on social
and governance;
the Chair was seen to continue to
demonstrate strong leadership; and
the Non Executive Director succession
plans were considered to be robust.
However, the Board and its Committees
have made tangible progress against
many of the action points identified
during 2021:
• focused on the succession of
Executive Directors and other key
leadership positions as detailed in
this report;
• IFRS 17 Insurance Contracts
• transitioned back to in-person
meetings when Covid-19-related
restrictions allowed for this,
while retaining the use of
video-conferencing for interim
Board calls and updates;
• driving accountability and
excellence in execution, including
the continued monitoring of
progress against the Company’s
business priorities and key projects;
• continued discussions on strategy,
including business mix and
capital allocation;
• devoted more time to considering
changes in the external
environment and their impact
on Hiscox, including competitor
activity in key markets; and
• maintained a focus on talent
management, employee
engagement and the retention
of high performers.
Robert Childs
Chair of the Nominations and
Governance Committee
– oversight of IFRS 17 and
understanding the business
changes and peer positioning
on this in addition to the
financial changes;
• topics for review – additional topics
for review were identified as part of
the review which then influenced
the agenda and training plans for
the year.
The Board welcomed the review’s
findings with the actions feeding directly
into ongoing succession planning
discussions and Board developments.
The Chair owns the action plan relating to
the actions and leads the implementation
of these actions, and will report on their
delivery in the 2022 Annual Report
and Accounts.
2020 external Board effectiveness
review – progress against
identified actions
In 2020, an external evaluation was
competed by Lintstock, an independent
third-party agency. Overall the external
evaluator rated Board and Committee
effectiveness as good or extremely good
with no fundamental issues highlighted.
In particular, Lintstock noted that the
independence of the Board (as currently
composed) was deemed satisfactory;
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Audit Committee report
In relation to financial reporting, the
primary role of the Audit Committee (the
Committee) is to monitor the integrity
of the financial statements of the Group
and any formal announcements relating
to the Group’s financial performance,
and review significant financial reporting
judgements contained within them. The
Committee meets four times a year.
Working with both management and
the external auditor, the Committee
reviewed the appropriateness of the
interim and annual financial statements,
concentrating on:
• the quality and acceptability of
accounting policies and practices;
• the clarity of the disclosures
and compliance with financial
reporting standards and relevant
financial and governance
reporting requirements;
• material areas in which significant
judgements and estimates have
been applied or where there has
been discussion with the external
auditor; and
• any correspondence from
third parties in relation to our
financial reporting.
The Committee is comprised of eight
independent Non Executive members.
Following the transition of the Chair
role to Donna DeMaio in May 2022,
this will return to seven members. The
Committee has recent and relevant
finance expertise and competence
relevant to the insurance sector.
To aid the review, the Committee
considered the key judgements and
estimates in the financial statements as
identified by the Chief Financial Officer, as
well as reports from the external auditor
on the outcomes of its annual audit and
half-year review. The Committee ensured
that the external auditor, PwC, displayed
the necessary professional scepticism
its role requires. The primary areas
considered by the Committee in relation
to the 2021 Annual Report and Accounts
were as follows.
i) Reserving for insurance losses
As set out in our significant accounting
policies on pages 154 to 155, the
reserving for insurance losses is the
most critical estimate in the Company’s
consolidated balance sheet.
The Chief Actuary presents a quarterly
report to the Committee covering Group
loss reserves which discusses both the
approach taken by management in
arriving at the estimates and also the
key judgements within those estimates.
The Committee reviewed and challenged
the key judgements and estimates in
valuing the insurance liabilities.
During the year, a number of natural
catastrophes occurred which impacted
the Group, including Hurricane Ida,
Storm Uri, and European floods. It
is important that the Company can
quickly, and with a reasonable degree
of reliability, estimate the gross and net
losses arising from these events. The
Committee received presentations from
the Chief Actuary and management
on the process undertaken, and the
judgements arrived at, to establish
these key estimates. The Committee
is satisfied with both the process that
was conducted and the reporting and
disclosure of the resulting estimates.
The Company continues to keep
Covid-19 losses under review, continually
evaluating loss estimates based on
entity-specific historical experience
and contemporaneous developments
observed in the wider industry when
relevant. The Committee received
Hiscox Ltd Report and Accounts 2021
89
This will be my final
report before stepping
down from the Board in
2022 and I am delighted
to state that the Audit
Committee continued to
work effectively in 2021.
We were pleased to
welcome Donna, whose
experience within both
financial services and the
US market will be valuable
for the next stage of the
Group’s journey.”
Caroline Foulger
Chair of the Audit Committee
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Audit Committee
report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
detailed presentations from the Chief
Actuary and management relating
to the latest information and the
recommendations arising therefrom.
The Committee is satisfied with both
the process that was conducted and
the reporting and disclosure of the
resulting estimates. While there remains
uncertainty around the final cost of these
events to the Group, the Committee
notes that the Group continues to adopt
a prudent approach where uncertainty
exists as to the final cost of settlement.
The Committee also reviewed the level
of margin held within the insurance
liabilities in the Group’s balance sheet.
Management confirmed that they remain
satisfied that the claims reported and
claims adjustment expenses, together
with claims incurred but not reported
liabilities included in the financial
statements, provide an appropriate
margin over projected claims costs to
allow for the risks and uncertainties within
the portfolio. As with prior years, the
Committee also considers the report of the
external auditor following its re-projection
of reserves using its own methodologies,
and the independent actuary who
reviews the estimates of insurance
liabilities for the Hiscox Syndicates.
