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Hiscox Ltd
Report and Accounts 2022
Hear from senior leaders about
the energy at Hiscox and the
opportunities ahead.
Read about how Hiscox is using
technology to work differently.
2
2
4
6
Chapter 1
Performance and purpose
Our purpose, values,
culture and vision
Our key performance
indicators (KPIs)
Our strategy and
how we operate
Key risks
8
12 Business priorities for 2023
14 Why invest in Hiscox?
Chapter 2
20 A closer look
20 Chairman’s statement
24 Chief Executive’s report
42 Capital
44 Risk management
48
54
Stakeholder engagement
Environmental, social and
governance (ESG)
Task Force on Climate-related
Financial Disclosures (TCFD)
60
Chapter 3
72 Governance
72 Board of Directors
75 Board statistics
76
Group Executive
Committee (GEC)
Chairman’s letter
to shareholders
83 Corporate governance
88
82
Compliance with the UK
Corporate Governance
Code 2018
Nominations and Governance
Committee report
99 Audit Committee report
94
Chapter 4
106 Remuneration
106 Annual statement from the Chair
of the Remuneration Committee
110 Remuneration summary
112 Annual report on
remuneration 2022
122 Implementation of remuneration
policy for 2023
126 Other remuneration matters
132 Remuneration policy
Chapter 5
148 Shareholder information
148 Directors’ report
151 Directors’ responsibilities
statement
151 Advisors
Chapter 6
157 Financial summary
158 Independent auditor’s report
166 Consolidated income statement
166 Consolidated statement of
comprehensive income
167 Consolidated balance sheet
168 Consolidated statement of
changes in equity
169 Consolidated statement of
cash flows
170 Notes to the consolidated
financial statements
231 Additional performance
measures (APMs)
232 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. However,
the material provisions of Section 172 of the UK
Companies Act are substantively covered by the
Bermuda Companies Act, which is the applicable
legislation that the Company is required to comply
with under Bermuda law. 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
Financial Conduct 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.
Q&
A:Writing the future
Q&A with Joanne Musselle
Group Chief Underwriting Officer
16
Opportunity knocks
Q&A with Paul Cooper
Group Chief Financial Officer
38
Tech savvy
Q&A with Stéphane Flaquet
Group Chief Operations and
Technology Officer
50
Brand ambassador
Q&A with Regine Fiddler
Chief Marketing Officer,
Hiscox USA
68
Going places
Q&A with Jon Dye
Chief Executive Officer,
Hiscox UK
78
People person
Q&A with Nicola Grant
Group Chief Human
Resources Officer
102
Re invention
Q&A with Matthew Wilken
Chief Underwriting Officer,
Hiscox Re & ILS
144
Network news
Q&A with Markus Niederreiner
Managing Director,
Hiscox Germany
152
Energy in collaboration
Here at Hiscox, we’re working differently. How we
collaborate to serve our customers and work with
our business partners is changing.
We’ve created what we call team charters: these
are co-created agreed ways of working with each
other that balance time in the office with time at home,
with the overarching principle of being there for our
customers. We’re also investing in and using technology
in new ways – making it easier for our customers to do
business with us, and using data to deliver intelligent
underwriting. Although technology can bring our global
teams even closer together, we also love connecting
in person to share our ideas and energy on moving the
business forward – just like some of our Hiscox Re & ILS
team featured on the cover of this report.
In the following pages, you’ll find a selection of Q&A
interviews from senior leaders right across our
business. Not only do they talk about what happened
in the business in 2022 and what’s coming up in
2023, they also talk about what brings them energy.
Hiscox Ltd Report and Accounts 2022
1
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Our purpose, values, culture and vision
Nelson Mandela famously said that ‘a
good head and a good heart are always a
formidable combination’ and I’m pleased
to say that both feature heavily in our
culture. But having a great culture is
not a destination – it takes a continuous
commitment to creating and maintaining
an environment where people do their
best work and quite frankly where they
enjoy coming to work. We reflect on our
culture regularly, we consider how we
listen and respond to feedback from
colleagues and we’re not afraid to explore
new ways of doing this. People recognise
the uniqueness of the Hiscox culture and
that makes me really proud.”
Aki Hussain
Group Chief Executive Officer
2
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
Our purpose, values,
culture and vision
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Our purpose
We give people and businesses the
confidence to realise their ambitions.
To do this we need differentiated
products and services, great talent
and energised and connected teams.
Success is measured in our reputation
and financial performance.
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 as an industry leader
in growth, profits and value creation.
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
play an important part in our strategy
and how we operate, in being a business
our customers can relate to, and in
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 2022 annual global employee
engagement survey, which was
completed by 88% of employees:
84%
said they felt proud to work for Hiscox.
During 2022, we:
645
attracted 645 new talented
permanent employees.
81%
said they would recommend Hiscox as a
great place to work.
390
promoted 390 existing employees.
76%
said they believe Hiscox has an
outstanding future.
70,000
delivered over 70,000 hours of staff
training worldwide.
Our values
Courage
Dare to take
a risk
Human
Clear, fair
and inclusive
Our purpose
We give people
and businesses the
confidence to realise
their ambitions.
Ownership
Passionate,
commercial and
accountable
Connected
Together,
build something
better
Integrity
Do the right thing,
however hard
Hiscox Ltd Report and Accounts 2022
3
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Our key performance indicators (KPIs)
Financial KPIs
Gross premiums written
$4,424.9m
Net premiums earned
$2,928.2m
Profit/(loss) before tax
$44.7m
2022
2021
2020
2019
2018
4,424.9
4,269.2
4,033.1
4,030.7
3,778.3
Combined ratio
90.6%
2022
2021
2020
2019
2018
90.6
93.2
114.5
106.8
94.4
2022
2021
2020
2019
2018
2,928.2
2,919.9
2,752.2
2,635.6
2,573.6
Basic earnings/(loss)
per share
12.1¢
2022
2021
2020
2019
2018
44.7
190.8
(268.5)
53.1
135.6
Ordinary dividend
36.0¢
2022
2021
2020
2019
2018
12.1
55.3
(91.6)
17.2
41.6
2022
2021
2020
2019
2018
36.0
34.5
0.0
13.8
41.9
Net asset value per share
701.2¢
Tangible net asset value
per share
608.2¢
Return on equity
1.7%
2022
2021
2020
2019
2018
701.2
739.8
689.0
768.2
798.6
2022
2021
2020
2019
2018
608.2
648.6
601.5
670.6
726.2
2022
2021
2020
2019
2018
1.7
8.1
(11.8)
2.2
5.3
4
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
Our key performance
indicators (KPIs)
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Non-financial KPIs
UK gender pay gap
16.0%
We measure and monitor the gender pay gap
globally so that, by understanding it, we can
continue to find ways to reduce it. In the UK, we
have been annually disclosing our UK gender pay
gap since 2017, and have seen a steady reduction
over time in our UK gender pay gap on a mean
basis. Improving diversity, equity and inclusion
at Hiscox is a high priority, and this year we have
also enhanced our ethnicity reporting to disclose
all-staff ethnicity data for the first time (see page 59).
London Market broker
satisfaction 79%
UK customer satisfaction
92%
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.
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.
2022
2021
2020
2019
2018
16.0%
19.1%
21.2%
26.1%
28.8%
2022
2021
2020
2019
2018
79%
71%
69%
78%
76%
2022
2021
2020
2019
2018
92%
92%
92%
89%
90%
0.0
12.5
25.0
37.5
50.0
62.5
75.0
87.5
100.0
Employee engagement
82%
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. Improving our
employee engagement scores was a strategic
priority in 2022 as part of our work around
building connected teams with shared values
and we are pleased to report our highest score
in ten years.
Germany customer
satisfaction 96%
US customer reviews
using Feefo 4.6/5
Germany is our largest operation in Continental
Europe, and here 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 quantitative analysis
on their experience with us and 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.
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.
2022
2021
2020
2019
2018
82%
64%
68%
71%
74%
2022
2021
2020
2019
2018
96%
95%
90%
99%
99%
2022
2021
2020
2019
2018
4.6
4.8
4.8
4.8
4.7
Hiscox Ltd Report and Accounts 2022
5
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Our strategy and how we operate
Over the years, we have built a strong
reputation as a specialist insurer in our
chosen segments. In our big-ticket
businesses – Hiscox London Market
and Hiscox Re & ILS – we focus on
building balanced portfolios through
controlled growth and with an emphasis
on leading the business we write.
In Retail, where more stable returns
have typically offset the greater volatility
of our big-ticket businesses, we focus
on building a differentiated brand and
product offering that customers value.
Volatility exists in every part of insurance,
but through a focus on building and
maintaining balanced portfolios we
create more manageable volatility
across the Group and are well
positioned to maximise both the
profitable, cyclical growth and the
structural growth opportunities ahead.
A strategy focused on high-quality growth
The Hiscox Group comprises four businesses facing 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
k e t
r
a
Hisco
x R
ox Lon d o n M
c
His
People
and culture
Brand
Underwriting
Technology
Capital
H
i
s
c
o
x
R
e & ILS
o
c
s
H i
e
t
a
il:
d
i
g
i
t
a
l
l
a
n
x R etail: traditio
• Small and micro businesses
• Digitally traded, with
low-cost distribution and
auto-underwriting
• Partnership management
capability through
digital connectivity
Significant structural
growth opportunity
• Focus on SMEs,
not traded digitally
• Leadership in specialist lines
• Long-term broker
partnerships
Delivers stable profit
generation and growth
• 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
• Specialist reinsurance
capability
• Holistic risk insights
• Expert alternative
capital manager
Delivers underwriting profit
and capital-light fee income
6
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
Our strategy and how
we operate
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Our strength lies in our
mix of business, our brand
and culture, our people
and specialist expertise
underpinned by investments
in technology. These hard
won attributes, combined
with a clear strategy and
focus on execution, position
us well for the road ahead.”
Aki Hussain
Group Chief Executive Officer
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, taking risks to evolve with
and lead market change and being
there for our customers.
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 where we currently see
exceptional market conditions.
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.
We invest in local market knowledge
and experience to truly understand
the markets we operate in and provide
relevant products and services. This
gives us a unique breadth of expertise,
serving customers from sole traders 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 and service 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 2022
7
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Key risks*
The risk
As an insurance group, specific risks related to our
business include:
Risk landscape and how we manage the risk
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.
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.
* The key risks to which we refer here, and elsewhere in this
document, also constitute the emerging and principal risks
required under the UK Corporate Governance Code 2018.
8
Hiscox Ltd Report and Accounts 2022
We consider strategic risks in a holistic way, to better prepare
our business for emerging threats, shifting trends, and
opportunities in the environment in which we operate. During
2022, we have remained vigilant to potential adverse impacts
of economic, geopolitical, social, technological and regulatory
developments on our Group strategy. Our Group strategy
was refreshed during 2022 under new Group Chief Executive
Officer Aki Hussain, with a clarity of focus on consistent delivery
from our big-ticket businesses, accelerated growth in Retail
digital and balanced growth in Retail traded, and has been
communicated across the business throughout the year.
The external environment remains complex, uncertain and
changeable but our robust strategy means that despite the
external headwinds there remains tremendous opportunity
for Hiscox in each of our chosen segments.
We continue to improve the quality and balance of our portfolios,
strengthening our pricing and risk selections, and growing
where the opportunities are commensurate with the risk.
In 2022, we navigated a set of complex external conditions
which amplified underwriting risks. These ranged from
geopolitical tensions (notably, the Russia/Ukraine conflict),
macroeconomic shifts (particularly increased inflationary
pressures in most Western economies), emerging societal
trends (such as increased propensity to litigation), and the
continued potential impact of climate change. Our active
monitoring and enhanced view of economic and social inflation,
impact from supply chain disruptions, heightened threat of
cyber attacks, and emerging litigation trends, allowed Hiscox
to respond promptly, ensuring our pricing keeps pace with
costs. We have updated and evolved our view of property
exposure risks from natural catastrophes influenced by
climate change through our set of realistic disaster scenarios
(see pages 46 to 47). Our underwriting exposure remains
well within our Board-approved risk appetite levels.
We are also investing in the underwriters of the future with
the roll-out of our innovative and award-winning faculty of
underwriting training academy, helping manage and
mitigate underwriting talent risks.
Chapter 1
Performance
and purpose
Key risks
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
The market landscape
remains complex and
changeable and we have
utilised our good risk
management practices to
protect and create value for
customers, employees, our
business and investors.”
Hanna Kam
Group Chief Risk Officer
The risk
Risk landscape and how we manage the risk
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
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.
Our consistent and prudent reserving philosophy serves to
manage the risk of insufficient reserves to cover claims cost
and associated expenses. The Group’s reserve levels continue
to be resilient, and we have completed two legacy portfolio
transactions in 2022, which will further limit the potential
for reserve volatility. We have responded to the heightened
inflationary environment with a detailed review of our key
inflation assumptions against emerging experience
and explicitly allowed further reserve margins for uncertainty.
Close monitoring of developments will continue in 2023.
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.
In 2022, many of our counterparties have faced the same
external conditions as we have, and there remains an
increased threat of global recession, which would in turn
increase default risk. We have closely monitored our
counterparty exposures during the year, and while the risk
factors have increased, our credit exposures remain within
the Group’s risk appetite. We have taken into account the
potential economic outlook in our decision-making on
outwards reinsurance purchasing for 2023.
Market risk
The threat of unfavourable or unexpected
movements in the value of the Group’s assets
or the income expected from them. This 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.
The volatile economic environment during 2022, with sharp
rises in inflation and accelerated interest rate increases, has
enhanced risk in our asset portfolios. Investment losses in the
year are largely due to mark-to-market adjustments to the value
of bond portfolios, which are unrealised. These have potential
for significant upside for 2023. Active decisions over 2022 have
made a positive contribution to the investment result, offsetting
some of the losses, and the outlook for market (asset) risk is
expected to improve.
Hiscox Ltd Report and Accounts 2022
9
Chapter 1
Performance
and purpose
Key risks
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
The risk
Risk landscape and how we manage the risk
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.
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.
We have refreshed our liquidity stress testing during 2022
and the Group remains in a strong liquidity position, with
around $1 billion of fungible liquidity, sufficient to cover
expiring debt obligations, business plan liquidity requirements,
and working capital headroom. Liquidity risk is monitored
through the use of a detailed Group cash flow forecast
which is reviewed by management quarterly, or more
frequently as required.
We monitor the regulatory, legal and tax compliance landscape
for emerging changes to local and international laws and
regulations in the jurisdictions we operate.
The regulatory landscape in 2022 was dominated by the
rapid application of a large volume of international sanctions
against Russian interests following the invasion of Ukraine,
which applied at different points throughout the year across
all of our operations worldwide. Our embedded sanctions
management processes enabled the compliance team to
support the business in quickly responding to the complex and
fast-changing sanctions landscape and we also supplemented
our sanction-screening processes with additional reviews of
the ultimate beneficial owners of a large number of insured
risks across multiple business lines.
The most significant tax compliance development in 2022
has been the continued movement towards implementation
of the OECD’s Global Anti-Base Erosion Model Rules (Pillar
Two) at a local level. As well as maintaining a watching brief
on the evolution of this initiative, we have also worked with
expert advisors and industry bodies such as the Association of
Bermuda Insurers and Reinsurers and the Association of British
Insurers to ensure industry-specific issues are identified and
addressed. We seek to work transparently and collaboratively
with our key tax authority stakeholders to anticipate the tax
impact of both commercial and legislative changes.
We invest in proactive engagement with all of our regulators,
including through our participation in the annual college of
supervisors, hosted by the Bermuda Monetary Authority,
which is an opportunity to update all of our regulators
together on strategic developments across the Group.
10
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
Key risks
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
44
180
Read more on risk management in
chapter 2 and note 3.
The risk
Risk landscape and how we manage the risk
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.
Risks from people, process, systems and external events are
closely monitored by senior executives across the business.
Ongoing competition and retention of talent, heightened threat
of cyber attacks and continued growth in hybrid working
practices is affecting the operational risk landscape.
Our approach to monitoring operational risk has been
adapted to enable the business to monitor the risks with a
focus on promoting risk awareness and proactive reporting of
operational incidents. We continue to embed our operational
risk management including our defences against, and response
to, cyber threats. During 2022, we reviewed the Group-wide
set of crisis management response plans and performed a
series of cyber crisis simulations to give our teams first-hand
experience of dealing with a situation, and to test our response
plans against potential operational disruption.
Talent risk is also being actively managed as part of a continued
focus on our employee proposition, which has included the
introduction of our all-staff share ownership initiative, HSX:26,
and which in 2023 will include new ways to develop and map
talent across the Group.
In addition, in 2022 mandatory monthly all-staff training
was supplemented with additional topical modules such as
sanctions, cyber security and risk culture throughout the year.
We also delivered additional training to underwriting and claims
teams on the sanctions developments referred to under the
regulatory, legal and tax governance section (see page 10).
Climate change 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 change related risk is not
considered a stand-alone risk, but a cross-cutting
risk with potential to amplify each existing risk type.
We monitor climate change related risk through a number
of lenses, including underwriting selection, pricing,
multi-year view of natural catastrophe risk, asset types, and
developments in potential climate litigation. Every year we
run a range of realistic disaster scenarios, updated with our
in-house climate research (see pages 46 to 47), and we
participate in regulatory stress testing exercises.
We have introduced investment environmental, social and
governance (ESG) dashboards for each of our insurance
carriers and we continue to embed our greenhouse gas targets
for the Group, which in 2023 will include the development of a
supporting action plan.
Hiscox Ltd Report and Accounts 2022
11
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Business priorities for 2023
Business priorities for 2023
We will balance risk and opportunity in 2023 through a focus on five core priorities.
Getting the balance right
between risk and opportunity
is crucial. Our business
priorities for 2023 build on
our 2022 achievements, and
I’m particularly excited about
what technical excellence
means for us in the year
ahead and how that plays
out against a backdrop
of retail growth and huge
big-ticket opportunity.”
Joanne Musselle
Group Chief Underwriting Officer
1
Realising the
retail opportunity
2
Managed volatility
during big-ticket growth
Following multi-year investments in
technology, in 2023 we will focus on
realising the opportunities that exist
across Hiscox Retail. This means
further leveraging our head start in
digital small business insurance by
building an SME ecosystem through
which to serve this high-growth segment
of the economy, and investing in brand.
Having finalised systems transformation
in the USA, and as new systems
continue to come on board across
Europe, we are well positioned to cater
to changing buying behaviours with
efficient customer-focused processes.
Hiscox London Market and Hiscox
Re & ILS continue to enjoy favourable
market conditions in many lines.
As in 2022, we will remain focused on
leveraging our unique combination of
underwriting and digital expertise to grow
profitably – particularly in those areas
where we have market-leading expertise
and experience – while also managing
volatility. In addition, we will sharpen
our focus on potential new emerging
opportunities, for example, around
supporting the economy to transition
to low-carbon intensity industries.
12
Hiscox Ltd Report and Accounts 2022
Business priorities for 2023
We will balance risk and opportunity in 2023 through a focus on five core priorities.