On the basis of this work, it reported
no material misstatements in respect of
the level of reserves held by the Group at
the balance sheet date. On the basis of
these assessments and the consistent
application of the Group’s reserving
principles, the Committee was satisfied
that the valuation of insurance liabilities
at 31 December 2021 was appropriate.
ii) The recoverability of
reinsurance assets
The Committee received regular
updates on the credit risk exposures
to reinsurers, including the impact of
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Hiscox Ltd Report and Accounts 2021
business interruption and the status
of recoveries resulting from Covid-19.
There were updates on the process
to monitor the levels of recoverability,
including the level of collateral held, and
the regular contact with counterparties,
the ratings of reinsurers and the
concentration of risk. The reinsurer panel
and associated exposures appear to
be robust, and management are not
aware of any material issues regarding
concentration risk, credit risk or default
risk. The Committee is satisfied with the
approach taken and the recoverability of
reinsurance assets.
iii) Going concern assessment and
longer-term viability statements
The Committee reviewed and advised
the Board on the Group’s going concern
and longer-term viability statements
included in this Annual Report and
Accounts, and the assessment reports
prepared by management in support
of such statements. As part of this
review, the Committee assessed the
methods, assumptions and judgements
underpinning the going concern
assessment. The Committee was
satisfied by the level of analysis presented
during the year, the related approach
taken, and statements made in the
Group’s key external reporting. More
information on the going concern and
viability statements can be found on
pages 128 to 129.
iv) Recoverability of goodwill and other
intangible assets
Judgements in relation to impairment
testing relate primarily to the
assumptions underlying the calculation
of the value in use of the Group’s
businesses, being the achievability of
the long-term business plans and the
macroeconomic factors underlying the
valuation process.
The Committee reviewed and discussed
the analysis performed by management
and challenged the appropriateness of
the assumptions made.
The Committee is satisfied with the
approach taken and the recoverability
of the assets.
v) Accounting for the defined
benefit scheme
As explained in note 2.15, the Group
recognises the present value of the
defined benefit obligation, less the fair
value of plan assets at the balance sheet
date. The Committee reviewed the report
of the key judgements and estimates in
the financial statements from the Group
Chief Financial Officer, and the results of
the independent pension valuation, and
is satisfied that the assumptions used to
measure the net liabilities are reasonable.
vi) Valuation of the investment portfolio
The Group values and reports its
investment assets at fair value. Due to the
nature of the investments, as disclosed in
notes 17 and 20, the fair value is generally
straightforward to determine for most of
the portfolio which is highly liquid. For the
element of the portfolio held in equities
and investment funds, a small proportion
relies on a higher degree of judgement.
The Committee, through the Investment
Committee, receives reports on the
portfolio valuation and is content with
the process and the estimates reported.
Sensitivity analysis on valuation of assets
is captured within the financial risk
section (note 3.3) of this report.
vii) The recoverability of deferred
tax assets
A deferred tax asset can be recognised
only to the extent that it is recoverable.
The recoverability of deferred tax assets
in respect of carry-forward losses
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
Audit Committee
report
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
requires consideration of the future levels
of taxable profit which will be available to
utilise the tax losses. The assumptions
regarding recoverability of deferred
tax assets remain consistent with prior
years. The Committee challenged
the underlying assumptions for the
recognition of deferred tax assets,
principally the availability of future
taxable profits and utilisation period.
viii) Estimated premium income
An estimate included within the
Group’s close process is an estimate
of gross premiums written during the
year. For certain contracts, premium
is initially recognised based on
estimates of ultimate premium. This
occurs where pricing is based on
variables which are not known with
certainty at the point of binding the
policy. In determining the estimated
premium, the Group uses information
provided by brokers and coverholders,
as well as past underwriting experience,
the contractual terms of the policy
and prevailing market conditions. The
estimated gross written premium is
regularly reviewed and the Committee
is satisfied with the approach taken.
Systems and process change projects
The Committee received updates on
various change projects including the
Group’s programme implementing
IFRS 17 Insurance Contracts. The
IFRS 17 updates covered key IFRS 17
accounting policies which have been
approved, educational material, and
programme risks and governance.
any other relevant activities including
its key performance measures and the
development of its resources. Updates
on aspects such as the assessment
of internal audit’s effectiveness and
the review of the internal audit policy
are shared annually. The internal audit
plan is derived using a risk-based
approach. In 2021, key themes included
core underwriting and claims controls,
Covid-19-related impacts, change
controls and embedding, the financial
control framework, data governance and
controls, various regulatory themes,
and information security.
External auditor
PwC has been the Company’s external
auditor since 2016. PwC is invited to
attend all meetings of the Committee and
it is the responsibility of the Committee
to monitor their performance, objectivity
and independence. The Committee
discusses and agrees with PwC the
scope of its audit plan for the full-year
and the review plan for the interim
financial statements.
The Audit Committee receives reports
from PwC at each meeting which
include the progress of the audit,
key matters identified and the views
of PwC on the judgements outlined
above. PwC also reports on matters
such as their observations on the
Company’s financial control environment,
developments in the audit profession,
key upcoming accounting and
regulatory changes and certain
other mandatory communications.
Internal audit
The Group’s Chief Auditor provided
quarterly updates to the Committee on
the progress of the internal audit plan,
the outcomes of recent audits, the
progress of audit-related actions, and
To provide a forum in which any
matters of concern could be raised
in confidence, the Non Executive
Directors met with the external and
internal auditors throughout the year
without management present.
The Committee also meets annually
with the auditor and with the finance
team without management present.
Non-audit services are not contracted
with PwC unless it is clear that
there is no practical alternative and
there are no conflicts of interest or
independence considerations.
Throughout the year, the Committee
assesses the independence,
effectiveness and quality of the
external audit process. This process
forms the basis for its recommendation
to shareholders to reappoint the
external auditor.
Chair of Audit Committee
As part of the succession plan for the
retirement of the Audit Committee Chair,
it was announced on 22 November 2021
that Donna DeMaio will become the new
Chair. A key part of the orderly transition
from one Audit Committee Chair to
another was Donna’s active participation
in the ongoing review cycle for the 2021
Annual Report and Accounts. See page
85 for further details.
Fair, balanced and understandable
The Committee assessed whether
the Annual Report and Accounts,
taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Group’s financial position
and performance, business model and
strategy. The Committee reviewed the
processes and controls that underpin
its preparation, ensuring that all
contributors, and senior management
are fully aware of the requirements and
their responsibilities.
Caroline Foulger
Chair of the Audit Committee
Hiscox Ltd Report and Accounts 2021
91
Q&
A:
with Dan Alpay
Line Underwriter – Flood, Hiscox London Market
Rising tide
US flood is a major growth
area for our big-ticket
business, driven in
part by innovations in
digital underwriting.
Dan Alpay joined Hiscox
in 2009 as part of the very
first graduate training
scheme. In 2016, he took
over as underwriter for
the household line of
Hiscox London Market.
Also contained within his
portfolio was US flood –
then, in Dan’s words,
‘a tiny fledgling business’.
By 2019, the flood product
had grown to the point
where it demanded his
full-time attention.
Q: How did US flood come
to be part of the Hiscox
London Market offering?
A: Since 1968 flood had
been underwritten by the US
government. If you’re in a flood
zone and have a federally
backed mortgage – which
most mortgages are – it’s a
legal requirement to buy flood
insurance. But until a few
years ago, you could only buy
it through the government’s
National Flood Insurance
Program (NFIP) – no private
carrier could offer flood
insurance. In 2012, the NFIP
was $30 billion in debt, mainly
due to Hurricanes Katrina and
Sandy, so the government
decided to throw open the
marketplace. After watching
closely for a couple of years,
we sensed an opportunity to
move in. Through the NFIP,
you can only buy $250,000 of
buildings cover and $100,000
of contents. When those
limits were put in place in the
seventies, they would have
covered most buildings in the
USA; now they don’t come
close. Using the strength of
our underwriting, we’re able
to offer something much
broader: our FloodPlus
product covers up to
$2.5 million in value.
Q: US flood is expected to
continue to grow strongly.
What’s the secret behind
that rapid growth?
A: It’s really a success story
about digital trading. We
decided quite quickly that
we were going to build an
online platform to do the
underwriting for us – we had
no legacy to build on, so we
had the luxury of a blank slate.
Although we also distribute
flood through third-party
intermediaries, the way it’s
92
Hiscox Ltd Report and Accounts 2021
underwritten isn’t manual
at all. It uses an online rating
portal, which we control.
It’s a very different rating
mechanism, which allows us
to be faster, more responsive
and a lot more granular in
what we do.
It’s not been simple.
Any underwriting product
demands tonnes of data, but
we started out with nothing
except a few models, which
were still in their infancy, and
our gut feel for underwriting.
The NFIP didn’t release any
of its data until 2020, so
everyone was going in blind.
Then Hurricanes Harvey and
Maria hit in 2017, and that was
an important learning point
for us. With a catastrophe
product, you’re not getting
claims every day, so although
any big event is a negative
in terms of cost, it gives us
another chance to evaluate the
product. We doubled down,
kept investing in technology,
and have grown ever since.
It’s been a fun ride, and we’re
in an exciting place now.
Q: Is flooding a growing
problem in the USA?
A: We deal with hurricane-
borne flooding and flooding
from just normal rain and river
rise, and both appear to be
getting more prominent as
time goes by – clearly driven
by climate change. The big
events tend to be happening
more frequently. Cat 4 and
Cat 5 landfalling hurricanes
are supposed to be rare, but
we’ve seen five in the past
three years and that does
raise the question: is this a
blip or is it the new norm? The
challenge for us is to ensure
we’re pricing for the growing
risk and providing adequate
cover for customers who
want protection.
Q: How was 2021 for you?
A: Really good. We managed to
grow the portfolio significantly.
We weathered more events,
and we weathered them
while retaining profitability.
We’re at the point now where
there’s strong belief within the
business that this is working.
More and more customers
are buying the product, more
brokers and distributors are
wanting to talk to us. Most
importantly, it’s genuinely
helping people. Hurricane
Ida, which caused extensive
flooding in New York, New
Jersey and Connecticut
in September 2021, was
testament to that. We’ve been
going through the process of
paying those claims, putting
people back on their feet.
Q: How do you see the
human value being
applied at Hiscox?
A: I think Hiscox as a culture
tends to be very empathetic,
but also fair, and that’s quite
a hard balance to strike.
We’ve had a tough few years,
the market has been in a
bad place, and it’s easy at
times like that for people to
feel disillusioned or worried.