Chapter 1
Performance
and purpose
Business priorities
for 2023
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
3
Technical excellence
4
Operational leverage
5
Connected and
energised teams
Technical excellence is a multi-year
priority thanks to a long-held focus
on active underwriting portfolio
management. We continue to focus
on portfolio optimisation – addressing
lower decile lines through careful
management, and clearing the path for
growth in top quartile lines, as well as
those areas experiencing favourable
market conditions. During 2023, we
will continue to develop our technical
capabilities, insights and tracking
mechanisms, and further define our
sustainable underwriting strategy.
Steps taken to evolve our operating
model during 2022 are already
enhancing ownership and speed
of decision-making, and we will have
a similar focus on operational leverage
in 2023. Beyond the rebalancing of our
global versus local capabilities, this will
mean further establishing technology as
a competitive advantage, particularly in
Hiscox Retail. It will also mean enhancing
our process management capabilities
to improve efficiency and effectiveness
and increase the speed of execution, to
support the Group not only through its
next phase of growth, but also as we look
to realise economies of scale through a
sharpened focus on expense efficiency.
We will build on the strong progress
made in 2022 to embed hybrid
working and develop new employee
benefits such as an enhanced
sabbatical policy, the introduction
of Hiscox days and HSX:26 – our
all-staff share ownership initiative.
The next stage of employee proposition
development will happen during 2023,
in line with our ambitions to be an
employer of choice within our sector.
In addition, we will look to find new
ways to develop and map talent across
the Group that can support the delivery
of our strategy.
Hiscox Ltd Report and Accounts 2022
13
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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, and as we face into
favourable market conditions in our
big-ticket businesses, we have
sufficient capital to realise the
attractive opportunities ahead.
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 we are
focused on building scale, our market
shares remain modest and the size of
the addressable market is huge, giving
us plenty of headroom for growth. In our
big-ticket businesses, where we now
lead on more open market risks, our
combination of underwriting and digital
expertise differentiates us.
155%
total shareholder return over the last
ten years.
Over 1.5m
total number of retail customers across
the Group.
$1.7bn
returned to shareholders over the last
ten years*.
Two-thirds
Hiscox London Market currently leads
over two-thirds of the business it writes.
A rated
over ten years of S&P A rating.
90%
Hiscox London Market combined ratio
below 90% for three consecutive years.
50m SMEs
size of the addressable SME market
across the UK, USA and Europe.
$1bn
Over $1 billion in premium delivered by
Hiscox Re & ILS for the first time in 2022.
$269.5m
underwriting profit† in 2022, the best in
seven years.
* Based on special, ordinary and Scrip Dividends
paid to shareholders since 1 January 2013.
Excludes the final dividend proposed for 2022.
† Underwriting profit is defined as segment income less
expenses, excluding investment result, for Retail,
London Market and Re & ILS. See note 4 on page 194.
We are facing some of the
most attractive market
conditions we’ve seen in
years, with tremendous
pricing opportunities in
big-ticket lines and a chance
to substantially grow our
market share in retail.
Every part of our business
is structurally and financially
well positioned to contribute
to our continued growth,
with solid foundations that
can support the weight of
our ambitions.”
Paul Cooper
Group Chief Financial Officer
14
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
Why invest in Hiscox?
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Big-ticket business
Hiscox Re & ILS
Hiscox London Market
Retail business
Hiscox UK
Hiscox Europe
Hiscox Special Risks
Hiscox USA
Hiscox Asia
* 2020 restated for Hiscox Special Risks.
4,935
4,795
4,530 4,532
4,224
S
L
I
&
e
R
x
o
c
s
H
i
,
t
e
k
r
a
M
n
o
d
n
o
L
x
o
c
s
H
i
3,625
3,652
3,268
3,310
l
i
a
t
e
R
x
o
c
s
H
i
Total Group controlled premium
($m)
5,000
4,500
4,000
3,500
3,000
2,500
2,000
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
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020*
2021
2022
Hiscox Ltd Report and Accounts 2022
15
Q&
A:
with Joanne Musselle
Group Chief Underwriting Officer
Writing the future
Shaping the future of underwriting
means embracing risk, investing in
data and analytics, and taking a fresh
approach to training underwriters. >
16
Hiscox Ltd Report and Accounts 2022
Hiscox Ltd Report and Accounts 2022
17
Joanne Musselle has been with
Hiscox since 2002 and held a number
of senior positions in both claims and
underwriting. In 2019, she became
Group Chief Underwriting Officer,
driving rigorous standards and
using data and analytics to meet
the challenges of the future.
Q&
A:
with Joanne Musselle
Group Chief Underwriting Officer
Q: You’ve been with Hiscox for over
two decades now – what was it that
drew you here in the first place?
A: I’d been busy working for some of the
big corporates, always in the technical
areas, whether it be on the reserving
side, pricing, underwriting or claims.
I’d been in Asia for about five years,
working for big global insurers, when I
got a call about a role at Hiscox. I knew
Hiscox from the syndicate side, but
back then the retail company was tiny,
with premiums of just over £200 million.
And there was something in it that really
struck a chord. It was like a green-field
site. So when I met some of the team,
the idea of helping build out the retail
side sounded really exciting. And
unlike the big global insurers it was
already customer-centric rather than
product-centric, which really appealed
to me. What I didn’t know then was that
I would be coming for 20 years!
with your own. And then it’s the people.
There is just this rare quality to the people
I work with: professional, brilliant at what
they do, experts, collaborative. I don’t
find it hierarchical either. It’s genuinely
‘best answer wins’. We want to get to the
best answer, and that can come from
anyone at any time. I love that courage is
one of our values, because it gives you
license to say: “I know everybody wants
to turn left, but I want to turn right. Can
we discuss why...”
Q: For the past couple of years, you’ve
been the Group Chief Underwriting
Officer. What does that involve?
A: It’s all about the technical side –
the risk selection, pricing, exposure
management, reinsurance, product
development, wording. We have
six business-unit-focused Chief
Underwriting Officers around the Group
who are responsible for the day-to-day
execution of our strategy, but my job is
to set that strategy with the Board. It’s
big things like how much risk we want
to take, what new areas we may want
to move into, how we structure our
propositions and how we think about
emerging risks.
I always think that no matter what role
you’ve got, it has three parts to it. The
first part is just doing the job well, doing
those things I’ve just mentioned. The
second is evolving the role for the future,
investing in things like data and analytics.
And then the final part, which is the most
important, is people: making sure we’re
engaging, attracting and developing the
people around us.
Q: So what is it that’s kept you here
so long?
A: Lots of things, but first and foremost
the values – you can’t stay somewhere
for that long if the values don’t chime
Q: How has Hiscox’s approach to
underwriting evolved in recent years?
A: It’s obviously been a complex
period for everyone, and like the rest
of the world we’ve had to navigate our
18
Hiscox Ltd Report and Accounts 2022
way through some unprecedented
situations. Our focus on data and
analytics is definitely giving us a better
understanding of how a book of business
is performing. But I’ve been really keen
not just to respond to the here and now,
but really think about where we want
to take the organisation. We’ve spent
a huge amount of time and energy on
something we’re calling ‘underwriting
evolution’. Part of this is around critically
assessing our portfolios. Are we in the
right lines? Are our portfolios structurally
profitable? How are we assessing
emerging risk? Do we need to develop
new propositions, new products? I think
our portfolios are probably now in their
best shape for a long time, but there’s
always more we can do.
Q: So where else do you think the
portfolio should go?
A: Like others in the industry, our
commitment to sustainable underwriting
means we’ve got an exclusion strategy
– that’s focused on eliminating our
underwriting exposure to some of the
worst carbon emitters, like coal plants,
by 2030. But exclusion isn’t enough.
We’ve always invested heavily in climate
and climate research and we’re a big
natural catastrophe underwriter, so
we’ve got a lot of technical expertise
in that space, and we can utilise that
expertise to help build out products
around changing risks such as flood.
We can also help our customers to
navigate the low carbon transition,
for example, in big-ticket lines
where we’re providing liability cover
for decommissioning fossil fuel
infrastructure or where we’re supporting
the installation of renewables. We’re a
niche and specialist insurer, so we’re not
going to be able to play everywhere, but
we need to be challenging ourselves on
our role in the transition as best we can.
If you have a house, there’s a risk your
house might flood. You buy insurance
to transfer that risk. But if we can
mitigate that risk, if we can help you
as a homeowner prevent a flood
taking place, that’s good for you, it’s
good for us and it’s good for society.”
There is just this rare quality to the
people I work with: professional,
brilliant at what they do, experts,
collaborative. I don’t find it
hierarchical either. It’s genuinely
‘best answer wins’. We want to get
to the best answer, and that can
come from anyone at any time.”
Another thing that plays into this, and it’s
going to be a big focus of mine in 2023, is
what I call ‘risk mitigation’. It’s something
I’m really passionate about. If you have
a house, there’s a risk your house might
flood. You buy insurance to transfer that
risk. But if we can mitigate that risk, if we
can help you as a homeowner prevent a
flood taking place, that’s good for you,
it’s good for us and it’s good for society.
Reducing that risk also feeds back into
our pricing. We’ve done a couple of
things already, like LeakBot – a device
that we’ve given to our homeowners
which shuts off the mains if there’s a
leak. We’ve also spent a huge amount
of time looking at cyber resilience for
small businesses, putting in place really
practical tools that can empower them
to mitigate their cyber risk.
Q: What kind of opportunities are
being opened up by advances in
data and analytics?
A: One of my jobs is risk selection and
making sure that we really understand
the risks we underwrite, so we need
to utilise data for that to improve our
performance. But we’re also thinking
about how we utilise data to improve the
customer experience. For example, you
might ask a customer tens of questions
when they buy insurance from you,
but if some of those answers already
exist externally, then can you pull that
information together in such a way that
results in you asking the customer less
questions? And then, also thinking
about how to use data and technology
to reduce our costs. That’s really
important, because if we’ve got lower
costs, we can reflect that back to our
customers in terms of pricing.
Q: What’s your approach to training
and developing underwriters?
A: Recently, we’ve been building out
what we call the ‘faculty of underwriting’.
We spent a lot of time coming up with
the capabilities that we think an
underwriter of the future will need, but
we spent just as much time thinking
about how we deliver those capabilities.
I’ll give you an example. The old model
was to sit in training sessions for days
on end, staring at PowerPoints. But
people these days don’t learn like that.
They want to learn in quick, bite-sized
bursts, so we’ve partnered with a gaming
company to develop training apps that
tap into the psyche of competition,
presenting underwriting questions
in a really addictive way. We hadn’t
anticipated quite how competitive our
people would be, and we’ve got people
doing these modules eight, nine, ten
times to keep improving their score
which is brilliant.
Q: Outside of work, what gives
you energy?
A: My family and friends for sure. I’m a
mum of two teenagers, so it’s like living in
student accommodation at the moment!
More personally, I just get a buzz out of
a run. I am not an Olympic runner, I’m
never going to win a race, but for me,
for my mental health, just to clear my
mind, I absolutely love it. You don’t need
anybody else and you can do it anywhere
in the world – just put on your trainers
and off you go.
Hiscox Ltd Report and Accounts 2022
19
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Chairman’s statement
It has been a pivotal year for Hiscox, with new
leadership and an evolved strategy being
tested by a turbulent operating environment,
and I am very pleased with our performance.”
Robert Childs
Chairman
Before I provide my usual commentary
on the business, we have announced
with our 2022 results that I will be
stepping down as Chairman during
2023, and the Board has commenced
the search for my successor.
After 37 years at Hiscox and 50 in the
industry I am very happy that I will be
passing the baton when the business
is in such a good place – excellent
leadership, strongly capitalised, with
favourable market conditions and
huge opportunities ahead.
Aki in this, his first year as Group Chief
Executive Officer. Aki has brought new
insights and developed a strong talented
Executive team, and when the time
comes, I will retire a happy shareholder.
And now for the balance of my report.
Performance
It has been a pivotal year for Hiscox, with
new leadership and an evolved strategy
being tested by a turbulent operating
environment, and I am very pleased
with our performance.
An important job for any Chairman is
overseeing a Chief Executive transition
and I have been glad not only to ensure
a seamless transition from Bronek to
Aki, but also to work more closely with
Although it has been an active year
for catastrophes, both man-made
and natural, we have made a strong
underwriting profit of $269.5 million
thanks to the discipline of our teams.
20
Hiscox Ltd Report and Accounts 2022
This good performance has been offset
by unrealised investment losses on our
bond portfolios, but we expect these
to unwind as our bonds mature.
An important job for any Chairman is
overseeing a Chief Executive transition
and I have been glad not only to ensure
a seamless transition from Bronek to
Aki, but also to work more closely with
Aki in this, his first year as Group Chief
Executive Officer. Aki has brought
new insights and developed a strong,
talented Executive team. Aki has
embedded a refined strategy that is
reducing the volatility profile for the
Group. He has also assembled an
impressive team who are delivering
technological and operational changes
that are being well received by both
business partners and our people.
People
We had to navigate a challenging
employment market during the year,
as the war for talent continued. I am
therefore pleased that we have not
only maintained top talent, but also
attracted many more.
Aki’s first key appointment was Paul
Cooper, our Group Chief Financial
Officer, who joined the business in May.
He has over 25 years of financial services
experience across both the retail and
Lloyd’s insurance markets and is already
bringing valuable external perspectives
to our organisation. I remember Paul
from his previous time at Hiscox, when
he was Finance Director for Hiscox UK
and Europe, and have enjoyed working
with him again.
After 15 years with the Group, Amanda
Brown, our Chief Human Resources
Officer retired during 2022, and I would
like to thank her for her sage counsel and
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chairman’s statement
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Hiscox Ltd Report and Accounts 2022
21
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chairman’s statement
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
I am extremely proud that
we are reporting our best
employee engagement score
for ten years. Not only do the
overwhelming majority of our
people feel proud to work
at Hiscox (84%), they would
also recommend Hiscox as
a great place to work.”
clarity of thought over the years, which
I have personally valued and so too has
our Board. She has been succeeded by
Nicola Grant, who joined us from ING
Group and brings a wealth of experience
in engaging and leading large workforces
across multiple markets.
At the same time, Jon Dye joined as
Hiscox UK Chief Executive Officer.
Jon is a recognised industry leader with
solid CEO experience and a fantastic
track record of building profitable
businesses. His broker relationships,
leadership and energy are already
making a difference.
These appointments, along with the
promotion of Stéphane Flaquet to Group
Chief Operations and Technology Officer,
have resulted in a very capable new
Group Executive Committee formed
under Aki’s leadership.
Beyond the top team, I am extremely
proud that we are reporting our best
employee engagement score for ten
years. Not only do the overwhelming
majority of our people feel proud to
work at Hiscox (84%), they would also
recommend Hiscox as a great place to
work (81%) and believe that Hiscox has
an outstanding future (76%). Aki has to
take a lot of credit for this, along with his
leadership team.
Environmental, social and
governance (ESG)
In a year of pronounced geopolitical
and macroeconomic challenges,
ESG has not been far from our minds
and conversations. Aki will cover in
his Chief Executive’s report the
environmental and governance
aspects that the business has been
thinking about, and the huge amount
of work that has been done to support
22
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chairman’s statement
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
our colleagues on the ‘social’ side
of ESG. But as Chair of the Hiscox
Foundation in the UK, our charitable
foundation, I am especially proud that
we have donated $1.8 million to good
causes this year.
This has included one-off support and
multi-year partnerships, in line with
our three strategic pillars of charitable
giving, as well as targeted donations
that recognise the Russia/Ukraine
conflict, floods in Pakistan, and the
rising cost of living where – to reflect
the rising costs that charities are
facing – we increased our donations
to multi-year partners in line with
inflation for the current financial year.
It is also why we are working with
MyBnk for an extended period to
support their delivery of expert-led
financial education to school children
and young people across the UK,
recognising the importance of
learning financial capability skills
from a young age.
I know that playing an active part in our
communities matters to our people too
because they spent over 1,400 hours
volunteering during 2022, supporting
not only some of our office charity
partners such as Spear Bethnal Green
and Colchester Foodbank, which are
chosen by employees, but also causes
that are personally important to them.
Outlook
We live and work in turbulent geopolitical
times and this is where the insurance
market can come into its own. As a
specialist insurer offering coverage
across classes that include political
violence, kidnap and ransom, cyber,
the full range of professional indemnity
and property damage, we are well
placed to help customers manage their
risks. The opportunities in our big-ticket
businesses are huge and the rating
environment is with us in a way that
you could argue we haven’t seen for
decades. We will still be trimming the
sails in various places, recognising our
lower volatility profile, but there is nothing
like a price rise to reduce volatility.
The opportunities are equally huge in our
retail businesses, where the hard work
over the last three years to replace core
systems is reaching a point where they
can propel these businesses in their next
growth phase. With new leadership in
Hiscox UK and strengthened leadership
in Hiscox USA and Hiscox Europe, each
business is attractively positioned for
what lies ahead.
In concluding this, my last Chairman’s
statement, I truly believe we are on the
cusp of something great – ready to
make the most of the excellent markets
before us.
Robert Childs
Chairman
8 March 2023
Hiscox Ltd Report and Accounts 2022
23
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Chief Executive’s report
I am very pleased with the progress made
across the Group during 2022, as we delivered
the strongest underwriting result in seven years.
We have a refined strategy, a new experienced
and energetic leadership team, we have
made significant progress in rolling out new
generation technology in the USA and Europe
and we are enjoying our highest employee
engagement scores in ten years.”
Aki Hussain
Group Chief Executive Officer
In my first year as Group Chief Executive
Officer, I am pleased to report the
Group delivered a strong result during
a year of heightened geopolitical
uncertainty, economic unpredictability
and natural catastrophe losses. An
underwriting profit of $269.5 million
(2021: $215.6 million) and a combined
ratio of 90.6% (2021: 93.2%) is a
testament to the disciplined execution
of our strategy of building more
balanced portfolios to drive reduced
earnings volatility. The current complex
underwriting environment presents
opportunities for businesses like ours,
with underwriting excellence at the
core, backed by a strong balance sheet.
I am excited about the hard market in
reinsurance, which is a necessity to
reverse multi-year losses suffered by the
24
Hiscox Ltd Report and Accounts 2022
industry. These are the best conditions
we have seen in over a decade and our
talented and experienced underwriters
have the financial flexibility to deploy
capital to make the most of the
opportunities ahead.
2022 has been a year of delivery for
our Retail business with many key
milestones achieved. In the USA, our
largest retail market, we completed the
strategic repositioning of the broker
channel business and substantially
delivered the technology transformation
programme of our digital partnerships
and direct (DPD) business, setting us up
for growth acceleration in 2023. In the
UK we transitioned to new leadership
under Jon Dye, an industry veteran with
huge ambition for our business, and in
Europe we passed the milestone of half a
billion Euros of gross premiums written.
Importantly, we have achieved our target
of returning the Retail combined ratio
to within the 90% to 95% range a year
ahead of schedule, which is a testament
to the decisive actions we have taken.
The business is in great shape and it
is at this juncture that after 37 years
of committed service, Robert Childs,
Hiscox Chairman, has announced his
intention to step down. I have personally
greatly valued his ability to drive clarity
in our decision-making, his advice and
human approach, and the support he
has given me ever since I joined the
business and particularly now as Group
Chief Executive Officer. He has been
instrumental in transforming Hiscox
into a successful global business
and I wish him all the best in his
well-earned retirement.