In that moment, you need
empathetic leadership. I
think that’s been expressed
really well. There are a lot of
individuals here who take it
upon themselves to put an
arm around someone, and
that is so important.
Q: During the lockdowns of
the past two years, what did
you miss most about being
around other people?
A: Mostly, just having a chat
about something completely
unrelated to work. We did
virtual catch-ups all the time,
but it’s never the same as
the experience you have
when you’re together,
bouncing off each other.
The other thing it brought
home is how much we learn
by osmosis. That’s especially
important for people who
are just starting out. If you’re
sitting in your house on your
own and you have a small
question you can’t answer,
you’re not going to call your
manager or set up a meeting.
But when you’re in the office
and they’re sitting right next
to you, you’ll just lean over
and ask. You miss all of that
working remotely.
Hiscox Ltd Report and Accounts 2021
93
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Annual statement from the Chair of the
Remuneration Committee
Dear fellow Shareholder
At Hiscox, our remuneration strategy is
designed to attract and keep talented,
ambitious people and foster a culture
that encourages sustainable high
performance. Our aim is to deliver
strong returns across the insurance
cycle and create long-term value for
our shareholders.
The Committee believes that for all
employees, basic pay should be
competitive, with bonuses reflecting
personal and business performance.
We expect all employees to meet or
exceed a series of objectives based
on our strategy and values, which are
essential to Hiscox’s business operations
and reputation, including delivering
great customer service, complying with
regulation and managing risk. Long-term
share awards provide alignment with
the shareholder experience and reward
demanding performance targets linked
to net asset value per share growth and
shareholder returns.
We believe this approach works well for
both our employees and shareholders,
and I would like to thank shareholders
for their high levels of support on the
remuneration resolutions at the AGM
in recent years.
Performance and
remuneration outcomes
In 2021, the Executive Directors led
the business to deliver a pre-tax
profit of $190.8 million (2020: loss of
$268.5 million), pre-tax ROE of 8.1%
(2020: -10.8%) and a combined ratio
of 93.2% (2020: 114.5%). Despite
elevated natural catastrophes losses
and a subdued investment return, this
represents a resilient performance,
helped by portfolio optimisation action
taken over a number of years and
improving rates in big-ticket lines. In
the UK, the business has continued to
prioritise UK business interruption claims
and has made significant progress in
settling claims during 2021.
During 2020, we made a commitment
that Executive Directors would not be
paid a bonus until the dividend had
resumed, irrespective of the Group’s
performance. Dividend payments have
now been resumed, with an interim
dividend of 11.5 cents per share paid on
22 September 2021 and a final dividend
(subject to shareholder approval) to be
paid on 13 June 2022 of 23.0 cents per
share, in line with pre-Covid-19 levels.
Hiscox has not furloughed any staff or
accessed any UK, USA, or European
government support schemes.
For 2021, a pre-tax ROE of 8.1% was
achieved (above the hurdle rate of 2.5%)
and a bonus pool was therefore created.
In considering the bonus awards for
Executive Directors, the Committee
took into account the ranges agreed
at the start of the year alongside
the personal performance of the
individuals, the delivery of Group’s
business priorities, and the overall
performance of Hiscox, as well as a
consideration of risk. More information
on business performance during 2021
can be found on pages 16 to 33, and
for more on Executive Director
performance see page 103. Taking
these factors into account, Bronek
Masojada and Aki Hussain were awarded
bonuses of 90% of salary, representing
30% of the maximum opportunity.
Joanne Musselle as Group Chief
Underwriting Officer, was awarded a
bonus of 107% of salary, representing
27% of the maximum opportunity,
reflecting the best underwriting result
for five years.
Our remuneration strategy
is designed to attract
and keep talented,
ambitious people and
foster a culture that
encourages sustainable
high performance. Our
aim is to deliver strong
returns across the
insurance cycle and
create long-term value
for our shareholders.”
Colin Keogh
Chair of the Remuneration Committee
94
Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Chapter 4
Remuneration
Annual Statement
from the Chair of
the Remuneration
Committee
This bonus outcome follows two years
of zero bonus pay-out for the Executive
Directors during 2019 and 2020 – in line
with our approach of rewarding financial
achievements, not just effort – despite
very strong personal performance over
those two years. For the wider workforce
during this period, we paid bonuses
relative to personal performance and
business area profitability.
The 2019-2021 Performance Share
Plan (PSP) was set against stretching
net asset value plus dividends per share
targets. The net asset value per share
threshold of 7.5% compound growth
over the three-year performance period
was not met.
As already noted, the Committee
assessed performance in the round
when determining variable pay
outcomes, including an assessment
of wider Company performance, the
employee experience, the shareholder
experience and wider stakeholder
experience, alongside a consideration
of risk. The Committee concluded that
there would be no exercise of discretion
to override the outcomes of the
performance conditions for 2021.
Board changes in 2021
After 21 years as Group Chief Executive
Officer (CEO), Bronek Masojada stepped
down as an Executive Director of Hiscox
with effect from 31 December 2021.
Following his retirement from the Board,
Bronek is continuing as an employee
of Hiscox Ltd and accordingly, he has
received no loss of office payment in
respect of his services as a Director. In
his new role, Bronek will provide strategic
advice as a Director for key subsidiaries,
enabling Hiscox to continue to benefit
from his considerable experience. In line
with our policy and best practice, Bronek
will be subject to a post-employment
shareholding requirement for a period
of two years from stepping down from
the Board.
The Board was delighted to appoint Aki
Hussain, previously Group Chief Financial
Officer (CFO), as Group CEO, effective
1 January 2022. Aki’s appointment
followed a thorough and independent
process led by the Nominations and
Governance Committee, and supported
by a leading recruitment firm, which
involved a global search and the
assessment of both internal and external
candidates. More information on that
process can be found on pages 82 to 83.
As announced in July 2021, Aki’s salary
for the Group CEO role has been set at
£750,000 per annum. All other elements
of his package are unchanged, namely
a pension allowance of 10% of salary in
line with the wider workforce, a maximum
bonus opportunity of 300% of salary and
a performance share plan opportunity of
up to 250% of salary.
In determining the package for the
incoming Group CEO, the Remuneration
Committee was mindful that Bronek had
been in the role for over two decades and
had built up a considerable shareholding
in the Company. The Committee
has a track record of demonstrating
a disciplined approach to salary
management, with CEO increases set
at or below the wider workforce since
2014. While the salary for the incoming
Group CEO has been set above
that of Bronek, the search process
demonstrated the competitive landscape
and recruitment market in which we
operate, and provided direct insight
into the level of packages required
to attract high-quality candidates.
Therefore, taking into account the scale
and complexity of the role, the calibre
and experience of Aki, as evidenced by
his performance as Group CFO and his
knowledge of the Hiscox Group, and
considering market data both for the
UK and globally, with reference to our
key international peers, the Committee
considered that the package for the role
was appropriate.
As announced in December 2021,
Paul Cooper has been appointed as
Group CFO and will assume the role
during 2022. His salary has been
set at £525,000 per annum, with all
other elements of his package being
consistent with that of the outgoing
CFO, namely a pension allowance
of 10% of salary, a maximum bonus
opportunity of 300% of salary and a
performance share plan opportunity
of up to 250% of salary. The salary
positioning is c.2.2% above the outgoing
CFO, consistent with the increase to Jo
Musselle’s salary (and below the average
UK employee increase). In line with
standard practice and consistent with
our remuneration policy, Paul will receive
awards to compensate for remuneration
arrangements forfeited on leaving his
previous employer. These awards will
mirror the time horizon and form of
the original awards with performance
conditions applied (where relevant).
Further details on Aki and Paul’s
remuneration arrangements are set
out in the annual report on remuneration
on page 107.
2022 remuneration
For 2022, Joanne Musselle’s salary
will be increased by 2.2%. There will
be no further increases in 2022 for Aki
Hussain or Paul Cooper following their
appointments as Group CEO and Group
CFO respectively.
Hiscox Ltd Report and Accounts 2021
95
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Chapter 4
Remuneration
Annual Statement
from the Chair of
the Remuneration
Committee
towards redressing the balance. We have
established structures and processes
which ensure that men and women are
paid the same for similar roles, so the
focus of our work has been on getting
more women into more senior roles
across the Group. Improving diversity
and inclusion remains a priority, and
while our progress so far has been
helped by the policies, processes and
partnerships we have established, we
recognise there is more to do. For more
information, see pages 84 to 87.
2023 remuneration policy
The current remuneration policy was
approved by shareholders at the 2020
AGM and, as such, a new policy is
required to be put to the vote at the 2023
AGM. We look forward to consulting
with shareholders over the coming year,
ahead of the policy’s renewal.
In summary
The Remuneration Committee is satisfied
that the 2021 outcomes are aligned with
the experience of shareholders and
reflective of business performance.
Colin Keogh
Chair of the Remuneration Committee
There are no proposed changes to the
award levels or structure of annual bonus
awards, which will continue to be based
on pre-tax ROE performance, alongside
individual and strategic performance,
including non-financial factors, the
shareholder and wider stakeholder
experience, and the consideration of risk.
Bonuses will not be paid unless the
Group’s performance exceeds a hurdle
rate of return set, taking into account
prevailing market conditions.
There are no proposed changes to the
award levels or structure of Performance
Share Plan (PSP) awards, which will
continue to be based on stretching
growth in net asset value (NAV) plus
dividends targets and relative total
shareholder return (TSR) against a group
of global insurance peers. Further detail
on the 2022 PSP measures and targets
are set out on pages 108 to 109.
Wider workforce
During the year, the Committee
was updated on wider workforce
remuneration trends and policies to aid
our understanding of how Executive
Directors’ remuneration aligns to
employees. There has been a consistent
pay philosophy and reward structure
across the Group for a number of years
and the approach for the Executive
Directors is aligned with this.
Pay
In the UK, Hiscox has been an accredited
Living Wage employer since 2019.
This approach ensures that everyone
at Hiscox receives a wage that
recognises the actual cost of living
in the UK. The Board also aims to ensure
workforce views on a range of issues,
including remuneration, are reflected
in decision-making. This is done not
only through the annual employee
engagement survey, but also through
the employee engagement network
which is led by our Employee Liaison,
Anne McDonald, and which discussed
remuneration during 2021 – with the
outputs of those discussions fed back
to the Board.
Bonuses
Annual bonus payments are funded
from profit-related pools and employees
who are eligible for an annual bonus
are subject to the same deferral terms
as set out in the policy that applies
to Executive Directors. For 2021, a
new element was introduced to the
annual bonus for management below
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Hiscox Ltd Report and Accounts 2021
the Board, to incentivise and reward
individual contribution. For Executive
Directors, bonuses are only payable once
a minimum ROE has been achieved,
with individual performance taken into
account thereafter.