Rates
2022 performance benefitted from a
favourable rate environment across
all Hiscox businesses, with rates in
reinsurance now exhibiting all the signs
of a hard market. This is underpinning
continued rate strengthening in primary
insurance, mainly wholesale.
Hiscox Re & ILS benefitted from an
average risk adjusted rate increase
of 13% in the period, above our
expectations. This is driven primarily
by North American property and
retrocession, with rates up 14% and
16% respectively, with Florida exhibiting
particularly hard market conditions.
Specialty lines also experienced
double-digit increases, driven by cyber
and terrorism, with rates up 42% and 26%
respectively. Since 2017, this business
has achieved cumulative rate increases
of over 50% across the portfolio.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Hiscox Ltd Report and Accounts 2022
25
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
The reinsurance marketplace
is undergoing a seismic shift,
with 2022 rates above the
2012 level, and we anticipate
material improvement across
nearly all lines for 2023.”
The reinsurance marketplace is
undergoing a seismic shift, with 2022
rates above the 2012 level, and we
anticipate material improvement across
nearly all lines for 2023. Hurricane Ian
served as a catalyst, among other
factors, following many years of
losses across the sector, leading to
significant improvement in the rating
environment. Capacity continued to
reduce during 2022 both in the traditional
arena and the ILS space, as a result
of another year of industry losses and
volatility in the investment markets.
This is leading to a true hard market
for catastrophe-exposed risks. We
are witnessing the best market
conditions in over a decade and have
deployed additional capital at January
renewals, achieving risk-adjusted rate
increases of 45% in property and 26%
in specialty.
In 2022, Hiscox London Market
benefitted from an average rate
increase of 6%, which was ahead
of our expectations. Since 2017, this
business has achieved cumulative rate
increases of 70%. Rate growth remained
positive for all classes of business except
D&O, which is already very attractively
priced, having achieved cumulative
rate increases of over 240% since the
end of 2017. Overall the rate outlook
for 2023 is positive, underpinned by
the macroeconomic environment and
reinsurance costs, with the strongest
growth expected in terrorism and
property lines.
While pricing in Hiscox Retail is
generally less cyclical, in 2022 it
benefitted from an average rate increase
of 7%. This was led by Hiscox Europe
where on average rates were up 8%,
underpinned by double-digit rate
increases in cyber, commercial property
26
Hiscox Ltd Report and Accounts 2022
and traditional professional indemnity.
In Hiscox USA on average rates were
up 7%, with strong rate growth in cyber
and allied health. Hiscox UK saw rate
increases of 5% on average, with strong
rate momentum in cyber, commercial
property and entertainment.
Overall, the premium growth achieved
by the Group through rate and indexation
in 2022 kept pace with our inflation
assumptions. As we look forward, the
rate outlook for 2023 remains strong,
particularly in reinsurance.
Claims
2022 was another year with elevated
large losses, both natural catastrophe
and man-made, so it is pleasing to
see that in spite of these challenges
Hiscox maintained strong profitability,
delivering a Group combined ratio of
90.6%. There are no material changes
to previously announced net loss
estimates for Hurricane Ian and
the Russia/Ukraine conflict.
As previously communicated, the
Group reserved $135 million net of
reinsurance including reinstatement
premiums for Hurricane Ian, based
on an insured market loss of $55 billion.
The majority of our exposure is in
big-ticket lines: $90 million net in
Re & ILS and $40 million net in London
Market. This represents a modest
exposure for Hiscox London Market,
as the business had pulled back from
under-priced Florida business in the
preceding years. Estimated net losses
for the Retail portfolio are modest at
$5 million.
The Russia/Ukraine conflict tragically
continues to be a live event. The human
cost of this event is immense and
long-lasting and our thoughts are with
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
An actively managed business
Total Group controlled premium 31 December 2022: $4,935.4m
Period-on-period in constant currency
Small
commercial
Reinsurance
Property
Art and
private client
Specialty
Global
casualty
Marine
and energy
+5%
+25%
-17%
+4%
-5%
+9%
+12%
$1,705m
Professional liability
Errors and
omissions
Private directors
and officers’ liability
Cyber
Commercial
small package
Small technology
and media
Healthcare related
Media and
entertainment
$1,145m
Property
Marine
Aviation
Specialty
$466m
Commercial
property
Onshore energy
USA homeowners
Flood programmes
Managing
general agents
International
property
$458m
$451m
Home and contents
Kidnap and ransom
Fine art
Classic car
Luxury motor
Asian motor
Contingency
Terrorism
Product recall
$388m
Public directors and
officers’ liability
Large cyber
Personal accident
General liability
$322m
Cargo
Marine hull
Energy liability
Offshore energy
Marine liability
Hiscox Ltd Report and Accounts 2022
27
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Hiscox Retail achieved
a combined ratio of
94.8%, returning to the
90%-95% combined
ratio range a year ahead
of the stated target,
despite the complex
macroeconomic
environment.”
Hiscox Retail
Gross premiums written
Net premiums written
Underwriting profit
Investment result
(Loss)/profit before tax
Combined ratio (%)
2022
$m
2,272.1
1,976.8
101.9
(98.9)
(3.4)
94.8
2021
$m
2,290.0
1,969.3
34.9
26.9
54.9
98.9
all those who are directly or indirectly
impacted. Hiscox’s estimated ultimate
loss from all risks in the Ukraine and
Russia remains unchanged at $48 million
net of reinsurance1, with just under
three quarters of it attributable to
Hiscox London Market. The majority of
London Market’s and all of Re & ILS’s
reserves comprise incurred but not
reported (IBNR) losses. Hiscox London
Market exited the aviation hull insurance
business in 2018 and political risk/trade
credit business in 2017.
While inflationary pressures continue
to persist across our markets, the
impact on our business is relatively
contained due to the short-tail nature
of our book, with the average duration
of our liabilities at 1.9 years. Hiscox has
a conservative reserving philosophy;
continuously monitoring claims inflation
trends and evaluating reserve adequacy
to ensure we maintain profitability
and a robust balance sheet position.
In the first half of the year we proactively
strengthened our best estimate by
$55 million as a precautionary net
inflationary load, and this remains
unchanged after undertaking a
similar review at the full year.
Throughout the course of 2022 we
continued to proactively take action to
manage volatility from the back-book,
in particular in longer-tail lines where
we have either exited portfolios or
refined our underwriting strategy. In
March, our Hiscox Re & ILS business
executed an LPT, buying protection
for our casualty reinsurance portfolio
that is in run-off. Following that, in July,
Hiscox London Market undertook an
LPT to reinsure circa $116 million
of reserves for 1993 to 2018 year of
1Including impact of reinstatement premiums.
28
Hiscox Ltd Report and Accounts 2022
accounts. These deals, together
with the two LPTs completed in 2021,
mean that 23% of 2019 and prior years’
gross reserves are reinsured up to a
1-in-200 downside risk.
At a Group level we also hold margin
above best estimate as an additional
buffer to compensate for the uncertainty
in timing and cost of claims. At the end
of 2022, the margin stood at 8.9%,
down from 11.0% in the first half of
the year. Through a combination of
executing a number of LPTs and
proactive action on addressing inflation,
uncertainty on prior-period losses
is reducing, consequently we have
moderated the margin to be more in
line with our target range of 5%-10%,
although remaining at the upper
end of the range. Furthermore the
favourable prior-period run-off is
reflected in reserve releases of
$239 million in 2022, which are
from all business segments.
With regards to the new business we
are writing, we mitigate inflationary
pressures through a combination of
exposure indexation and rate increases.
Our current pricing and reserving
assumptions incorporate expected
inflation which is a multiple of experience
in recent times. Therefore, the increased
premium we are collecting across the
Group is keeping pace with inflation
and our view of risk assumptions.
Hiscox Retail
Hiscox Retail comprises our retail
businesses around the world: Hiscox UK,
Hiscox Europe, Hiscox USA and Direct
Asia. In this segment, our specialist
knowledge and ongoing investment in
the brand, distribution and technology
reinforce our strong market position in
an increasingly digital world.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Hiscox Retail grew gross premiums
written by 5.1% in constant currency to
$2,272.1 million (2021: $2,290.0 million)
and added over 55,000 net new
customers. Our commercial lines,
which constitute over three quarters
of Retail gross premiums written,
grew 6.7% in constant currency, with
strong momentum across the UK and
Europe. We moderated our growth
in Hiscox USA as we completed the
US broker portfolio repositioning and
substantially delivered the US DPD
technology implementation. On a
go-forward basis, Hiscox Retail grew
6.6% in constant currency. With these
programmes complete, Hiscox Retail
growth is expected to trend towards
the middle of the 5%-15% range in 2023.
Hiscox Retail achieved a combined
ratio of 94.8%, returning to the
90%-95% combined ratio range a year
ahead of the stated target, despite the
complex macroeconomic environment.
We expect to operate within this range2
going forward.
Our Retail business has been
undergoing a multi-year technology
transformation programme. The UK
is developing next-generation e-trade
capabilities for less complex broker
intermediated business, complementing
the direct-to-consumer digital platform.
In 2022 we migrated the vast majority
of the US DPD business onto the new
technology stack, and core platform
replacement is also underway in
Germany and France, with Benelux
to follow in 2023. Convenience for
the customer is at the heart of our
distribution philosophy. Whether our
customers want to connect to a Hiscox
employee or complete the customer
2 Under IFRS 4.
journey entirely online, our combination
of talented people, supported by these
technology investments, creates the
platform and opportunity to serve
millions of customers. The technology
enables greater levels of algorithmic
underwriting, process automation,
improved efficiency and will create
operating leverage over time.
We will invest incrementally in brand
across our Retail business in 2023.
The Hiscox brand already has a strong
market position, and it is the right time
to bolster it further to drive growth over
the long term.
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.
Hiscox UK gross premiums written were
up 2.8% on a constant currency basis,
but reduced by 6.4% to $778.0 million
(2021: $831.1 million) in US Dollars due
to the depreciation of the Sterling. The
business delivered a solid performance,
with commercial lines showing strong
growth of 8.5% in constant currency,
boosted by rate improvements and
excellent retention rates.
2022 marked strong growth in the
number of online sales for UK direct
commercial and we expect this trend
to continue. The pace of our digital
capability development, including
e-trading for brokers, has significantly
picked up this year and we continue
to drive several strategic initiatives to
improve our core digital capabilities.
The impact of the UK weather has
been within our expectations.
Hiscox Europe
Hiscox Europe provides both personal
lines cover, including high-value
household, fine art and classic car, and
commercial insurance for small- and
medium-sized businesses.
Hiscox Europe is the strongest growing
business segment in the Hiscox Retail
portfolio. Gross premiums written
were up 13.6% in constant currency to
$543.7 million (2021: $532.0 million),
surpassing the €500 million milestone
for the first time. All five markets in Europe
delivered double-digit growth in constant
currency, demonstrating our attractive,
differentiated position and underpinned
by strong growth in commercial lines
of 16.2%.
Hiscox Germany, Europe’s largest
market, grew gross premiums written
by 11.3% in constant currency to
cross the €150 million mark. Hiscox
Germany is a market leader in cyber,
and continues to innovate and develop
products that meet changing customer
needs. In 2022, our German business
launched a modular cyber product for
businesses with less than €2.5 million
in revenue. The modular approach
allows customers to add cover as their
needs change, and delivers a more
efficient claims service should the need
arise. After some early success, we plan
to roll-out this new product in our other
European markets.
The introduction of new core technology
in our European businesses remains on
track. This multi-year project is being
implemented in phases with efficiencies
gained as it progresses. Germany and
France are already well underway and
with Benelux to follow in 2023. The
implementation is less complex than in
the USA, as it is a country-by-country
Hiscox Ltd Report and Accounts 2022
29
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
In the first half of 2023 we will
launch a new ESG-focused
Lloyd’s sub-syndicate. It will
be complementary to Hiscox
London Market’s existing
portfolio and will provide
access to additional capacity
for qualifying clients with
positive ESG credentials,
such as renewable power
generators and energy
storage providers.”
roll-out, and the digital business in
Europe is nascent, although the potential
is significant. We look forward to seeing
significant benefits upon completion
of the project not only for the business,
in areas such as automation and
efficiencies in policy administration,
but also for customer experience in
terms of market connectivity.
Hiscox USA
Hiscox USA focuses on underwriting
small commercial risks distributed
through brokers, partners and
direct-to-consumers using both
traditional and digital trading models.
Our aspiration here remains to build
America’s leading small business insurer.
2022 was a year of transition for
Hiscox USA, as the business delivered
on two major change initiatives – the
broker portfolio repositioning, through
which we have exited circa $160 million
of business since 2019, and the
re-platforming of the US DPD business,
which is now substantially complete.
Hiscox USA’s gross premiums
written grew 2.1% to $897.9 million
(2021: $879.2 million), up from 1.2%
at the half year, as the effect of the
broker business repositioning was
weighted towards the start of
the year.
While the overall growth of the US
broker business was impacted by the
tail of planned actions, in the second
half, we have seen green shoots as
our regional underwriting teams are
back on the front foot, re-engaging
with brokers to write profitable
business in our go-forward lines.
Our refreshed US senior leadership
team and an enhanced business
development function will strengthen
the momentum behind this.
30
Hiscox Ltd Report and Accounts 2022
In the US DPD business, all
direct-to-consumer customers have
been on the new technology platform
since June. Direct to consumer growth,
as expected, was lower during the
peak period of migration in the first half
of 2022, but has started to accelerate
notably since the end of the third quarter
as the combination of new technology,
a focused marketing drive and improved
conversion rates take effect.
The migration of our partnership business,
which represents two-thirds of US DPD,
commenced in the second half of 2022,
with the vast majority of partners now live
on the new platform. Mirroring the direct
experience, growth slowed during the
peak migration period in the latter part of
2022. The partnerships business is now in
the embedding phase which is expected
to extend into the second half of 2023, as
over 50,000 agents and producers who
have access to the new portals, need time
to develop familiarity with the technology
and for partners to begin re-marketing
the Hiscox platform. Consequently,
we anticipate the production from new
and existing partners to gradually ramp
up through 2023, after a subdued first
quarter 2023. We therefore expect US
DPD to grow towards the middle of 5%
to 15% range in 2023. Once embedding
of partnership business is complete,
growth is expected to accelerate.
Our partnerships team has already
started to take actions to increase
activity, at both the partner and agency
level, to encourage the marketing of
our platforms and to increase usage
as we emerge from this period of
technology migration. Following a
two-year hiatus to the onboarding
of new partners, in January 2023
we added 15 new partners to our
digital platform and expect them to
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Hiscox London Market
Gross premiums written
Net premiums written
Underwriting profit
Investment result
Profit before tax
Combined ratio (%)
2022
$m
1,114.9
735.1
110.0
(54.4)
53.0
84.8
2021
$m
1,171.4
711.5
89.6
15.8
104.8
89.1
commence production in the second
and third quarter.
The near- and long-term market
opportunity is incredibly attractive.
I expect momentum to build through
the year as marketing takes effect;
as new and existing partners and
agents ramp up production and as
technology benefits such as the
potential for higher conversion rates
begins to have a discernible impact.
Hiscox Asia
DirectAsia grew gross premiums
written by 12% in constant currency
to $52.5 million (2021: $47.7 million).
Momentum picked up markedly in
Singapore with the top line growing
19.5% due to the opening up of
international travel, boosting travel
insurance sales and motor partnerships.
Thailand’s premium growth was
underpinned by partnership business.
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 result in 2022, despite another
active year of large losses. Our focus
on building balanced portfolios
delivered strong growth in selected
lines, namely public D&O, general
liability, upstream energy, terrorism
and cargo; and at the same time
reduced our exposure to what was
under-priced catastrophe-exposed
business in the binder portfolio.
Overall, gross premiums written
declined 4.8% to $1,114.9 million
(2021: $1,171.4 million), with 3.3
percentage points due to planned
reductions in property binder
portfolios and the impact of Russian
sanctions, which mainly affected our
upstream energy and space portfolios.
In addition, flood growth was tempered
as competitive dynamics changed with
National Flood Insurance Programme
(NFIP) reducing prices, while we
maintained our risk-based pricing
approach. We expect competitive
dynamics to improve following
Hurricane Ian and as the demand for
a flood-specific product continues to
grow in the US market given recent
events. Net premiums written increased
3.3%, as strong rate momentum made
retaining more premium attractive.
Hiscox London Market delivered a
$110.0 million underwriting profit,
up 22.8% on the prior period. The
combined ratio of 84.8% showed a
4.3 percentage point improvement
year-on-year, despite a $40 million
net loss from Hurricane Ian and
$34 million net loss from the
Russia/Ukraine conflict. This is the
third consecutive year in which Hiscox
London Market’s combined ratio
has been below 90%, which is a
testament to the underwriting focus
on creating more balanced and
profitable portfolios.
Since 2018 we have reduced our
property binder exposure by just under
a half, non-renewing business which
did not meet our profitability hurdles.
The positive impact is clear to see in the
robust underwriting result. I am pleased
to report that the multi-year major
changes in the property binder book
are now substantially complete and
we consider the remaining book to
be rate adequate. On completion
of this activity and in light of the
ongoing attractive market conditions,
we expect Hiscox London Market
to grow gross premiums written in
2023, while continuing to maintain
a disciplined approach.
We are also investing in our digital
capabilities. Advances have been
made in the digitalisation of pricing and
underwriting models across general
liability and terrorism. Throughout
2022 and into 2023 we have also been
redesigning our FloodPlus and BindPlus
systems so that they can be deployed
in the Cloud, an important step which
will make them scalable for future
growth. At the same time, we have
continued to make underwriting and
pricing changes to maintain profitable
growth in both lines. We will continue
to drive further automation across
our business to enhance our ability
to select and price risks more effectively.
We also continue to innovate. For
example, as economies across the
globe are looking to transition to more
sustainable energy production models,
we are developing our strategy of
participating in this shift. In the first half of
2023 we will launch a new ESG-focused
Lloyd’s sub-syndicate. At its early stage
it will be nested within Syndicate 33
and lean on its existing stamp capacity.
It will be complementary to Hiscox
London Market’s existing portfolio
and will provide access to additional
capacity for qualifying clients with
positive ESG credentials, such as
renewable power generators and energy
storage providers. To further enhance
the scale of this ESG syndicate, we
will partner with third-party capital on
our specialist ESG positive portfolio to
supplement Syndicate 33’s capacity.
To build the portfolio we will utilise our
existing underwriting talent and broker
relationships to access clients while
continuing to develop deep in-house
expertise in the specialist sectors
Hiscox Ltd Report and Accounts 2022
31
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Hiscox Re & ILS
Gross premiums written
Net premiums written
Underwriting profit
Investment result
Profit before tax
Combined ratio (%)
2022
$m
1,037.9
268.1
57.6
(34.0)
21.5
81.6
2021
$m
807.8
274.2
91.1
8.8
98.5
68.0
focused on the transition to the green
economy, such as electric vehicles
and renewables.
The outlook for 2023 is positive, as we
are looking to broaden out in specialty
and casualty lines through disciplined
growth in attractively priced business.
We will do this by working with our
key broker relationships to seek and
support attractive and profitable
growth opportunities on their merit,
and driving the entrepreneurial spirit
of our talented underwriters.