Share schemes
All PSP participants are subject to the
same performance measures and targets
for the performance element of awards.
Below the Board an element of the award
is non-performance tested and vests
subject to continued employment.
Hiscox also operates an all-employee
Sharesave Scheme to foster a culture of
ownership among the wider workforce.
The scheme provides all employees with
the opportunity to save over a three-year
period and to purchase Hiscox shares
at a discounted price. The Scheme is
popular, with 66% of UK employees
currently participating. Shareholding
guidelines also extend to Hiscox Partners
who are expected to own shares valued
at 100% of salary, such is our ownership
culture, while Executive Directors are
expected to own shares valued at 200%
of salary.
Pensions
Executive Directors’ pension benefits
have always been consistent with the
wider UK workforce, and Executive
Directors receive either a 10% of salary
cash allowance in lieu of the standard
employer pension contribution or a
combination of cash and pension
contribution, totalling 10% of salary.
UK gender pay reporting
In 2021, Hiscox published its fifth annual
gender pay report for the UK, and the
mean pay gap of 19.1% (2020: 21.2%)
represents steady progress at getting
more women into more senior and
higher-paid roles. Since 2017, on a mean
basis, our gender pay gap has reduced
steadily and is now 12 percentage points
lower than when reporting commenced.
The median figure was 20.7% in 2021
(2020: 25.0%). On a median basis, the
gender pay gap has also reduced over
time, with the exception of 2020 when
the data reflects the introduction of
part-time teams in our entry-level
customer-facing roles, increasing
flexible working opportunities, with the
majority of these roles filled by women.
While some of the fundamentals
remain – that our pay gap reflects the
higher proportion of men in more senior
roles – we are making steady progress
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Chapter 4
Remuneration
Annual Statement
from the Chair of
the Remuneration
Committee
How we have addressed the following factors in the UK Corporate Governance Code 2018
Factor
Consideration of how this is addressed for Hiscox
Clarity – remuneration
arrangements should be
transparent and promote
effective engagement
with shareholders and
the workforce.
s Shareholders’ views on the key changes to the remuneration package are sought.
s In 2021, the Employee Liaison facilitated a discussion with respect to the content of
the remuneration policy and how this aligns to wider company pay policy, and shared
feedback on this with the Board. The Remuneration Committee also receives information
on broader workforce remuneration policies and practices during the year which informs
its consideration of the policy for Executive Directors.
Simplicity – remuneration
structures should avoid
complexity and their rationale
and operation should be easy
to understand.
s Hiscox’s remuneration framework is simple, comprising three main elements:
i) fixed pay (base salary, benefits and pension);
ii) annual bonus; and
iii) performance share awards.
s The remuneration philosophy is a simple one: to reward performance. For over a decade,
the foundation of the Group’s remuneration strategy has been the belief that the best way
to foster a high-performance culture across the Group is to ensure that pay reflects our
results, not just effort.
s The remuneration policy’s operation in 2021, including form of awards, time horizons,
and performance measures, is designed to avoid complexity and is fully disclosed in
the Directors’ remuneration report on on pages 114 to 125.
Risk – remuneration
arrangements should ensure
reputational and other risks
from excessive rewards, and
behavioural risks that can
arise from target-based
incentive plans, are identified
and mitigated.
s Incentive awards are capped and are not considered excessive.
s Executive Directors’ annual bonus awards are judgement-based within a formulaic
framework based on ROE performance, to ensure they reflect their overall performance
rather than being measured according to a formulaic outcome. Risk is also taken into
consideration as part of this.
s The Committee has the ability to apply independent judgement to ensure that the
vesting outcome of performance share awards is a fair reflection of both the Company’s
performance and that of the individual over that period.
s Part of the annual bonus is subject to deferral, and share awards are subject to a
holding period following vesting. All variable remuneration is subject to malus and
clawback provisions.
s Following an annual review by the Chief Risk Officer, no risk adjustments are proposed to
2021 variable remuneration outcomes.
s The range of possible values are set out in the performance scenario charts in the
remuneration policy on page 124.
s Limits and ability to exercise discretion are also set out in the policy. No discretion was
exercised in 2021.
s Historic variable incentive pay-outs have had a strong link to the Company’s actual
performance. There is a track record of payment for performance, with evidence of
zero bonuses where ROE performance has been below the predetermined hurdle.
s The 2021 performance outcome and bonus awards are described on page 102. The
2019-2021 share grant will not vest as the performance hurdle was not met.
s The variable incentive schemes, including quantum, time horizons, form of award and
performance measures are all designed with the Company’s purpose, values and strategy
in mind.
s The pay arrangements for the Executive Directors are aligned with those of the broader
workforce and senior team.
Predictability – the range of
possible values of rewards
to individual Directors and
any other limits or discretions
should be identified and
explained at the time of
approving the policy.
Proportionality – the link
between individual awards,
the delivery of strategy and
the long-term performance of
the Company should be clear.
Outcomes should not reward
poor performance.
Alignment to culture –
incentive schemes should
drive behaviours consistent
with Company purpose,
values and strategy.
Hiscox Ltd Report and Accounts 2021
97
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Remuneration summary
Key principles underpinning
remuneration at Hiscox
Summary of remuneration arrangements
A summary of the
remuneration
arrangements for
Executive Directors
is provided opposite.
Base salary
Competitive fixed pay.
Benefits
Same as majority of employees.
Annual bonus
Aligned to shareholder interests.