Hiscox Re & ILS
The Hiscox Re & ILS segment comprises
the Group’s reinsurance businesses
written in London and Bermuda and the
insurance-linked security (ILS) activity
written through Hiscox ILS.
Hiscox Re & ILS gross premiums written
increased by 28.5% to $1,037.9 million
(2021: $807.8 million) crossing the
$1 billion milestone for the first time, as
we benefitted from further hardening
market conditions. Much of the growth
was supported by ILS inflows in the first
half of the year, while broadly maintaining
our net written premium position.
Excluding reinstatement premiums,
gross premiums written grew 34.4%.
The business delivered a particularly
strong performance in retrocession
and North American and international
property catastrophe lines, underpinned
by increased demand and continued
pressure on the supply of capacity in
both the traditional and ILS space.
ILS assets under management (AUM)
was $1.9 billion as at 31 December 2022
($1.4 billion at 31 December 2021).
During the first half of the year we
secured net AUM inflows of $511 million.
32
Hiscox Ltd Report and Accounts 2022
This was partly offset by $79 million net
outflows in the second half. Despite the
positive inflows of AUM in 2022, there is
uncertainty within the market regarding
the availability of new or replacement
ILS capital in the near term, as a result of
multiple years of significant loss events,
latterly combined with economic volatility
in the form of rapidly rising rates and
decade-high inflation. In part, it is this
uncertainty that drove improved rates
and tightening of terms and conditions
during the January 2023 renewals.
It is into the resulting highly attractive
market that Hiscox is deploying its own
organically generated capital to fill the
gap in the market that has been left by
a combination of third-party capital
contraction and retrenchment by
some reinsurers.
Hiscox Re & ILS delivered a strong
combined ratio of 81.6%, despite the
$90 million net loss from Hurricane Ian.
We continued to drive underwriting
discipline by further reducing our exposure
in the risk excess class. We have also
successfully reduced our participations
on aggregate excess of loss deals and
will continue this disciplined underwriting
action in 2023 designed to reduce
exposure to secondary perils.
Investments
The total investment result was a
loss of $187.3 million (2021: profit of
$51.2 million), or a negative return of 2.6%
(2021: positive return of 0.7%). Assets
under management as at 31 December
2022 were $7.1 billion (2021: $7.3 billion).
Concern over inflation dominated the
economic picture during 2022, as it
remained at the highest levels in decades
and proved persistent, exacerbated
by disruptions to the global supply
chain, lockdowns in China and the
Russia/Ukraine conflict. Central banks
responded with sharp rises in interest
rates, pushing rates to levels last seen
before the 2008 financial crisis. Despite
high inflation and tightening monetary
policy, unemployment remained low and
economic growth was resilient across
many regions. However, having seen
interest rates rise sharply in developed
markets, the focus shifted from inflation
to the impact of higher interest rates
on the economy. Growth expectations
were revised down across the globe,
and expectations of recession rose in
key economies.
The upward move in risk-free rates,
along with a weakening growth outlook,
led to a repricing across a wide range of
markets. Diversification was of limited
help to portfolios given the broad spread
of losses affecting most asset classes.
Bond markets sold off as risk-free rates
rose, leading to some of the weakest
bond returns in decades. Credit spreads
widened leading to losses on corporate
bonds. Global equity indices ended the
year down almost 20%, albeit a rally into
year-end moderated the losses. Against
this backdrop, the investment loss of
$187.3 million was not unexpected.
However, with 93% of our fixed income
portfolio in investment grade bonds, most
of the losses were mark-to-market. Our
risk asset portfolios fell, though some
exposures made absolute gains helping
to alleviate the losses at the margin.
The reinvestment yield on the bond
portfolio rose again in the final quarter to
reach 5.1% as at 31 December 2022, up
from 4.8% at the end of September 2022.
The change during 2022 from the
starting yield of just 1.0% is
transformational for forward-looking
returns. The short-dated nature of
our portfolio means reinvestments
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Strategic focus
Total Group controlled premium for 2022
100% = $4,935.4 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
23%
Large property
8%
Casualty
8%
Specialty – terrorism, product recall
5%
Marine and energy
7%
Small commercial
27%
Tech and media casualty
7%
Art and private client
9%
Specialty – kidnap and ransom,
contingency, personal accident
4%
Small property
2%
Hiscox Ltd Report and Accounts 2022
33
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Portfolio – asset mix
Investment portfolio $7.1 billion as at 31 December 2022
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
34
Hiscox Ltd Report and Accounts 2022
76.3
18.9
4.8
19.6
9.3
8.9
29.0
26.6
6.6
72.5
15.1
8.8
3.6
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 24.0 cents
per share.”
are quickly raising the cash coupon
component of returns. The portfolio
has much improved prospects for
investment returns in 2023 and beyond.
We have maintained a relatively
defensive portfolio coming in to 2023.
Duration remains short and credit quality
remains high. Risk asset exposures
are modest, with no direct exposure to
UK commercial real estate, giving us
room to add risk should opportunities
arise. Otherwise we continue to look to
incrementally improve long-term risk
and capital-adjusted outcomes through
further diversification.
Dividend, capital and
liquidity management
In the continuing uncertain
macroeconomic and geopolitical
environment, Hiscox remains strongly
capitalised against both regulatory
and rating agency requirements.
The Hiscox Group Bermuda Solvency
Capital Requirement (BSCR)
ratio is estimated at 197%, as at
31 December 2022. The slight reduction
to prior year follows an increase in
capital allocation to Hiscox Re & ILS at
January 2023 renewals as we deployed
capital in a highly attractive market,
in line with expectations. We remain
comfortably above the S&P ‘A’ rating
threshold and significantly above the
regulatory capital ratio requirement.
As the year progresses, we will
continue to assess the opportunity
and may deploy further capital if
the market conditions persist.
As we write the vast majority of our
reinsurance business in the first half,
there is an element of seasonality in
the half-year solvency position which
is smoothed out at the year-end
due to continued capital generation,
currently underpinned by
improved underwriting conditions
and investment result outlook.
The Group’s available liquid resources
are sufficient to execute against the
business plan and act as a buffer to
cover opportunities or market events,
with fungible liquidity of around
$1 billion. During September 2022,
the Group issued £250 million of
five-year unsubordinated unsecured
notes3. The transaction was in excess
of three times oversubscribed,
demonstrating strong sentiment
and market confidence in the Group.
The issuance of the notes was timed
to coincide with the redemption of
£275 million unsubordinated debt4
during December 2022. The funds
raised mean that the Group continues
to have strong liquidity and appropriate
leverage of 20.6%.
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 24.0 cents per
share. This brings our total dividend
for the year to 36.0 cents per share.
The record date for the dividend will
be 5 May 2023 and the payment date
will be 13 June 2023. The Board
proposes to offer a Scrip alternative,
subject to the terms and conditions of
Hiscox’s 2022 Scrip Dividend Scheme.
The last date for receipt of Scrip
elections will be 22 May 2023 and the
reference price will be announced on
31 May 2023. Further details on the
3Fixed rate of 6.00 per cent paid annually in arrears.
4Fixed rate of 2.00 per cent paid annually in arrears.
Hiscox Ltd Report and Accounts 2022
35
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
dividend election process and Scrip
alternative can be found on the investor
relations section of our corporate
website, www.hiscoxgroup.com.
People
During the year I took important steps
to refresh our leadership team – the
Group Executive Committee (GEC)
– and the full team is now in place.
Jon Dye, our new UK Chief Executive
Officer, and Nicola Grant, our new
Group Chief Human Resources Officer,
joined the GEC in September; as well as
Stéphane Flaquet who was appointed
to the newly created role of Group Chief
Operations and Technology Officer. Paul
Cooper also joined the Executive team
earlier in the year as our new Group Chief
Financial Officer. The GEC contains a
wealth of experience and knowledge
combined with energy and passion and
I look forward to working with them to
deliver on the many opportunities that
lie ahead of us.
At the forefront of my mind is always that
people are our greatest asset. The future
success of Hiscox depends on our ability
to attract, nurture and retain high-calibre
talent. A key focus this year has therefore
been to enhance our employee value
proposition to not only encourage these
behaviours but exceed our employees’
expectations. I am proud of the benefits
that are available at Hiscox such as
HSX:26, under which every permanent
employee owns a part of the Group
through the share grant we launched
earlier in the year, and our sabbatical
programme which entitles staff with
five years of continuous service to an
additional four weeks of paid leave.
We also refreshed our global diversity,
equity and inclusion (DEI) strategy and
vision across the Group and put in
place a new Group DEI policy to better
36
Hiscox Ltd Report and Accounts 2022
reflect our intent and approach. In
addition, in recognition of the difficult
economic circumstances currently
facing our workforce we also paid out
a cost of living lump sum to our UK,
European and Bermudian employees
most impacted by the rising costs of
energy, food and fuel.
The refined strategy, improving financial
performance and distinctive benefits
are having a positive effect; this
is captured in our 2022 employee
engagement scores which are our
highest in ten years. Our people believe
in the strategy and in our outstanding
future. Clearly an engaged employee
base bodes well for the drive and energy
needed to seize the opportunities ahead
and grow our business.
Finally, I want to highlight the completion
of our long-anticipated London office
move. On 31 October our London-based
team moved into new office space at
22 Bishopsgate. This is the location
where we have the largest concentration
of people and is a meaningful milestone
for Hiscox. The carefully thought out
space has been designed as a place for
us to carry out our business in a modern
and collaborative environment, enabling
new ways of working with each other
and with our business partners.
Environmental, social and
governance (ESG)
During 2022, we focused on further
embedding our ESG structures,
processes and policies and I was
particularly proud to see our efforts
to date recognised in an MSCI ESG
rating upgrade from A to AA.
We started the year with the publication
of our new greenhouse gas (GHG) targets
for the Group and since then, we have
made solid progress towards embedding
them in the business. We have started
to develop a low-carbon transition
plan for the Group to set out in more
detail the journey towards meeting our
ambitious targets, and intend to publish
more information on this in line with UK
regulatory requirements. We are also
making good progress towards the first
of our interim targets for transitioning our
investment portfolio, with approximately
20% of our corporate bond portfolio
having net-zero/Paris Agreement-aligned
targets as at year-end.
We are continuing to consider the
right approach for Hiscox when it
comes to sustainable underwriting
and investing, taking into account
both our ESG exclusions policy and
our responsible investment policy.
In big-ticket underwriting, we monitor
all risks according to their ESG
profile and continue to decline and
non-renew risks in line with our
exclusions policy. Through this same
tracking process we are able to monitor
the positive risks we are supporting
such as wind and solar energy, and
electric vehicles. In reinsurance, we
have exited from all business where 30%
or more of subject premium is derived
from restricted areas, and we continue
to monitor our portfolio composition
against our ESG focus areas, capturing
programmes declined for ESG
reasons in regular internal reporting.
We have also made strong progress
on the investment side where ESG is
fully embedded in our investment
processes: net-zero wording is now
in all segregated investment manager
mandates; we have enhanced the
ESG credentials of our emerging
market bond portfolio; and an
investments-focused ESG dashboard
is now a regular feature of Investment
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Chief Executive’s report
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Our people believe in
the strategy and in our
outstanding future. Clearly
an engaged employee base
bodes well for the drive and
energy needed to seize the
opportunities ahead and
grow our business.”
Committee reporting. Our sustainable
assets including green/ESG bonds
are now over $300 million, with over
5% of bond portfolios in green and
ESG-labelled bonds.
I am especially excited about the
potential for our ESG-focused
Lloyd’s sub-syndicate.
2023 outlook
I am very optimistic about the outlook
for 2023. Our Retail business is
primed to accelerate growth towards
the middle of 5%-15% range in 2023.
We have completed the necessary
underwriting actions in the US broker
business and substantially completed
the technology transition in US DPD; the
UK is reinvigorated under new leadership
and ambition, and Europe continues to
go from strength to strength. Marketing
spend has increased in all Retail markets
to support our growth efforts.
The reinsurance market conditions
are the best we have seen in over a
decade. Hiscox is a net beneficiary
of reinsurance rate hardening. The
scale and breadth of our business, as
well as the long-standing relationships
developed with our reinsurance
panel, have been an essential part
of ensuring we secured the required
retrocession protection to support our
2023 business plan.
Hiscox Re & ILS has the expertise, strong
balance sheet and financial flexibility
to capitalise on the current trading
conditions. As a result of deploying
our organic capital at 1 January 2023
renewals, our net premiums written in
January 2023 were up 49% year-on-year.
In 2023, net premium written growth
is expected to exceed gross premium
written growth.
Our London Market business is building
a solid and dependable track record
of profitability, and with the property
portfolio changes now mostly complete,
I expect to see the business grow as
we continue to deploy underwriting
aggregate with discipline in the improving
market conditions. In addition, with
the work underway to create leading
capabilities in digital trading and
underwriting the energy transition,
there is excitement in the business about
the coming years and the opportunity
to play a key role in the London Market.
We expect the investment result, which
has been a headwind over the last
12 months, to become a tailwind in
2023, as bond reinvestment yields
reached 5.2% at the end of February.
Last but not least, change in how we
present our numbers to the market is
coming in the form of IFRS 17; however,
this is purely a change in accounting
standard, which has no impact on our
business fundamentals. The strategy
and the economics of the business
are unchanged.
Finally, I would like to thank our
employees, business partners and
shareholders for their continued support.
Aki Hussain
Group Chief Executive Officer
8 March 2023
Hiscox Ltd Report and Accounts 2022
37
Q&
A:
with Paul Cooper
Group Chief Financial Officer
Opportunity knocks
Hiscox is financially sound and poised
for significant growth across its many
business units. The challenge for the
finance function is to help realise that
rich potential. >
38
Hiscox Ltd Report and Accounts 2022
Hiscox Ltd Report and Accounts 2022
39
Paul Cooper joined Hiscox as Group
Chief Financial Officer in May 2022,
after working in Chief Financial Officer
roles at M&G Plc, Arrow Global and
Canopius. Paul had previously served
as Finance Director for Hiscox UK and
Europe from 2006 to 2011 during a key
phase in the Company’s growth.
Q&
A:
with Paul Cooper
Group Chief Financial Officer
Q: You’re what’s known in the
business as a ‘boomerang’ – you
left Hiscox in 2011 before returning
a decade later. What were your
impressions of the Hiscox culture the
first time around, and has it changed
much in the interim?
A: The first time around, the business
seemed very entrepreneurial, very
ambitious, always trying new things. It
had a really strong vision for growing the
business, not only in the Lloyd’s space,
but also across retail and internationally.
The people here were a pleasure to
work with, and they all wanted to do the
best for the Company. There was a real
sense that people wanted to get on,
that they liked coming to work. I think
what’s very pleasing on my return is that
those aspects still prevail. If anything,
they’ve been reinvigorated under Aki’s
leadership. He’s got loads of energy,
and I think he’s employed people who
have the same vigour. We’re all here
to deliver on the potential that Hiscox
undoubtedly has.
Q: How would you characterise the
condition of the Group’s finances?
40
Hiscox Ltd Report and Accounts 2022
A: The business itself is really well
placed. It’s a diverse business with a
number of different business units and
what’s pleasing is that they all have very
strong potential, they’re all very well set in
terms of performance and capability. And
that’s against the background of a strong
rating environment. Pricing is going in the
right direction, and has been for four or
five years, and that looks set to continue.
So, the commercial aspect is strong,
the culture is strong, and the balance
sheet is really strong too. Liquidity is
good. With all that in place, my focus
can be on how I help the business grow
and drive more value, rather than – if
I were joining a company undergoing
turnaround – shoring up the balance
sheet and fixing things.
Q: Where do you see opportunities
for growth?
A: Everywhere – absolutely everywhere.
As I said, all of the business functions
are firing on all cylinders. If you take
the Re & ILS business, for example,
they’re going through one of the most
attractive rate environments they’ve
seen in decades. From their perspective,
the opportunity for growth is very
significant. There’s just a question of
risk appetite – while those rates are very
attractive, you don’t want to bet the
house on going after them and end up
with an unbalanced portfolio. Rates are
also continuing to harden in the London
Market, so we see real opportunities for
growth in that area too.
Then there’s our Retail business. Europe
is fantastically positioned – it’s been
growing in all of its six markets. The
UK has been re-energised under the
leadership of Jon Dye, who knows the
market well and has the pedigree to
deliver a really profitable business. And
then the US business has an amazing
opportunity in a significant market that
is currently fragmented, under-served
and ripe for disruption from a digital
perspective. I think we’ll see big gains
there over the coming years.
Q: Is much change currently required
within the finance function?
A: Finance is a function that demands
constant change – it’s always going to
be either a recipient of change because
the business itself is evolving, or it needs
to be proactively improving itself to help
drive developments elsewhere. As a
general philosophy, I’m always looking
at what we need to change in order to be
better. Right now, more specifically, there
are some major changes required for
the implementation of a new accounting
standard called IFRS 17, which is placing
an enormous demand on all finance
professionals in the insurance industry.
There’s a significant level of attention on
it, and its scale and complexity are not to
be underestimated.
Q: In layman’s terms, what is IFRS 17?
A: There are a number of elements, but
essentially it changes the way that
you measure some aspects of the
profit-and-loss account and the balance
sheet. The biggest part of that is that
you now discount your claims liabilities.
There’s also a lot more presentation and
disclosure required. From now on, we will
have to report on a much more granular
level. The biggest challenge in the short
term is that this has placed significant
demand on us to make changes to
systems and data, which in turn adds to
the demands being placed on the finance
function. IFRS 17 is a big deal, layered with
complexity. It will take time to bed in, but
it does mean that, in future, transparency
levels will be greater, so our performance
will be easier to understand and easier to
compare with other businesses.
The business itself is really well
placed. It’s a diverse business
with a number of different business
units and what’s pleasing is that
they all have very strong potential,
they’re all very well set in terms of
performance and capability. And
that’s against the background of
a strong rating environment.”
We’ve had quite a sizeable investment
in systems and processes in recent
years, so the question now is, how
do you maximise those? We have
more and more data available, and
I think there’s a competitive edge to
be gained by optimising its use and
understanding its dynamics.”
Q: Aside from that, what have your
other major priorities been in your
first year in the role?
A: One accomplishment has been to
engage more with capital markets
and develop a closer relationship
with equity analysts. We also
essentially refinanced our debt in
September, and that’s no small
exercise. In the grand scheme of
things, though, I would say that the big
priority is to do things faster: report in
a faster time, improve our forecasting
capability, improve our management
information so that we can better
understand performance. We’ve had
quite a sizeable investment in systems
and processes in recent years, so
the question now is, how do you
maximise those? We have more and
more data available, and I think there’s
a competitive edge to be gained by
optimising its use and understanding
its dynamics. We’ve made a good start
in that space, and it’s already showing.
There are aspects of performance that
we can measure now that we simply
wouldn’t have been aware of six
months ago.
Q: You’ve come back into the role at
an interesting time from a political
and macroeconomic perspective.
What has that meant for the business?
A: Clearly, the most notable thing has
been the Russia/Ukraine conflict. From
a reserving perspective, that’s all been
well covered off, and we’ve managed
our exposures very well. But on the asset
side of things, it has stoked inflation,
and that’s had an impact on central
banks, which have responded by driving
up interest rates. As a consequence,
we’ve had unrealised losses on bonds
in our investment portfolio, which
has obscured the strong underlying
insurance performance of the business.
In time, we’re confident that those losses
will be reversed. It’s clear that markets
understand and appreciate that this
situation is not permanent, so our share
price has not really been impacted.
Q: What will your approach be to
developing people within the
finance function?
A: That’s a really interesting question.
Traditionally, and I don’t ascribe this
only to Hiscox, finance people tend
to become technical experts in a
particular area – they become the
best reserving actuary, or the best
capital actuary, or the best financial
planning and analysis (FP&A) person.
The problem is that at a certain level
of seniority, you really need to have
a broader, more diverse experience.
By necessity, if you want to be a chief
financial officer, you’ve got to know how
things work across financial reporting,
actuarial, FP&A, capital, reserving, and
so on. A management position requires
not only a depth, but also breadth of
understanding. At the very least, you
need to know how to get the right people
in to give you the right insights and help
you get to the right judgements, and that
does require experience. I’d like to see
more emphasis placed on people moving
around within finance, so that they get
that greater breadth of understanding.
Q: Outside of work, what gives
you energy?
A: Loads. I love to run with the dog.
I socialise with good friends and family.
And I watch Arsenal play football –
although that creates a different stress!
I’m a season-ticket holder. They’ve been
very good recently, but that brings an
angst of its own – worrying about when
they’re going to fall from grace, rather
than why they’re doing so badly. It’s
almost worse!
Hiscox Ltd Report and Accounts 2022
41
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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.
At 31 December 2022, available capital
was $2,427 million (2021: $2,599 million),
comprising net tangible asset value of
$2,096 million (2021: $2,226 million)
and subordinated debt of $331 million
(2021: $373 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 $931 million
(2021: $941 million), of which $331 million
was utilised as at 31 December 2022
(2021: $331 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. Available capital is
compared 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 capital adequacy within the
insurance sector, for public consultation.
However, further rounds of industry
consultation with S&P have since been
required, and S&P is now expected to
publish the conclusions of their additional
consultation in the first quarter of 2023,
with the intention of introducing the new
framework for adoption later in the year
should no further rounds of consultation
be required. While some uncertainty
remains as to the final details of the new
S&P model, based on the information
which S&P has provided to the industry
so far, we expect the Group’s rating to
remain unchanged. We monitor our
capital positions from our rating agencies
very closely and factor them 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, so 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
Our capital resilience is
the result of our long-held
active capital management
approach and, in light of
current and upcoming market
conditions, positions us well
for funding future growth.”
Gareth Jones
Interim Group Head of
Capital Management
42
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Capital
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
191
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.
Projected capital requirement
$2.43 billion available capital
$2.34 billion available capital (post-final dividend)
Economic
Regulatory
3.0
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 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.
2.5
The Group’s estimate for the year-end
2022 BSCR solvency coverage ratio
is 197% (2021: 202%). 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.
1.5
2.0
1.0
0.5
0.0
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 2022. 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 2022
43
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Risk management
The Group’s core business is to take
risk where it is adequately rewarded
to maximise returns to shareholders.
The Group’s success is dependent on
how well we understand and manage
our exposures to key 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:
s we maintain underwriting discipline;
s we seek balance and diversity
through the underwriting cycle;
s 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
2022, we continued to further 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 at an aggregate level, and define our
risk tolerances: the thresholds which
would represent a ‘red alert’ for senior
management and the Board.
Risk appetites, which are set for the Group
as a whole and for each of our insurance
carriers, 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.
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 on page 45. 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,
Our risk management
strategies and processes
continue to evolve with
our business, and we
work hard to ensure we
have a strong risk culture
throughout the organisation,
supported by regular and
robust internal training and
awareness campaigns.”
Hanna Kam
Group Chief Risk Officer
44
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Risk management
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Three lines of defence model
Owns risk and controls
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.
Assesses, challenges and advises
on risk objectively
Provides independent oversight,
challenge and support to the first line
of defence. Consists of the Group risk
team and the compliance team.
Risk management framework
Understanding and managing the
significant exposures we face.
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
definition
Risk
owner
ORSA
documentation
Business
planning
Risk
reporting
O
R
e
S A proc
Risk
governance
s
s
Risk
appetite
ORSA
governance
Assurance
Risk
assessment
Risk
monitoring
Risk
measurement
Risk
mitigation
Capital and
solvency
assessment
sustainability, reserving, investments
and credit, as well as emerging risks.
The Group Risk and Capital Committee
and the Group Underwriting Review
Committee are sub-committees of
the Risk Committee and make wider
decisions on risk. More information
on these Committees can be found
on pages 63 to 65.
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.
The role of the Board in risk management
and key developments during 2022
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
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.
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 on our key risks and monitors
emerging risks throughout the year. In
2022, additional risks considered include
associated risks with Cloud provider
concentration, reversal of globalisation
trends impacting the complexity and cost
of regulatory compliance, and potential
disruptions arising from infectious
diseases outbreaks. An overview of
the processes for identifying emerging
risks through the Grey Swan Group is
described on page 65. Stress tests and
reverse stress tests (scenarios such as
those shown on pages 46 to 47, 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 important
risk management developments
during 2022:
s a risk management maturity
framework was introduced
during the year to help set the
organisation’s maturity goals
against six key dimensions of risk
management, as well as monitor
ongoing progress made against
these goals. The maturity model
has been introduced at both
Group and business unit level;
s maintaining a strong risk culture
across the organisation is
recognised as a key component
of effective risk management at
Hiscox Ltd Report and Accounts 2022
45
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Risk management
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Hiscox. During the year, the Group
risk team developed processes
to more systematically assess
risk culture across the Group
considering aspects such as tone
from the top, risk transparency,
the organisation’s use of lessons
learned and its ability to identify
and respond to uncertainty. As
part of this work, an 18-month plan
has also been developed to further
enhance the organisation’s risk
culture which will continue to be
monitored through the processes
developed during the year. These
processes now include a risk culture
survey for all staff to be completed
as part of annual risk management
training which has been rolled out;
s there has been a strong focus
during the year on performing
targeted risk reviews at both Group
and legal entity level (including those
driven by regulatory developments).
Particular emphasis has been
placed on performing reviews to
assess the risks for the organisation
associated with inflation given the
current macroeconomic conditions
being observed.
The Risk Committee also supports the
Board in its review of the effectiveness
of the Group’s risk management and
internal control systems as part of its
annual declaration of compliance with
the Bermuda Monetary Authority’s
Group Supervision Rules and via the
annual Group-wide risk and control
self-assessment and associated
second-line review.
The Board, through the Risk Committee,
has conducted a robust assessment of
the emerging and key risks facing the
Company, including those that would
threaten its business model, future
performance, solvency or liquidity, and
is satisfied that no material changes to
the key 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
and the Risk Committee of the Board.
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
46
Hiscox Ltd Report and Accounts 2022
Casualty extreme loss scenarios
As our casualty businesses continue to grow, we develop extreme loss scenarios
to better understand and manage the associated risks. Losses in the region
of $75-$825 million could be suffered in the following extreme scenarios:
Event
Estimated loss
Multi-year loss
ratio deterioration
5% deterioration on three years’
casualty premiums
Economic
collapse
An event more extreme than witnessed
since World War II*
Casualty reserve
deterioration
Estimated 1:200 view of a casualty
reserve deterioration on current
reserves of c.$2bn
Pandemic
Cyber
Marine
scenarios
Offshore
platform
Terrorism
Global pandemic considering broader
and alternative impacts than Covid-19
A 1:200 cyber event, such as a
major Cloud outage or mass
ransomware attack. Includes
‘silent cyber’ exposures**
Range of events covering collision
and sinking of vessels and any
resultant pollution
Total loss to a major offshore
platform complex
$235m
$375m
$825m
$100m
$350m
up to $75m
up to $100m
Aircraft strike terror attack in a major city
up to $350m
Property
catastrophe†
1-in-200 year catastrophe event from
$280bn US windstorm
$500m
*Losses spread over multiple years.
**‘Silent cyber’ refers to losses incurred from non-cyber product lines from a cyber event.
†As a point of comparison.
monitoring how the business goes about
meeting regulatory expectations around
enterprise risk management.
2022 has seen a continued focus on
improving the efficiency of the risk
management framework, mainly through
the streamlining and automation of
repeatable cycles. This creates further
capacity for risk reviews and deep-dives
and for more support to be available
to change programmes across the
Group, as well as ensuring appropriate
support and challenge is provided to
the first line of defence in assessing,
understanding and responding to risks
associated with the current geopolitical
and economic environment.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Risk management
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
More information on our approach to
risk management can be found at
hiscoxgroup.com/about-hiscox/
risk-management.
8
Read more about our key risks.
Property extreme loss scenarios
Boxplot and whisker diagram of modelled Hiscox Ltd net loss ($m) January 2023.
Stress tests and reverse stress tests are regularly performed and reported on to the Risk Committee of the Board. These include
climate-related scenarios such as those shown in the chart below.
800
700
600
500
400
300
200
100
0
Upper 95%/lower 5%
Modelled mean loss
Hiscox Ltd loss ($m)
800
700
600
500
400
300
200
100
0
Industry loss return
period and peril
s
s
o
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e
k
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7
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9
1
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o
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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
04
07
02
36
05
07
14
08
70
12
13
22
24 127
21
19
30
48 193
34
28
39
86 277
This chart shows a modelled range of net loss the Group might expect from any one catastrophe event.
The white on the red 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 2022
47
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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.
Brokers
The risks we write through brokers
account for around 85% of our business,
so we look to build strong and lasting
relationships with those that share
our values.
Regular investor dialogue
We maintain regular dialogue with capital
markets stakeholders, predominantly via
our Group Chief Executive Officer, Group
Chief Financial Officer and Director
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 2022, the
Company conducted around 370
meetings and met with around 150
investors, representing approximately
76% 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 2022 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 18
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.
48
Hiscox Ltd Report and Accounts 2022
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, including through qualitative
broker interviews, 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 2022, this included cyber
security trends and mitigation strategies,
the insurance implications of self-driving
cars, the importance of passion in
building a small business and the
latest online art buying trends.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
Stakeholder
engagement
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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.
Suppliers
Our suppliers are an important extension
of our in-house expertise, which is
why we aim to work with like-minded
businesses that share our purpose.
Customer satisfaction
We talk to thousands of customers each
year, through both quantitative surveys
and 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.
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 current focus
in the UK is reviewing our marketing and
communications in line with the FCA’s
new Consumer Duty regulations, where
we will also take into account customer
insights and feedback.
Customer-focused products and tools
We use a combination of customer
insight and claims experience to develop
not only our risk transfer products,
but also risk mitigation tools. These
include our cyber exposure calculator
and the Hiscox CyberClear Academy,
a NCSC-approved cyber training
programme for customers.
Regular dialogue
Our Chief Compliance Officer and
compliance teams worldwide lead
our relationships with our regulators
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 Bermuda Monetary Authority as
our Group supervisor, which gives an
important annual opportunity for us to
present a consistent message to all of our
regulators on issues of common interest,
and in 2022 was attended by members
of the Group’s senior management team,
including all of the Executive Directors.
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 (ABIR) and the
Association of British Insurers (ABI).
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 2022, this included participation in
the Prudential Regulation Authority’s
market-wide General Insurance Stress
Test (GIST) in the UK.
Regulatory reporting
The Group and its subsidiaries met all
material regulatory reporting obligations
for 2022.
Robust procurement processes
We want to work with businesses
that align with our values and support
our goals, and we reflect this in our
robust procurement processes. These
processes ensure we assess suppliers
against a wide range of criteria,
encompassing financial stability, culture
and ethics, as well as innovation and
development. For larger contracts,
these processes also include a degree
of Executive Director involvement
or oversight.
Supplier code of conduct
We expect our suppliers to adhere to
high standards in areas such as risk
management and compliance, in line
with our regulatory requirements,
and when it comes to environmental,
social and governance issues, such as
diversity, equity and inclusion (DEI) and
environmental practices.
Active dialogue
We maintain active dialogue with our
suppliers to ensure our expectations,
ambitions and ways of working remain
aligned. This dialogue is often driven
by the relationship managers for each
contract and supported or facilitated
by our Group procurement experts,
and for larger contracts will include
senior management or Executive
Director involvement.
Hiscox Ltd Report and Accounts 2022
49
Q&
A:
with Stéphane Flaquet
Group Chief Operations and Technology Officer
Tech savvy
The future of technology at Hiscox will see
a growing focus on business outcomes,
a convergence of approaches between
retail and big-ticket and a change of
mindset around the management of data. >
50
Hiscox Ltd Report and Accounts 2022
Hiscox Ltd Report and Accounts 2022
51
After building a career in operations
and change leadership, Stéphane
Flaquet joined Hiscox in 2010 as Chief
Operating Officer for Europe, before
moving to London in 2012 to head
up the Group technology function.
After time as Managing Director for
Hiscox Europe, Chief Transformation
Officer for the Group and Interim CEO
of Hiscox UK, he took on the newly
created role of Group Chief Operations
and Technology Officer during 2022.
Q&
A:
with Stéphane Flaquet
Group Chief Operations and
Technology Officer
Q: How has the role and profile of
technology at Hiscox changed in
recent years?
A: It’s been a massive change. Key to
this is that the technology function has
emerged as a core function across all
business areas. Technology can be a
source of competitive advantage, but
for that to happen you need to have
close proximity between the technology
team and the rest of the business.
If you’ve got the IT leader in the room
for most of the conversation, they’ll be
able to do a better job of enabling the
business. We now have technology
leaders sitting within all our business unit
leadership teams, which is a big change.
You can see it in the way our business
unit CEOs now talk about IT in their
communications, in their operating
plans. It’s no longer acceptable for a
leader to say: “I don’t understand tech”.
A decent understanding of technology
is as important as people leadership,
business economics, financial
management, and so on. Our leaders
are willing to learn because they realise
the potential of technology to transform
their business in so many ways.
52
Hiscox Ltd Report and Accounts 2022
Q: How do you ensure you’re delivering
effective technology change?
A: In IT, delivery times can be quite
long, so you need to plan ahead. But as
we know, the pace of innovation in tech
is increasing and the pace of adoption
is increasing even faster, so you also
need to be able to iterate super quickly.
Getting the balance between the two
is really tricky. If you’re too short term,
you’re always on the back foot, trying to
respond to business demands. If you’re
too long term, by the time you deliver
something, you’re delivering what the
business needed three years ago. We
need to be having different conversations
and using different delivery mechanisms.
There is business transformation that
requires multi-year planning, but there is
other change delivery that can be done
in two-week iterations. And this is not
a tech conversation, this is an overall
business agility ambition.
What those two levels of delivery have
in common is the need to always have in
mind what the business outcome is that
you want to get to. In IT, it’s so easy to
get caught in the buzz. But the role of IT
leaders is not just finding the next cool
piece of kit and spending a lot of Hiscox’s
money on it. It’s about using tech in a way
that makes our business better – that is
the really cool thing. That’s where the
proximity between the technology team
and the rest of the organisation is so key.
IT is a means to an end. It’s not a goal in
itself. So focusing on tangible business
outcomes is critical. That has been front
of mind as we successfully re-platformed
our retail businesses in the UK, the USA
and now Europe.
Q: Is there a difference in your
approach between retail and
big-ticket business?
A: Historically, technology was more
important in retail than in big-ticket –
high-volume, low-margin business is
where tech traditionally had a key role to
play. But what we’ve seen over the past
few years is a convergence in the use of
technology between retail and big-ticket.
For example, one of the great successes
is how the London Market is now
distributing some of its products directly
to the local producers using the kind of
application programming interface (API)
and pricing capability you would expect
in retail. Historically, in big-ticket it’s all
about technical excellence, pricing,
analytics, modelling, and you now see
a lot more of that going into the retail
space. I think we’re seeing a real meeting
in the middle where these previously very
different business types are using the
same core capabilities. Having a strong
enterprise architecture function that is
able to connect the dots, drive re-use
and economies of scale is even more
critical in that context of convergence.
Q: What is your vision for how the
use of data should change in the
coming years?
A: Insurance has always been about
What we’ve seen over the past few
years is a convergence in the use
of technology between retail and
big-ticket. For example, one of the
great successes is how the London
Market is now distributing some
of its products directly to the local
producers using the kind of API and
pricing capability you would expect
in retail.”
IT is a means to an end. It’s not a
goal in itself, so focusing on tangible
business outcome is critical. That has
been front of mind as we successfully
re-platformed our retail businesses in
the UK, the USA and now Europe.”
data and will always be about data,
but technology transformation can
dramatically impact the way we use it
and the value we get from it. We currently
have lots of pockets of good practice
all across the organisation, so now
we’re focusing on connecting the dots
between them. So rather than looking
at underwriting data, or claims data, or
marketing data, or brand awareness
data, we want a 360° view of all those
different components. That is only going
to be achieved if we start treating data as
a product, rather than as a by-product of
any particular activity. We need people to
own that product, take responsibility for
its integrity and accuracy and then make
it available to other data owners. That’s a
completely different mindset and is one
of the capabilities that we are building.
Q: How do you see technology in the
workplace evolving?
A: It’s obvious to say, but our
relationship to technology, both personal
and professional, has fundamentally
changed in the last few years. I think
one of the few good things about
the pandemic is how the adoption of
technology has accelerated. During
2022 we moved into our new office here
in London, and now I enter the building
using my phone, book a desk using an
app, order lunch using an app. We don’t
have phones on our desk, I hardly have
papers anymore, I just carry my laptop
and my iPhone and this is my life and I
can do everything that I want with this.
But I still think there is more we can do.
We need to recreate the same simplicity
and convenience for our people that
we all have in our personal life, and
we need to offer our customers the
same seamless experience. This
is a never-ending journey because
our expectations as customers are
constantly rising, and rightfully so.
Q: Beyond your technology brief,
what are your other priorities?
A: One major priority is to strengthen
our operational capabilities in retail.
Retail is the fastest growing part of our
organisation, and to support that growth
we’re focused on making sure we have
all the right capabilities in place, dialled
up to the appropriate level: from the
voice of the customer, to management
information, strategy leadership,
automation, process management,
technology enablement, all of that. We
also currently have very distinct retail
businesses, and they’re all operating
slightly differently, so an element of
operating model convergence is needed
and I think technology can play a really
exciting role in that.
Q: Outside of work, what gives
you energy?
A: Now that my kids have mostly left the
nest, the best thing that happened to
me over the last three years is that I got
a dog for the first time, a chocolate
Labrador called Mosey. He has changed
my life completely. I can’t believe that I’ve
lived for almost 47 years of my life without
a dog. What a waste!
Hiscox Ltd Report and Accounts 2022
53
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Environmental, social and governance (ESG)
We will continue to build on this progress
during 2023, through a combination
of one-off programmes of work and
ongoing engagement on key issues.
This will include:
s publishing a low-carbon
transition plan in line with UK
regulatory requirements;
s further defining the Group’s ESG
risks and opportunities through
ESG materiality mapping;
s continued industry collaboration
on issues including the measuring
of underwritten emissions.
Our approach to environmental,
social and governance standards
(ESG) is shaped by a clearly stated
ambition: to be here for the long
term, for our customers, colleagues
and communities, operating in a
sustainable way for the future.