Performance Share
Plan (PSP)
Aligned to long-term shareholder
interests and performance.
Shareholding guidelines
Aligned to shareholder interests.
The Hiscox remuneration policy is
designed to drive a culture of high
performance and create sustainable
long-term value for shareholders.
The policy follows three clear principles:
A simple and results-driven,
with variable rewards if Hiscox
delivers profits and shareholder
returns in excess of specified
return thresholds;
A incentivise Executive Directors
appropriately, over the short and
long term; and
A align Executive Directors’ interests
with those of our shareholders,
focusing on effective risk
management, return on equity
(ROE) and net asset value growth,
which drives total shareholder
return over time.
Remuneration outcomes for 2021
Bonus of c.30% of
maximum opportunity
for the Executive
Directors.
Long-term performance
impacted by Covid-19
events and catastrophe
claims. PSP awards
granted in 2019 will
not vest.
Single figure of
£1,332,964 for the CEO.
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Hiscox Ltd Report and Accounts 2021
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
Remuneration summary
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
114
Read our updated remuneration policy.
Benefits
Same as majority of employees.
Annual bonus
Aligned to shareholder interests.
Implementation of policy for 2021
Implementation for 2022
Base salary
Competitive fixed pay.
Salaries for 2021:
— Bronek Masojada: £667,000
— Aki Hussain: £513,500
— Joanne Musselle: £513,500
Salary increase of 2.0%, in line with average UK employee increase.
Salaries for 2022:
— Aki Hussain: £750,000
—Joanne Musselle: £525,000
—Paul Cooper: £525,000
Salary increase for Joanne Musselle of
2.2%, below the average UK employee.
Executive Directors’ benefits can include health insurance, life insurance, long-term disability schemes and participation in
all-employee share schemes. Retirement benefits are delivered via a cash allowance of 10% of salary, paid in lieu of the standard
pension contribution, or a combination of pension contribution and cash allowance, totalling 10% of salary. These benefits mirror
those available to most other employees in the organisation.
Maximum opportunity, performance
metrics and deferral unchanged.
Maximum opportunity:
— up to 300% of salary for CEO and CFO;
— up to 400% of salary for CUO.
Over the past ten years, the average bonus to the CEO has been equivalent to 28%
of the current maximum opportunity.
Performance metrics: combination of ROE and individual performance delivered
against set objectives approved by the Board. Disclosure of the ROE target ranges
and detail around the individual performance factors including specific risk-based
objectives used to determine outcomes for 2021 is provided on pages 101 to 103.
Deferral: part deferral of amounts in excess of £50,000.
2021 actual as percentage of salary:
— Bronek Masojada: 90%
— Aki Hussain: 90%
— Joanne Musselle: 107%
Performance Share
Plan (PSP)
Aligned to long-term shareholder
interests and performance.
Award subject to three-year performance period and two-year holding period.
Maximum opportunity: 250% of salary for all Executive Directors.
Maximum opportunity, performance
metrics and time horizons unchanged.
Vesting subject to: net asset value per share growth plus dividends (60% weighting)
and relative TSR (40% weighting).
Shareholding guidelines
Aligned to shareholder interests.
2021 award as percentage of salary:
— Bronek Masojada: 250%
— Aki Hussain: 250%
— Joanne Musselle: 250%
Holding period: awards subject to a further two-year holding period following vesting.
Share ownership guidelines of 200% of salary for all Executive Directors,
after five years in role.
Share ownership and post-employment
shareholding guidelines unchanged.
2021 actual:
— Bronek Masojada: 3,910%
— Aki Hussain: 154%
— Joanne Musselle: 165%
Aki Hussain was appointed in September 2016.
Joanne Musselle was appointed in March 2020.
Post-employment shareholding requirement: retain a shareholding at the level of
the in-employment guideline for one year and half this amount for the following year.
Hiscox Ltd Report and Accounts 2021
99
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Annual report on remuneration 2021
This report explains how the remuneration policy was implemented for the financial year ending 31 December 2021
and how it will be applied for the 2022 financial year.
PwC has been engaged to audit the sections in the annual report on remuneration 2021 below entitled ‘Executive Director
remuneration’ and ‘additional notes to the Executive Director remuneration table’, ‘annual bonus’, ‘long-term incentives’, ‘Non
Executive Director remuneration’, ‘Directors’ shareholding and share interest’, ‘Performance Share Plan’ and ‘Sharesave
Schemes’, ‘Payments to past Directors’ and ‘Payments for loss of office’, to the extent that would be required by the Large
and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2013.
Executive Director remuneration
2021
Name
Bronek Masojada2
Aki Hussain
Joanne Musselle
2020
Name
Bronek Masojada
Aki Hussain
Joanne Musselle3
Salary
£
663,750
511,000
511,000
Benefits
£
10,588
8,308
9,060
Bonus
£
600,300
462,150
550,000
Long-term
incentive
plan1
£
Retirement
£
Total split
Total
£
Fixed
remuneration
£
Variable
remuneration
£
0
0
0
58,326 1,332,964
1,027,911
46,453
1,116,998
46,938
732,664
565,761
566,998
600,300
462,150
550,000
Salary
£
649,625
500,125
418,458
Benefits
£
10,533
7,532
7,637
Bonus
£
0
0
0
Long-term
incentive
plan1
£
0
0
0
Retirement
£
57,085
45,464
38,404
Total
£
717,243
553,121
464,499
Fixed
remuneration
£
717,243
553,121
464,499
Total split
Variable
remuneration
£
0
0
0
1 2021 long-term incentives relate to performance share awards granted in 2019 where the performance period ends on 31 December 2021. The award is due to
vest on 8 April 2022. Based on performance achieved, this award will lapse in full. As the award will lapse in full there is no part of the award attributable to share
price appreciation.