We take our role in the world seriously
and want to play a responsible part in
society, but we are pragmatic about
what that looks like. The language of
ESG is rapidly evolving, but the issues
it encompasses are not new, and in
many cases our responses to them are
already embedded in our business. For
example, having a deep understanding
of climate change through catastrophe
modelling and research is a fundamental
part of our business and an area
where we want to be market leading.
In other areas, progress comes through
regulation or public interest, but we also
see future opportunities to innovate and
serve our customers.
To achieve our ambition, we focus
on making positive and persistent
improvements to our approach across
ESG. For example, during 2022, we
established an ESG data provider within
our London Market business, which over
time will support underwriting decisions in
big-ticket lines and help us factor ESG into
our future exposures. We also saw a 28%
decrease in our operational greenhouse
gas (GHG) emissions in 2022 against
our 2020 baseline year, and realised the
fifth year of incremental improvement in
closing our UK gender pay gap, which is
now at 16.0% on a mean basis.
Our progress over the past year was
reflected in our MSCI ESG rating, which
was upgraded from A to AA, and in
our CDP score, which improved from
a B- in 2021 to a B in 2022.
The challenges of ESG are
not easy to solve, which
is why I like the pragmatic
approach that Hiscox is
taking to address them.
That means operating
responsibly, but also
working with others to
drive meaningful progress.”
Jon Dye
Chief Executive Officer, Hiscox UK
and Sustainability Steering
Committee member
54
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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
r
i v e
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m a n a g e m e n t
i g a t i o n
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t
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environmental
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e a
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t o m a
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m unity
i n t h e c o m
Being an insure r o u r
customers can re l y o n
Hiscox Ltd Report and Accounts 2022
55
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Environmental
We carefully manage our environmental
impact and work with our customers,
suppliers and business partners to
respond to the changing climate.
This includes finding ways to limit our
own consumption of materials such
as energy and water and reducing
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
Our ESG exclusions policy officially came
into force at the start of 2022 and is an
important pillar of our environmental
ambitions. This policy 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 ANWR
region; oil sands; and controversial
weapons such as landmines.
Since then we’ve made solid progress
across underwriting, reinsurance
and investments:
s in big-ticket underwriting, we now
monitor all risks according to their
ESG profile and continue to decline
and non-renew risks in line with
our exclusions policy. Through
this same tracking, we are able to
monitor the positive risks we are
supporting such as wind and solar
energy, and electric vehicles;
s in reinsurance, we have exited
from all business where 30% or
more of subject premium derived
from restricted areas, and we
continue to monitor our portfolio
56
Hiscox Ltd Report and Accounts 2022
composition against our ESG
focus areas, capturing programs
declined for ESG reasons in regular
internal reporting;
s in investments, we have shared the
policy with our fund managers, to
ensure it is considered in relation
to pooled funds, and we have
eliminated our investment exposure
within all directly-held bonds that
fall outside of appetite. In addition,
we have now fully embedded ESG
into our investment processes:
net-zero wording is now in all
core bond investment manager
mandates; we have enhanced the
ESG credentials of our emerging
market bond portfolio; and
an investments-focused ESG
dashboard is now a regular feature
of Investment Committee reporting.
Our sustainable assets including
green/ESG bonds are now over
$300 million, with over 5% of
our bond portfolio in green or
ESG-labelled bonds.
GHG reduction targets
Central to our efforts to manage our
environmental impact is an ambitious
set of targets for the reduction of GHG
emissions. We announced our new
Group-wide GHG targets with our 2021
full-year results, and during 2022 we have
focused on embedding them. These
targets, which were developed using SBTi
methodologies and designed to align
with a 1.5°C net-zero world by 2050, are:
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 full-time
equivalent (FTE) by 2030, against a
2020-adjusted baseline*;
s transition 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 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.
In 2022, we took some important first
steps in response to these targets:
s we completed a half-year footprint
in order to provide a mid-point
for assessing emissions and
further enhance our data
collection processes;
s we conducted a deep-dive on
renewable electricity usage across
the Group, and identified key sites
to focus on for continued adoption
of renewable electricity in support
of our Scope 1 and 2 target;
s we made good progress towards
the first of our interim targets
for transitioning our investment
portfolio, with approximately 20%
of our corporate bond portfolio
having net-zero/Paris-aligned
targets as at year-end.
We will build on this further with the
development of a low-carbon transition
plan for the Group, in line with UK
regulatory requirements.
* Baseline year adjusted in light of Covid-19-related
lockdown measures,to reflect a more normal year
in terms of business travel etc.
† Operational Scope 3 emissions predominantly
consist of purchased goods and services and
capital goods, and business travel (air, rail and
car travel).
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Water and waste
GHG emissions*
Water usage
Waste generated
2022
10
49
2021
20
34
Year-on-year
change
-50%
44%
Scope
Scope 1
Scope 2 (market-based)
Total Scope 1 and 2
Scope 3 (operational)
Scope 3 (operational) per FTE
Total operational footprint
Scope 3 (non-operational)
Investments
2022
(tCO2e)
786
927
1,713
19,298
5.83
21,011
9,862
127,497
2021
(tCO2e)
678
866
1,544
17,116
5.80
18,660
8,458
125,156
2020
(tCO2e)
615
1,111
1,726
27,461
8.91
29,187
7,046
135,275
2022 vs. 2020
baseline
28%
-17%
-0.8%
-30%
-35%
-28%
40%
-6%
Our Scope 1-3 emissions excluding investments are independently verified to a reasonable
assurance level, with investment emissions verified to a limited assurance level. A copy of
the verification statement can be found at hiscoxgroup.com/responsibility/environment.
Total GHG emissions inventory
We continue to focus on managing and
minimising our carbon footprint as a
Group. While we saw a 28% decrease in
our operational GHG emissions in 2022
against our 2020 baseline year, our total
operational footprint increased by 13%
in 2022 when compared to 2021.
While some of this increase relates to
emissions arising from one-off capital
goods spend – such as those generated
as a result of our London office move
– there are other areas where we have
seen an increase in emissions due
to continued improvements in data
accuracy as we continue to enhance
our data collection processes.
We also saw an increase in upstream
transport and distribution emissions, as
we have this year started to account for
transport emissions related to purchased
goods and services and capital goods as
part of our Scope 3 footprint.
Business travel emissions this year
also reflect the expected rebound
in travel-related emissions that we
reported last year, as work patterns
continue to normalise.
Environmentally-focused commitments
ClimateWise
Paris Agreement 2015
Principles for Responsible Investment
(PRI)
Principles for Sustainable Insurance (PSI)
Sustainable Markets Initiative
Task Force on Climate-related Financial
Disclosures (TCFD)
* 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.
An assessment across all categories of Scope 3
emissions has taken place and the material
categories are disclosed as part of our full GHG
inventory (above). Note some emissions totals
may not tally due to rounding.
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.
A copy of our Streamlined Energy and Carbon
Reporting (SECR) GHG emissions table can be
found on page 63.
† 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 2022
57
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Charitable giving and volunteering
Hiscox Foundation
Hiscox Gives
Social
In everything we do, 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.
Being a customer-centric business
Being an insurer our customers can rely
on is part of our reason for being, and
we continue to focus on providing
easy-to-understand products that suit
specific customer requirements. For
example, in Hiscox London Market
we enhanced our malicious attack
offering with resilience training during
the year; in Hiscox ILS we launched
a special opportunities portfolio in
response to market dynamics; and
in the UK we are adapting to the FCA’s
new customer-focused Consumer
Duty regulations.
Our approach is to consider not just the
transfer of risk through insurance, but
also how we can help our customers
mitigate the risks they face. In cyber,
we do this through the training and
education we offer as part of the Hiscox
Risk Academy, and in home insurance
we do it through our partnership with
LeakBot, an early leak detection system
that we’ve provided to over 8,000
Hiscox UK insured homes to date.
You can read more about our approach
to risk transfer and risk mitigation on
pages 18 to 19.
During the year we also reflected on the
impact on our customers of the rising
cost of living, leading to enhanced
vulnerable customer training in the UK
and the development of a cost of living
dashboard through which to regularly
monitor changing customer behaviours.
58
Hiscox Ltd Report and Accounts 2022
The work we do with customers is
recognised in our strong customer
satisfaction scores for the year (see
page 5).
Supporting our communities
Supporting the communities in which
we work has been part of our DNA for
decades, and our charitable foundation,
the Hiscox Foundation, dates back to
1987. We focus our charitable giving
around three strategic pillars:
s social mobility and entrepreneurship;
s protecting and preserving
the environment;
s causes our people are
passionate about.
During 2022, we donated over
$1.8 million to good causes and
our people spent over 1,400 hours
volunteering. This included targeted
donations that recognise specific events
such as the Russia/Ukraine conflict and
the floods in Pakistan. During the year,
in recognition of the rising cost of living
and the increasing costs that charities
are facing, we increased our donations
to our UK multi-year partners in line with
inflation for the 2022/23 financial year.
Being a great place to work
Building an engaged and inclusive
workforce was a strategic priority for us in
2022. We made great strides in reviewing
our employee proposition and introduced
new rewards for colleagues including our
share ownership scheme, HSX:26. We also
introduced ‘Hiscox days’ – an additional
two days for employees to do whatever
matters most to them. A new sabbatical
policy came into force, which provides
four weeks’ paid leave for every five years
of service. These changes were the result
of a renewed focus on listening to what
employees want, and most importantly
responding to it. The impact is reflected
in our 2022 employee engagement results
– our best in ten years (see page 3).
We also continue to progress our diversity,
equity and inclusion (DEI) efforts, as we
strive to build teams that are as diverse
as the customers we serve. We currently
have 18 employee network chapters,
including a new ‘global abilities’ network
focused on disabilities and neurodiversity,
which we introduced during 2022. More
information on our approach to DEI can
be found on page 95 to 97.
We have been an accredited Living Wage
employer in the UK since 2019, but in 2022
we recognised the additional challenges
of high inflation levels and an increased
cost of living on our people. As a result,
we made one-off cost of living lump sum
payments of £1,500/$1,500/€1,500 to the
lowest-earning portion of our workforce
– benefitting 38% of our people.
Governance
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.
More information on our governance
practices – including as they relate to
ESG and climate-related issues – can
be found in the risk management, TCFD
and corporate governance sections of
this report.
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Environmental, social
and governance (ESG)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Social commitments and partnerships
Black Insurance Industry Collective (BIIC) SEO London
Insuring Women’s Futures
UK Living Wage employer
Gender/sex diversity at 31 December 2022
Men
Women
Not specified/prefer not to say
Ethnic diversity at 31 December 2022
White British or other white (including minority-white groups)
Mixed/multiple ethnic groups
Asian/Asian British
Black/African/Caribbean/black British
Other ethnic group, including Arab
Not specified/prefer not to say
Number
of Board
members
Percentage
of the Board
7
4
–
64%
36%
–
Number
of senior
positions on
the Board
(CEO, CFO,
SID and Chair)
Number in
Executive
Management*
Percentage
of Executive
Management*
Percentage
of Executive
Management
and direct
reports†
Percentage
of all
employees
4
–
–
7
5
–
58%
42%
–
53%
47%
–
49%
50%
<1%
Number
of Board
members
Percentage
of the Board
Number
of senior
positions on
the Board
(CEO, CFO,
SID and Chair)
Number in
Executive
Management*
Percentage
of Executive
Management*
Percentage
of Executive
Management
and direct
reports†
Percentage
of all
employees
10
–
1
–
–
–
91%
–
9%
–
–
–
3
–
1
–
–
–
9
–
2
–
–
–
82%
–
18%
–
–
–
83%
1%
4%
6%
–
6%
74%
2%
9%
7%
3%
4%
* For the purposes of the UK Listing Rules, Executive Management includes the Group Executive Committee (the most senior executive body below the Board)
and the Company Secretary, excluding administrative and support staff.
† For the purposes of the UK Corporate Governance Code, senior management (which for consistency we refer to as Executive Management in the tables above)
includes the Group Executive Committee and the Company Secretary and their direct reports, excluding administrative and support staff.
Our approach to gender/sex and ethnicity data collection and reporting is consistently applied in the countries where we collect
this data, according to local law and custom. We use the Group’s online HR management system, Workday, to collect and
securely store this data.
In all countries, employees can choose to self-report their gender/sex or specify that they ‘prefer not to disclose’.
In the countries where we collect ethnicity data (currently UK, Bermuda, USA and Guernsey), employees can choose to
self-report their ethnicity, specify that they ‘prefer not to disclose’, or not provide an answer at all (leave blank).
The self-reported ethnicity options provided in each country are aligned to the options provided in that country’s government
census, and have been collated corresponding to the UK Listing Rules’ prescribed categories. Any ethnicities reflected in a country’s
census that do not align with one of the prescribed categories in the table were included in the ‘other ethnic group’ row data.
The data reported here includes the self-reported data provided by our employees in the countries where we collect the
data. For any data categories where an employee has not provided a response, these employees are counted in the
‘not specified/prefer not to say’ row. We do this so that, to the best of our abilities, all employees in the countries where we
collect the data are accounted for.
The data does not include employees in countries where we do not collect the data.
Note: some totals may not tally due to rounding.
Hiscox Ltd Report and Accounts 2022
59
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Task Force on Climate-related Financial Disclosures (TCFD)
Reporting against the Financial Stability
Board’s Task Force on Climate-related
Financial Disclosures (TCFD) is a
requirement of the Financial Conduct
Authority (FCA) for all premium-listed
firms on a ‘comply or explain’ basis.
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,
including from a governance, risk
management, operations, underwriting,
investment, and marketing perspective.
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/2022climatereport.
Governance
Structure and oversight
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 (including
climate-related risks and opportunities)
across the Group. This spans from an
operational level up to the Sustainability
Steering Committee, the Risk Committee
of the Board, and the Board itself –
see page 64 for an overview of
structure, membership, roles and
responsibilities and frequency of
meetings, including management’s
role in assessing and managing
climate-related risks and opportunities.
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. During 2022, this included:
60
Hiscox Ltd Report and Accounts 2022
s discussion and approval at the
Sustainability Steering Committee
of the 2022/23 ambitions outlined in
our 2022 climate report;
s annual review of the ESG exclusions
policy and the responsible
investment policy, coordinated by
the ESG working group (and, in the
case of the responsible investment
policy, the Group Investment team)
and approved by the Sustainability
Steering Committee;
s meetings with catastrophe
model vendors to discuss latest
modelling developments, led by
our catastrophe modelling team,
which contribute to the work of
the Natural Catastrophe Exposure
Management Group (see page 64);
s deep-dive session with the Board
on how we account for the effects
of climate change in our modelling.
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). The climate action plans
we have developed as part of SMCR are
considered not only through the relevant
management meetings and subsidiary
boards but also at the Sustainability
Steering Committee to ensure appropriate
inputs and oversight and drive progress.
Training and building expertise
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 2022,
this included an externally facilitated
climate training session, available
to all Board Directors, to explore the
requirements and competencies of
a climate-informed board alongside
horizon scanning of future expectations
and regulatory requirements. This is now
an annual feature in the Board calendar
so we will continue to build expertise at
our most senior level in 2023.
Other opportunities to further build
in-house expertise are also considered
on a team-by-team, function-by-function
basis. For example, senior members
of our in-house investment team have
upskilled in ESG and climate matters by
gaining accreditation in the form of the
CFA Certificate in ESG Investing, and by
attending a course led by The University
of Oxford’s Sustainable Finance Group.
We will consider further ESG or
climate-specific training in 2023
as appropriate.
Policies and processes
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, more information on which
can be found on page 56. 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. The policy is reviewed
annually and its 2022 review
resulted in no changes;
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
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
46
64
Find out more about our modelling
of extreme natural catastrophe
loss scenarios.
Find out more about our governance
structure for climate-related matters.
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. The policy is reviewed
annually and its 2022 review resulted
in some small adjustments to
reflect progress, such as becoming
a Principles for Responsible
Investment (PRI) signatory;
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
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
Chief Operations and Technology
Officer and reviewed periodically,
its effective implementation relies
on Group-wide adherence to the
environmental principles we wish to
live by. During 2022, it was updated
to reflect the Group’s new net-zero
aligned GHG targets;
s the Hiscox Group supplier code
of conduct, which outlines how
our corporate values and
commitments to doing business
in a socially responsible way
extends to our relationships with
suppliers and any subcontractors
they may use. It covers areas
including our commitment to
fairness in the supplier selection
process; 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,
human rights and labour practices,
the environment, diversity and
inclusion, and anti-bribery and
corruption. It is owned by our
Group procurement team,
shared with suppliers during
the procurement process and
published on hiscoxgroup.com.
The supplier code of conduct
superseded the ethical guide to
suppliers during 2022.
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 pages 46 to 47), both through our
own established internal programme
of stress testing and scenario analysis
and also as participants in market-wide
activities such as the Bank of England’s
Climate Biennial Exploratory Scenario
(CBES) in 2021 and the PRA’s General
Insurance Stress test (GIST) in 2022.
Examples of the outputs of our internal
work include the property extreme loss
scenarios detailed on page 46, which
show the potential financial impact to
the Group of events including Japanese
earthquake, Japanese windstorm,
European windstorm, US earthquake
and US windstorm. Our risk management
practices also include the work of our
exposure management groups, which
is outlined on pages 63 to 65.
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 independent peer comparison
such as CDP, ClimateWise, Dow
Jones Sustainability Index, MSCI and
Sustainalytics. An overview of our
2022 performance resulting from these
disclosures can be found on page 65.
These scores are used to inform areas
of improvement for the year ahead,
alongside our own ESG plans, with the
resulting action plans agreed by the
Sustainability Steering Committee.
Strategy
Annual business planning
ESG and specifically climate issues
form part of the Board-approved Group
business plan for the year ahead. This
plan outlines the performance of key
business areas during the prior year,
and the strategic priorities for the
year ahead. Areas covered include
underwriting, investments, risk, IT,
finance and marketing, as well as
sustainability, and the plan is used by
senior management to guide the Group’s
annual business strategy and financial
planning where appropriate.
The 2022 Group business plan included
an overview of key climate-related areas
of focus for the year ahead such as:
s an annual review of the Group
ESG exclusions policy and the
responsible investment policy, both
of which were completed during
2022, with any recommended
changes to the policies approved
through the appropriate
governance channels;
s the development of a broader
suite of climate risk metrics and
transition pathway-aligned targets
for the investment portfolio, which
Hiscox Ltd Report and Accounts 2022
61
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
57
More information on our approach
to ESG and, in particular,
climate can be found at
hiscoxgroup.com/responsibility.
Find out more about our full GHG
inventory, including emissions arising
from our investment portfolio.
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.
This table shows Group GHG emissions in line with
SECR requirements, which differ from our full GHG
inventory on page 57. In our full GHG inventory
you will find information on emissions arising from
investments, business travel and other elements
not required under SECR.
has been considered during 2022
as part of the creation of an ESG
dashboard for investments, and
shared with all relevant working
groups and committees, up to
and including the Investment
Committee of the Board;
s enhancements to existing
processes for measuring
and monitoring the Group’s
carbon emissions, which were
addressed during 2022 through
the introduction of a half-year
footprinting process to provide
mid-year oversight of the data and
which further improved data quality.