2 Bronek Masojada retired as Group Chief Executive Officer and stepped down from the Board on 31 December 2021.
3 Joanne Musselle joined the Board 2 March 2020, following her appointment as Group Chief Underwriting Officer effective 1 January 2020. The figures in the 2020
table above relate to 2 March-31 December 2020.
Additional notes to the Executive Director remuneration table
Salary
Salary reviews take place in the first quarter of the year, effective from 1 April. As noted in last year’s remuneration report, Executive
Directors’ salaries were increased by 2.0% from April 2021, the same as the average UK-based employee salary increase.
Base salaries for Executive Directors from 1 April 2021 were as follows:
Bronek Masojada
Aki Hussain
Joanne Musselle
100
Hiscox Ltd Report and Accounts 2021
April 2021
£
667,000
513,500
513,500
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
Annual report on
remuneration 2021
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
Benefits
For 2021, benefits provided for Executive Directors included the healthcare scheme, Sharesave Scheme, life insurance, income
protection insurance and critical illness policies, as well as a Christmas gift hamper.
Retirement benefits
Bronek Masojada and Aki Hussain received a 10% of salary cash allowance in the year (less an offset for the employer’s
UK National Insurance liability) in lieu of the standard employer pension contribution. Joanne Musselle receives a combination
of cash allowance and employer pension contribution totalling 10% of salary (less an offset for employer’s UK National Insurance
on the cash allowance). The value of these retirement benefits is shown in the Executive Director remuneration table on page 100.
Executive Director retirement benefits are consistent with those offered to the majority of UK employees. This has been the policy
at Hiscox for a number of years.
The table below details the legacy entitlements from the closed defined benefit pension plan.
Pensions
Bronek Masojada
Increase
in accrued
pension
during
the year
£000
3
Total accrued
annual pension
at 31 December
2021
£000
Increase in
accrued pension
net of inflation
£000
Transfer value
of accrued
pension
at 31 December
2020
£000
Transfer value
of accrued
pension
at 31 December
2021
£000
Increase/
(decrease)
in transfer value
of accrued
pension
during the year
£000
63
–
2,712
2,933
221
Normal
retirement
age
60
There are no further accruals under this plan. In the event of retirement after normal retirement age, an increased pension would
be payable (in accordance with the scheme rules) to reflect the later payment date.
Variable pay
To ensure that remuneration is aligned with Company performance and the shareholder experience, a significant proportion of pay
is delivered through incentive awards, consisting of an annual bonus and share awards under the Performance Share Plan, which
can vary significantly based on the level of performance achieved. Bonuses are only paid if results exceed a specified threshold set
taking into account prevailing market conditions.
Although the remuneration structure has naturally evolved over time to reflect market and best practice, the simple framework has
been in place for more than 15 years.
Annual bonus
The maximum opportunity for 2021 remained unchanged from 2020, being 300% of salary for both the Group Chief Executive
Officer and Group Chief Financial Officer and 400% of salary for the Group Chief Underwriting Officer.
The bonus is structured in a way that ensures significant variability in outcomes, including the possibility of no bonus being paid.
The Remuneration Committee believes that the most appropriate measure for the calculation of the bonus pool is pre-tax return
on equity (ROE), as this aligns management’s interests with those of shareholders, minimises the possibility of anomalous results,
and ensures that incentives for Executive Directors and other employees are tied to the Company’s profit performance.
The Executive Directors, along with other employees across the Group, participate in profit-related bonus pools, which are
calculated at a business unit level and for the Group as a whole. In determining the bonuses to be paid to Executive Directors, the
Remuneration Committee bases its judgement on both the performance of the Group and a robust assessment of personal and
strategic objectives, including adherence to specific risk management objectives. The Remuneration Committee also seeks input
from the Chief Risk Officer and Chief Actuary to aid its assessment of whether bonus outcomes are appropriate.
Bonuses are not paid unless the Group’s performance exceeds a given threshold, irrespective of individual performance. Over
the past ten years there have been three occasions when the Group delivered a pre-tax ROE below the required threshold and no
bonuses were paid to Executive Directors. The threshold is set annually using an investment benchmark rate. The threshold for
2021 was set at pre-tax ROE of 2.5%.
A commitment was made in 2020 that Executive Directors would not be paid a bonus until the dividend had resumed, irrespective
of the Group’s performance. The dividend was resumed in 2021, with an interim dividend paid in September 2021. As set out
elsewhere in this report, the final dividend will be paid in June 2022.
Hiscox Ltd Report and Accounts 2021
101
Chapter 1
Performance
and purpose
4
Chapter 2
A closer look
16
Chapter 3
Governance
62
Chapter 4
Remuneration
Annual report on
remuneration 2021
94
Chapter 5
Shareholder
information
128
Chapter 6
Financial
summary
134
When setting targets, the Committee seeks to motivate strong performance while also encouraging sustainable behaviours,
in line with the defined risk appetite of the business. In determining the size of the Executive Director bonuses for 2021, the
Committee used the following framework. Actual bonus outcomes also take into account personal and strategic performance
and risk management.
Pre-tax return on equity
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