These outputs are included as part of
the 2022 performance review within
the 2023 Group business plan, with
new strategic deliverables (including
climate-related deliverables) set for the
year ahead.
Climate-related risks and opportunities
We consider climate change to be a
cross-cutting 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 that we are
exposed to through our underwriting,
but 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 climate litigation
risk, where one party may seek to
62
Hiscox Ltd Report and Accounts 2022
Near-term climate risks and opportunities
(0-5 years)
Medium- to long-term climate risks and
opportunities (5+ years, up to 2050)
More frequent and more intense natural
catastrophes arising from climate change,
such as floods and storms, could result
in changes to current claims patterns.
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 46.
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 GHG emission
reduction targets. For more information,
see page 56.
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 lines of business where we could see
increased opportunity over time, and in
some cases are already benefitting from
changing customer trends, for example
in 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.
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.
There is also the longer-term litigation
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.
While in the long term as a property
casualty insurer, Hiscox is certainly
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.
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Streamlined Energy and Carbon Reporting (SECR) GHG emissions
Activity
Scope 1 total
Natural gas
Company cars
Refrigerants
Scope 2 (market-based) total
Electricity (location-based)
Electricity (market-based)
District heating
Operational Scope 3 total
Total operational footprint (market-based)
Total Scope 1 and 2 – UK proportion (market-based)
2022
energy
(kWh)
2,439,188
1,048,235
5,311,279
5,311,279
307,720
2021
energy
(kWh)
2,342,644
377,056
5,603,303
5,603,303
108,999
2022
emissions
(tCO2e)
786
445
250
91
927
1,313
874
53
19,298
21,011
29%
2021
emissions
(tCO2e)
678
441
87
150
866
1,484
847
19
17,116
18,660
36%
Year-on-year
change in emissions
(tCO2e)
16%
1%
189%
-39%
7%
-12%
3%
182%
13%
13%
-20%
recover climate-change-related losses
from another who they believe may
have been responsible.
The governance and risk management
structures we have in place are critical
to the delivery of the annual Group
operating plan (outlined above) and
ensure a coordinated approach to
climate and other issues across the
Group. These structures are supported
by investments in technology – to ensure
the right modelling and data are available
to support our pricing and exposure –
and by in-house expertise – where we
combine off-the-shelf climate views with
our own claims expertise and insight
to form a unique view (what we call the
‘Hiscox view of risk’).
Therefore, we consider the potential
impact from climate-related issues over
short-, medium- and long-term time
horizons which are defined opposite
and which broadly align with business
planning timeframes.
In 2022, Hiscox Syndicate 33, Syndicate
3624 and Hiscox Insurance Company
(HIC) participated in the Bank of
England’s General Insurance Stress
Test Exercise (GIST). The objectives
of the GIST 2022 exercise were to
assess resilience to severe but plausible
natural catastrophe, as well as cyber
scenarios, to gather information about
firms’ modelling and risk management
capabilities and to enhance the PRA’s
and firms’ abilities to respond to future
shocks. While the exercise did not aim to
assess the financial impact specifically
from climate change, the climate-related
(atmospheric) scenarios it explored – US
hurricanes, European/UK windstorms
and UK flood – represented severe
but plausible realisations of current
climate conditions chosen to reflect
firms’ exposures and business models.
Industry-wide stress tests such as
the GIST support our established and
embedded programme of internal stress
testing and scenario analysis, and
contribute to their continued evolution.
In order to meet future disclosure
requirements in this area, we continue
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 includes planned activity
for 2023 to review our underwriting
portfolios against a range of global
warming scenarios, including a below
two degrees scenario, using both our
own and credible third-party data around
future target states for climate. We will
provide a further update on our progress
in this area in our 2023 Annual Report.
Risk management
Approach
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. 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.
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, 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.
Structure and oversight
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,
including those arising from the
management committees and working
groups that report up through the Risk
Committee, some of which are outlined
below, and from independent risk experts
for its understanding of the risks facing
both our business and the wider industry.
Group Underwriting Review (GUR)
The GUR is a Group management
committee focused on assessing progress
against the Group’s strategic underwriting
priorities, reviewing and challenging
the Group’s underwriting portfolio and
loss ratio performance, and approving
key underwriting risks. It also serves
as an escalation point for underwriting
governance and control issues.
The committee meets at least five
times a year, is chaired by the Group
Hiscox Ltd Report and Accounts 2022
63
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
ESG governance structure
How we manage and monitor ESG issues to ensure appropriate accountability and
oversight. This structure is supported by other established roles and teams that
contribute to our ESG story. These include our employee-led networks including our
green teams, our governance committees, and our Natural Catastrophe Exposure
Management Group. These areas are represented in elements of this structure.
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 Typically 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 Typically meets quarterly and embeds sustainability risks and opportunities.
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.
64
Hiscox Ltd Report and Accounts 2022
Chief Executive Officer, and attended
by other senior leaders including the
Group Chief Financial Officer, Group
Chief Underwriting Officer, Group
Chief Risk Officer – with experts invited
from actuarial, claims, underwriting risk
and reinsurance.
A number of working groups feed into
the GUR, including some with particular
climate relevance such as the Natural
Catastrophe Exposure Management
Group (see below) and the Casualty
Exposure Management Group, which
considers among other things risks
associated with climate litigation.
In focus: the Natural Catastrophe
Exposure Management Group
We review natural catastrophe risk at
least quarterly, through our Natural
Catastrophe Exposure Management
Group. This group 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 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.
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.
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
ESG disclosure
We recognise the importance of credible,
repeatable and comparable ESG
disclosure which is why we contribute to
a number of independent ESG standards.
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
2022: B grade
2021: B- grade
2022: AA grade
2021: A grade
2022: 83%
2021: 72%
2022: 28.7
2021: 27.1
2022: 45/100
2021: 40/100
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 flood hazard maps.
Group Risk and Capital
Committee (GRCC)
The GRCC is a Group management
committee focused on risk and capital
management. It covers all types and
categories of risk, including but not
limited to underwriting, reserving,
market, credit, operational and strategic
risk (see pages 8 to 11 for a summary of
our key risks), as well as risk aggregation,
concentration and dependencies.
The committee meets four times a
year, is chaired by the Group Chief
Executive Officer, and attended by
other senior leaders including the
Group Chief Financial Officer, Group
Chief Underwriting Officer, Group
Chief Risk Officer, and the Group
Head of Capital Management – with
other experts invited from across the
business as required.
A number of committees feed into
the GRCC, including some with
particular climate relevance such as
the Sustainability Steering Committee
and the Grey Swan Group (see below).
In focus: the Grey Swan Group
The focus of the Grey Swan Group is to
consider various enterprise emerging
risks identified from across the business
and to provide a forum for discussion
to ensure Hiscox has the relevant grey
swans identified and the right actions in
place to deal with them.
A number of elements feed into this
process including enterprise emerging risk
scanning; regulatory horizon scanning;
casualty exposure management;
strategic and business planning; claims
and actuarial reserving; and any other
relevant business unit or function inputs.
Rapidly evolving expectations on
company’s responses to ESG and
climate change is considered as part of
this group, in addition to other matters
unrelated to ESG or climate change.
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 Board-approved
GHG emission reduction targets, which
were 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 GHG targets commit us to:
s reduce our Scope 1 and Scope 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.
* Baseline year adjusted in light of Covid-19-related
lockdown measures,to reflect a more normal year
in terms of business travel etc.
† Operational Scope 3 emissions predominantly
consist of purchased goods and services and
capital goods, and business travel (air, rail and car
travel). More information on the Group’s operational
Scope 3 emissions can be found on page 57.
Interim GHG targets and progress
We recognise that achieving these targets
will take collective, consistent effort and
have started work towards achieving
them, as outlined below. This will continue
in 2023, when we will also publish our
low-carbon transition plan for the Group.
s In addressing our Scope 1 and
Scope 2 targets, we have this year
introduced a new half-year carbon
footprint process in order to further
enhance data transparency and
provide a new midpoint for internal
tracking and review. We have also
reviewed all electricity contracts
across the Group to further improve
our evidence base and oversight as
we migrate to renewable electricity
contracts wherever possible.
Where we have total control over
our utility providers, this is easier to
do, but where that control is shared,
or where it belongs to our landlords,
we will petition for change.
s On Scope 3, where emissions are
dominated by our investments,
as previously announced we have
set a number of interim targets:
that we will aim for more than
Hiscox Ltd Report and Accounts 2022
65
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
25% of our corporate bond
portfolio by invested value to have
net-zero/Paris-aligned targets by
2025, followed by an additional 25%
by AUM coverage every five years
as we aim to be on a linear path
to 100% portfolio coverage by
2040. We are currently making
good progress towards the
first of our interim targets, with
approximately 20% of our
corporate bond portfolio having
net-zero/Paris-aligned targets
as at year-end, and will continue
to engage with our managers on
further net-zero plans and action.
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 65) 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.
Progress against these targets will be
driven by our ESG working group and
overseen by our Sustainability Steering
Committee. 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.
More information on our 2022 carbon
emissions can be found on page 57.
Metrics and targets beyond GHG
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.
66
Hiscox Ltd Report and Accounts 2022
TCFD disclosure mapping
compliance statement
Disclosures have been made against the TCFD recommendations, taking into account the TCFD supporting guidance, and in
consideration of the FCA listing rules. 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.
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 impact of climate-related risks and
Focus on developing
CDP climate questionnaire 2022.
Describe the organisation’s governance around
Disclosed.
climate-related risks and opportunities.
Describe management’s role in assessing and
Disclosed.
managing climate-related risks and opportunities.
Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium, and long term.
Disclosed.
opportunities on the organisation’s businesses,
low-carbon transition plan
strategy, and financial planning.
to enhance disclosure.
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
Focus on identifying risks
and opportunities to
progress towards disclosure.
or lower scenario.
Describe the organisation’s processes for
Disclosed.
identifying and assessing climate-related risks.
Describe the organisation’s processes for
Disclosed.
managing climate-related risks.
2022 climate report* pages 9 to 12.
CDP climate questionnaire 2022.
2022 climate report* pages 15 to 16.
CDP climate questionnaire 2022.
2022 climate report* pages 24 and 28.
CDP climate questionnaire 2022.
2022 climate report* page 13.
More information on steps being
taken towards meeting this disclosure
requirement can be found on page 63.
2022 climate report* pages 15 to 16
and 27 to 32.
CDP climate questionnaire 2022.
2022 climate report* pages 15 to 16
and 27 to 32.
CDP climate questionnaire 2022.
Describe how processes for identifying, assessing,
Disclosed.
2022 climate report* pages 10 to 13
and managing climate-related risks are integrated
into the organisation’s overall risk management.
and 15 to 16.
CDP climate questionnaire 2022.
Disclose the metrics used by the organisation
Additional indicators to monitor
2022 climate report* pages 21 and 37.
to assess climate-related risks and
opportunities in line with its strategy
and risk management process.
and manage risk exposure,
CDP climate questionnaire 2022.
including TCFD’s cross-industry
See Hiscox Group website.
climate-related metrics, to be
considered over time.
Disclose Scope 1, Scope 2 and, if appropriate,
Disclosed.
Scope 3 GHG emissions and the related risks.
Describe the targets used by the organisation to
Disclosed.
manage climate-related risks and opportunities
and performance against targets.
2022 climate report* pages 36 to 37.
CDP climate questionnaire 2022.
See Hiscox Group website.
2022 climate report* pages 36 to 38.
CDP climate questionnaire 2022.
Chapter 1
Performance
and purpose
2
20
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Read more in our 2022 CDP disclosure
hiscoxgroup.com/cdpdisclosure2022.
Read more about our approach to
climate change in our 2022 climate
report*, available online at
hiscoxgroup.com/2022climatereport.
* Our 2022 climate report was published in
August 2022 and covers our climate-related
activities between July 2021 and July 2022.
Where we reference information from that report,
that information remains correct at 8 March 2023.
Disclosures have been made against the TCFD recommendations, taking into account the TCFD supporting guidance, and in
consideration of the FCA listing rules. 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
Describe the organisation’s governance around
climate-related risks and opportunities.
Status
Disclosed.
Describe management’s role in assessing and
managing climate-related risks and opportunities.
Disclosed.
Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium, and long term.
Disclosed.
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy, and financial planning.
Focus on developing
low-carbon transition plan
to enhance disclosure.
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario.
Focus on identifying risks
and opportunities to
progress towards disclosure.
Describe the organisation’s processes for
identifying and assessing climate-related risks.
Disclosed.
Describe the organisation’s processes for
managing climate-related risks.
Disclosed.
Describe how processes for identifying, assessing,
and managing climate-related risks are integrated
into the organisation’s overall risk management.
Disclosed.
Metrics and targets
Disclose the metrics and targets
used to assess and manage relevant
climate-related risks and opportunities
where such information is material.
Disclose the metrics used by the organisation
to assess climate-related risks and
opportunities in line with its strategy
and risk management process.
Additional indicators to monitor
and manage risk exposure,
including TCFD’s cross-industry
climate-related metrics, to be
considered over time.
Disclose Scope 1, Scope 2 and, if appropriate,
Scope 3 GHG emissions and the related risks.
Disclosed.
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Disclosed.
Reference
2022 climate report* pages 9 to 12.
CDP climate questionnaire 2022.
2022 climate report* pages 15 to 16.
CDP climate questionnaire 2022.
2022 climate report* pages 24 and 28.
CDP climate questionnaire 2022.
CDP climate questionnaire 2022.
2022 climate report* page 13.
More information on steps being
taken towards meeting this disclosure
requirement can be found on page 63.
2022 climate report* pages 15 to 16
and 27 to 32.
CDP climate questionnaire 2022.
2022 climate report* pages 15 to 16
and 27 to 32.
CDP climate questionnaire 2022.
2022 climate report* pages 10 to 13
and 15 to 16.
CDP climate questionnaire 2022.
2022 climate report* pages 21 and 37.
CDP climate questionnaire 2022.
See Hiscox Group website.
2022 climate report* pages 36 to 37.
CDP climate questionnaire 2022.
See Hiscox Group website.
2022 climate report* pages 36 to 38.
CDP climate questionnaire 2022.
Hiscox Ltd Report and Accounts 2022
67
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.
Q&
A:
with Regine Fiddler
Chief Marketing Officer, Hiscox USA
Brand ambassador
Building an insurance brand is about
so much more than advertising and
digital marketing. It’s about showing
customers, partners and brokers that
you genuinely care. >
68
Hiscox Ltd Report and Accounts 2022
Hiscox Ltd Report and Accounts 2022
69
Regine Fiddler joined Hiscox in
November 2020, with a long track
record of building and growing
brands in the banking and fintech
sectors. Based in New York, she is
tasked with driving the next phase
of Hiscox USA’s brand-building
to support its laser focus on small
business insurance.
Q&
A:
with Regine Fiddler
Chief Marketing Officer, Hiscox USA
Q: What was it that initially drew
you to joining Hiscox?
A: For me, the key drivers were what
Hiscox stands for as an employer and
how I saw that exhibited through our
advertising to customers, brokers and
agents. What I thought was compelling
was that we capture the small business
audience in a way that other brands
typically don’t. It’s very authentic, it’s
very real. For a marketer, insurance may
not seem like the sexiest sector, but I
love industries where marketing isn’t just
about selling a pretty product. It’s about
a product that can make a real difference
in people’s lives. Also, insurance isn’t
something that’s easy to market, so it
challenges you a little more!
Q: What do you think are the key
elements to building a successful
insurance brand?
A: When I think about building a brand,
it’s not really about advertising. It’s not
about having a pretty logo. Instead,
it’s about every touchpoint that drives
an emotional benefit. Whether you’re a
customer, a partner or a broker, when
you pick up the phone and call us, or
70
Hiscox Ltd Report and Accounts 2022
when you go through our e-commerce
experience, do you get the emotional
benefit of knowing who we are and what
our value proposition is? Do you feel,
“Hey, these people really are experts,
and they’re so efficient and reliable”?
Do we make you feel like you’ve got a
partner who’s really got you covered?
Advertising and digital marketing are
important, but it’s the soft skills that
we exhibit in our interactions that
matter most. Especially in a commodity
business, customers don’t rave if you
only deliver what they expect. We need to
go beyond that. We need to show that we
genuinely care. Every interaction, every
communication, has to exhibit that.
Q: Hiscox USA has been going
through a strategic shift on the
broker side. Tell us about that.
A: For our broker channel, our strategy
is to home in on where we have the
right products, as well as the right
underwriting expertise to provide the
very best solutions. So we made
the decision that the sweet spot for
us is serving small businesses with
annual revenues of under $25 million,
though we’re also continuing to serve
businesses with up to $100 million in
revenue. Writing anything over that
wasn’t core to our expertise. As a result,
we’ve slimmed down our appetite
for products that were being sold to
companies over $100 million. Unlike a
lot of carriers, we remain truly focused
on small business. There is plenty of
opportunity in that space – we have over
30 million small businesses in the USA!
So many successful companies start out
with entrepreneurs that have one or two
employees. Give them what they need,
and they’ll stay with you as they grow.
That’s how we’ll win in this category.
Q: When you’re dealing with smaller,
more entrepreneurial businesses, what
are the buttons you’re trying to push?
A: One of the main problems for small
businesses in choosing insurance is they
think it’s complex and time-consuming,
and they don’t really understand it.
Their pain point is, “This is complicated,
I don’t even know why I need it”. What we
should be thinking is, how do we provide
the information they need in a way that’s
digestible? Through content marketing,
we want them to understand why it’s
important to have insurance, what it
covers, and what is most applicable to
them. It’s about educating the customer
and providing them with efficient
information to make the best decision
for their business. It’s about focusing on
their needs. How do we, as our slogan
says, ‘encourage courage’? How do
we help them pursue their dreams?
Q: What other forms of marketing
work well for you?
A: Obviously we have brand marketing
and we have acquisition marketing, but
within that I would say about 20-25%
of our marketing balance is focused
on grassroots marketing. We’ve been
For a marketer, insurance may not
seem like the sexiest sector, but I love
industries where marketing isn’t just
about selling a pretty product. It’s
about a product that can make a real
difference in people’s lives.”
When I think about building a brand,
it’s not really about advertising.
It’s not about having a pretty logo.
Instead, it’s about every touchpoint
that drives an emotional benefit.”
going to small business trade shows,
we’ve been building connections with
diverse small business segments like the
US Hispanic Chamber of Commerce.
That allows us to interact with business
owners, which is really important to
understanding what makes them tick.
This isn’t static, of course, and what
we’re seeing now is that they care
about much more than just the price of
insurance – they care about who’s really
standing up for them when they need
them the most. That means a lot to us
because we pride ourselves on being
customer focused and having that
strong customer relationship.
Q: How does marketing work across
Hiscox as a global organisation?
How connected are you with your
peers in other regions?
A: That’s a very timely question,
because we’re currently undergoing a
global brand refresh project with the
Group. We’ve always been committed to
our brand being represented consistently
across the countries in which we operate,
so this is about us coming together as
a global marketing organisation and
defining who we are right now and who
we want to be as the business grows.
We’re now testing a couple of concepts
with customers across different countries
so it’s a pretty exciting time.
Q: So, where do you see the biggest
opportunities for Hiscox USA?
A: I think it’s in our continued investment
in digital. And not just in partnerships,
but direct-to-consumer and in the retail
trade, because brokers are going to want
more tools and more technology to drive
efficiency across their channel. We’ve
seen some of that, but it’s not over yet.
I love where we stand in our digital
evolution. We know that we need to
be great on the digital side, but we
also know that our business is based
on relationships. A broker wants to be
sure that there’s an underwriter or a
relationship manager on the other end of
the phone when they need them. Right
now, most carriers are really good at the
relationship side, but they’re not really
developed on the digital side. Or you
have insurtechs who are really great at
digital, but miss the mark when it comes
to building those relationships in the retail
traded channel. We want to make sure
that whoever you are, we’ve provided
a path to meet your needs and that’s
something that makes Hiscox unique
in the US market.
Q: Outside of work, what gives
you energy?
A: My family, for sure. It’s a simple thing.
I have a 14-year-old son, and watching
him grow up, watching him embrace life
and be much braver than I ever was at
14 – that is my greatest source of energy
and happiness.
Hiscox Ltd Report and Accounts 2022
71
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Board of Directors
Non Executive Chairman
Robert Childs (Aged 71)
Appointed Chairman: February 2013
Appointed to the Board: September 2006
Executive Director
Aki Hussain (Aged 50)
Group Chief Executive Officer
Appointed to the Board: September 2016
Executive Director
Paul Cooper (Aged 50)
Group Chief Financial Officer
Appointed to the Board: May 2022
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.
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 Considerable experience of financial
and commercial management
within a complex regulatory and
compliance environment.
s Qualified Chartered Accountant, with
significant experience of both the retail
and Lloyd’s insurance markets.
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.
Paul joined Hiscox in 2022 as Group Chief
Financial Officer. With over 25 years of financial
services experience, Paul has held a number of
senior roles, including most recently Interim
Group Chief Financial Officer at M&G Plc
and Chief Financial Officer for The Prudential
Assurance Company. Paul is a qualified
Chartered Accountant, having trained with
PwC, and sits on the board of a number of
Hiscox subsidiary companies.
External board appointments
None.
External board appointments
Visa Europe Limited.
External board appointments
Association of British Insurers.
Executive Director
Joanne Musselle (Aged 52)
Group Chief Underwriting Officer
Appointed to the Board: March 2020
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 20 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.
72
Hiscox Ltd Report and Accounts 2022
Senior Independent Director
Colin Keogh (Aged 69)
Appointed to the Board: November 2015
Independent Non Executive Director
Donna DeMaio (Aged 64)
Appointed to the Board: November 2021
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 Chair of the
Hiscox Insurance Company Limited Board and
also of the Remuneration Committee.
External board appointments
Ninety One Plc; Ninety One Ltd.
Relevant skills, experience and contribution
s Extensive financial services experience,
particularly in the USA.
s Proven expertise in overseeing global
auditing activities.
Donna has over 35 years’ financial services
experience, gained across banking and
insurance. She was AIG’s General Insurance
Global Chief Operating Officer 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 serves on the board of Hiscox Insurance
Company Inc. as a Non Executive Director and is
Chair of the Audit Committee.
External board appointments
Azure; State Street Corporation.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Board of Directors
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 64)
Appointed to the Board: November 2017
Independent Non Executive Director
Thomas Huerlimann (Aged 59)
Appointed to the Board: November 2017
Independent Non Executive Director
Anne MacDonald (Aged 67)
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
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 serves on the Hiscox SA Board
as a Non Executive Director.
External board appointments
Leadway Assurance Ltd, Nigeria.
Relevant skills, experience and contribution
s Extensive marketing expertise,
particularly in the USA.
s Sizeable 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, Travelers, Macys and
Pizza Hut. Anne 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 59)
Appointed to the Board: November 2017
Independent Non Executive Director
Lynn Pike (Aged 66)
Appointed to the Board: May 2015
Group General Counsel and
Company Secretary
Marc Wetherhill (Aged 50)
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 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 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; Bankwork$
Advisory; California State University Channel
Islands 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 2022
73
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Board of Directors
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Departures and appointments
Retired Non Executive Director
Executive appointments
Paul Cooper
(effective 9 May 2022)
Non Executive appointments
None.
Executive retirements
None.
Non Executive retirements
Caroline Foulger
(effective 12 May 2022)
Independent Non Executive Director
Caroline Foulger (Aged 62)
Appointed to the Board: January 2013
A resident of Bermuda, Caroline 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
stepped down from the Hiscox Ltd Board at
the 2022 AGM, following the conclusion of her
nine-year term with the Company.
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.
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Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Board statistics
59
Read more about gender and ethnic
diversity at Hiscox.
Board statistics
Board diversity at 8 March 2023
Gender
Female
Male
4
7
Age
46-55
56-65
66-75
3
4
4
Location
USA
Bermuda
Europe
Asia
3
1
6
1
Tenure
0-3 years
3-6 years
6-8 years
8+ years
3
4
3
1
Nationality
British
Bermudian*
American
Swiss
Australian
5
1
3
1
1
* Includes those Directors who hold
a Permanent Residency Certificate.
Hiscox Ltd Report and Accounts 2022
75
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Group Executive Committee
Aki Hussain
Group Chief Executive Officer
Joined Hiscox: September 2016
Paul Cooper
Group Chief Financial Officer
Joined Hiscox: May 2022
Robert Dietrich
Chief Executive Officer, Hiscox Europe
Joined Hiscox: June 1997
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.
Aki joined Hiscox in 2016 as Group Chief Financial
Officer and became Group Chief Executive Officer
in 2022. As such, Aki leads the Group Executive
Committee in realising the strategy, delivering the
business plan, and driving the Company through
its next phase of growth. 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.
Relevant skills, experience and contribution
s Considerable expertise of financial
and commercial management
within a complex regulatory and
compliance environment.
s Qualified Chartered Accountant, with
significant experience of both the retail
and Lloyd’s insurance markets.
Paul joined Hiscox in 2022 as Group Chief
Financial Officer to lead our team of 400
finance experts around the world and ensure
robust financial systems and continued capital
efficiency. With over 25 years of financial services
experience, Paul has held a number of senior
roles, including most recently Interim Group Chief
Financial Officer at M&G Plc and Chief Financial
Officer for The Prudential Assurance Company.
Paul is a qualified Chartered Accountant, having
trained with PwC.
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 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.
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.
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Hiscox Ltd Report and Accounts 2022
Relevant skills, experience and contribution
s Significant expertise in, and at the
forefront of, how digital is reshaping our
industry landscape.
s Multi-market, ground-up experience of
building omni-channel retail businesses.
Kevin has held a number of strategic planning,
leadership and operational roles across
the Group and was an early pioneer of our
eCommerce approach, having set up and run
our UK Direct business before relocating to
establish our digital operations in the USA. He
has led Hiscox USA since 2021, which now
spans nine offices and over 500 employees,
overseeing product and service innovations and
a programme of technology re-platforming that
can support our significant growth ambitions in
the region.
Relevant skills, experience and contribution
s In-depth knowledge of the European
insurance market.
s Significant experience of bringing niche
insurance products to market.
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.
Kate Markham
Chief Executive Officer, Hiscox London Market
Joined Hiscox: June 2012
Relevant skills, experience and contribution
s Strong experience of building
customer-focused businesses.
s Track record of establishing operational
and digital infrastructures that support
profitable 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.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Group Executive
Committee
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Jon Dye
Chief Executive Officer, Hiscox UK
Joined Hiscox: September 2022
Stéphane Flaquet
Group Chief Operations and Technology Officer
Joined Hiscox: March 2010
Nicola Grant
Group Chief Human Resources Officer
Joined Hiscox: September 2022
Relevant skills, experience and contribution
s In-depth knowledge of the UK
insurance market.
s Track record of building sustainable,
profitable retail insurance businesses.
Jon joined Hiscox in 2022 from Allianz UK, where
he was Chief Executive Officer. He leads our UK
retail insurance business, which spans eight
offices and over 800 employees and oversees
the development of our established broker
business, as well as our partnerships division
and direct-to-consumer offerings. Jon
is responsible for building on our long-term
broker relationships, distinguished brand
and deep expertise in underwriting and digital
distribution with new capabilities as we
continue to drive scale.
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 since held
a number of other senior roles including Group
Chief Information Officer, Chief Executive Officer
of Hiscox Europe, Chief Transformation Officer
and Interim Chief Executive Officer for Hiscox
UK. In his new role, created during 2022, he
oversees a number of critical Group functions
including claims, technology, change, property
services, procurement and marketing to ensure
the continued effective and efficient delivery of
core services while also driving process maturity
and digital transformation.
Relevant skills, experience and contribution
s Deep expertise in developing and
implementing HR strategies across
multiple geographies.
s Significant experience of global
performance and reward management,
robust talent and succession planning
and HR transformation.
Nicola joined Hiscox in 2022 from ING Group
where she held a number of senior HR positions.
She leads our team of 95 HR professionals
around the world and drives the Group’s
people strategy as we focus on attracting,
retaining and developing great people to
support the next phase of the Group’s growth.
This includes oversight of our HR policies and
procedures, employee rewards and benefits,
recruitment, learning and development, and
our approach to remuneration including
executive compensation.
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 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 leads our reinsurance and ILS
business, which operates in London and
Bermuda. She is responsible for ensuring the
110-strong team of underwriting, analytics
and asset manager experts take advantage
of changing market conditions and seize
opportunities as they present themselves, as
we continue to build both specialist reinsurance
capability and our position as an expert
alternative capital manager in the ILS space.
Hiscox Ltd Report and Accounts 2022
77
Q&
A:
with Jon Dye
Chief Executive Officer, Hiscox UK
Going places
Hiscox UK is a well-established retail brand
with a strong culture and considerable
expertise, and its opportunities for growth
are plentiful. >
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Hiscox Ltd Report and Accounts 2022
Hiscox Ltd Report and Accounts 2022
79
Jon Dye joined Hiscox in September
2022 after working in a number of
senior roles within the insurance
industry, most recently as Chief
Executive Officer of Allianz UK.
He also served as Chair of the ABI
between 2019 and 2021. In his new
post, he is responsible for leading
the next phase of growth for Hiscox’s
flagship UK retail business.
Q&
A:
with Jon Dye
Chief Executive Officer, Hiscox UK
Q: You’ve had a long career in the
insurance industry. What was it that
drew you to it initially?
A: I’m a law graduate, but I was always
pretty certain that I didn’t want to join
the legal profession. One of my lecturers
said: “If you’re interested in the law and
you want to change things, don’t be a
lawyer, because their role is to follow
their clients’ instructions. What you
need to do is work for one of the
compensators”. That means basically
the insurance industry and the
government. You hear lots of senior
people say: “I fell into insurance. It was
an accident”. I didn’t fall into insurance.
I chose to come to insurance because
I thought it was a fascinating and
important business, which it is.
Q: As well as several Chief Executive
Officer roles, you’ve also had a
recent stint as Chair of the
Association of British Insurers
(ABI). What did you take from
that experience?
A: I took a huge amount from that role
and it was all in the timing. I was
appointed in the summer of 2019,
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Hiscox Ltd Report and Accounts 2022
when none of us knew what was just
around the corner. Covid was one of
our industry’s biggest challenges for
lots of reasons, and being the ABI Chair
as the industry faced those challenges
was such a valuable experience.
Everybody had different views of
the same problem and we really did
have to work together to navigate
through it.
Q: What was your impression of
Hiscox from the outside?
A: My impression was that it had
managed to build a clearly differentiated
position in the market, which is a
very difficult thing to do in insurance.
There’s no IP in your product, because
it’s there on sale, for all to see. To
differentiate yourself is really quite
hard, but I think Hiscox has done that
spectacularly well. Good people,
clever products, fantastic claims
service – that’s what I perceived from
the outside and that is exactly how it
is. The culture runs through Hiscox in
a way that is genuinely tangible. Every
business says it’s customer-centric,
every business says it’s entrepreneurial,
but living up to that can be quite hard.
If you haven’t got that culture, creating
it is really difficult. And if you have got it,
wow – that’s a great advantage!
Q: What attracted you to this
particular role?
A: It’s an opportunity to grow not just
the business, but also my own skills and
experiences. We have an energetic new
Group Chief Executive Officer who has
big ambitions for us, who wants to see
the UK retail operation move forward
and is prepared to put money into that
in terms of brand investment, change
investment and broad support for what
we’re trying to do. There’s no issue in
terms of headroom. Are we banging
our head on the maximum that you
can achieve in terms of market share
in key products? No. It’s all in our gift.
That’s the great attraction. Through the
channels we’re already working in, we
can do things better and bigger than we
do today.
Q: Presumably, your relationship
with brokers will be vital to that
growth. How is that relationship
changing as technology evolves?
A: Technology is important. A lot of
our change budget is pointed at digital
initiatives with brokers. Brokers want us
to be easy to deal with, and for smaller,
more straightforward risks, that’s got
to be digital. I think we’ve got a real
opportunity here to steal a bit of a march
on the market and move ourselves into a
leading position if we invest intelligently.
We’re on a journey there and I think quite
an exciting one.
But in other ways, working with brokers
is no different to how it was in January
1989, when I started. People trade
with people they know and trust. And
that works all the way up and down the
business. It’s a partnership and our
success depends on our ability to build
and leverage those relationships. One
of the big advantages at Hiscox is that
we’ve got a very flat structure. Brokers
can easily get to the decision-makers
who are executing on the strategies that
we’ve laid down. We’re actually looking
to devolve even more decision-making
to frontline specialists, allowing them to
deliver at pace and in this market that’s
quite unusual.
Q: What do you think your priorities
will be in the coming year?
A: We’re known in the market for our
strong underwriting talent and we’ll
continue to strengthen and build this
We have an energetic new Group
Chief Executive Officer who has big
ambitions for us, who wants to see the
UK retail operation move forward and
is prepared to put money into that in
terms of brand investment, change
investment and broad support for
what we’re trying to do. There’s no
issue in terms of headroom.”
The launch of our new Hiscox
Underwriting Academy is going to be
important as it will enhance our ability
to grow and train our own talent. We’ll
continue to recruit market experts
where appropriate, particularly those
with specialist expertise in profitable
growth segments.”
core capability. The launch of our new
Hiscox Underwriting Academy is going
to be important as it will enhance our
ability to grow and train our own talent.
We’ll continue to recruit market experts
where appropriate, particularly those
with specialist expertise in profitable
growth segments.
We’ll also be investing in technology –
that’s really important. As well as
building our digital trading capability,
we also need to simplify and digitise our
own processes and automate simple
tasks. And we’re investing in technology
to improve the customer journey –
we need to ensure our people have
all the tools they need to exceed
customer expectations.
Q: How important is it to have a
high-performing claims service?
A: I spent the first 18 years of my
career working in claims, and for me
it’s the moment of truth in our industry.
People buy a promise, and they only
know if it was a good purchase or a
bad purchase when they need to make
a claim. Seeing customers as people
rather than numbers is absolutely
vital and it’s something that Hiscox is
famously brilliant at. Our claims service
is genuinely a major differentiator – we
continue to deliver a superb service,
with really strong customer satisfaction.
Q: What have you seen so far at
Hiscox that makes you optimistic
about the future?
A: I think the fundamentals of the
business are completely solid. The
unique culture, the differentiated brand,
the great people, the clever products,
that’s all there. It’s actually been quite
helpful to have someone come in from
the outside and point out some of
the things that we’re really good at,
because there are lots and lots of
them. So that’s what makes me most
optimistic. The fundamentals of this
business offer a brilliant foundation on
which we can build a bigger and better
business, and that’s what I intend to do.
Q: Outside of work, what gives
you energy?
A: I play squash. I whack a little rubber
ball around a room and burn a lot of
energy in a short space of time. And it’s
great. Hiscox is actually very good at
encouraging people to take a break, do
some exercise or just get out in the fresh
air, so when I do get the opportunity to
have a lunchtime game I find that I come
back to work feeling revived and ready
to go again.
Hiscox Ltd Report and Accounts 2022
81
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Chairman’s letter to shareholders
Pragmatism in ESG
The accountability and oversight
structures we have established for ESG
continue to drive healthy debate on
our role in the transition to a net-zero
economy (see page 60). We take a
pragmatic approach to ESG, including
climate-related issues, which can be
seen not only in the progress we are
making to reduce our exposure to
some of the worst carbon emitters as we
adapt to our ESG exclusions policy, but
also in our work with clients to ensure an
orderly transition. We also recognise the
importance of comparable disclosures,
which is why we continue to contribute
to a range of independent indices, and
this year we were particularly pleased
to see our MSCI ESG rating upgraded
from an A to an AA. Our second year of
TCFD disclosure, in line with the FCA
requirements, can be found on pages
60 to 67.
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
Dear Shareholder
2022 has been another year of focus
when it comes to ensuring we have
robust governance arrangements that
are equipped to manage not only the
risks we face but also the opportunities.
The corporate governance report that
follows will cover the detail of what this
encompasses at Hiscox, but below are
some key points from the year.
Board changes
Caroline Foulger stepped down from the
Board in May, following the conclusion of
her nine-year term. Pleasingly, we have
experienced a smooth transition from
Caroline to Donna DeMaio, who not
only serves as an Independent Non
Executive Director on the Board but
also as Audit Committee Chair. I would
like to thank Caroline for her counsel
and constructive challenge over the
years, which I have personally valued
immensely and which the business
has significantly benefitted from.
In addition, Paul Cooper joined the
Board as well as the Group Executive
Committee in May, following his
appointment as the Group’s Chief
Financial Officer. Paul has over 25 years
of financial services experience,
including across both the retail and
Lloyd’s insurance markets, and joined
with strong knowledge of the Group –
having served as Finance Director
for Hiscox UK and Europe from
2006 to 2011 during a key phase of
growth. We are benefitting immensely
from his experience and insights.
As we announced with our 2022 results,
I will be stepping down as Chairman
during 2023 following 37 years of
service to the Group, including ten
years as Chairman, and the Board
has commenced the search for my
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Hiscox Ltd Report and Accounts 2022
successor. An update on this search
and on the succession process will be
provided to the market in due course.
Embedding the new Group
Executive Committee
During his first year as Group Chief
Executive Officer, Aki has established
a Group Executive Committee with
a combination of business unit and
functional expertise, institutional
knowledge and fresh thinking. This
team of our most senior leaders has
worked collaboratively and effectively
over the course of the year to deliver
strong progress against our 2022
business priorities, particularly when
it comes to building connected teams
with shared values and mindset, which
is reflected in our best employee
engagement scores for ten years
(see page 3).
Listening to our people
We are now in the fourth year of our
Employee Engagement Network, led
by Independent Non Executive Director
Anne MacDonald in her capacity
as Employee Liaison. This network
comprises a representative group of
colleagues, with diversity of geography,
business area, age, race and tenure, and
meets twice yearly, with anonymised
insights reported back to the Board.
These are rich discussions, which in
2022 have included rewards and
benefits, hybrid working, ESG, feedback
for Aki in his new role, and what our
people want to see from new Group
Executive Committee members. As
a result, the views of our people have
constructively helped to shape Board
discussions, for example around
employee engagement as we review
and refine our employee proposition,
and our approach to hybrid working.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 88 to 93.
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 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 detailed
in 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 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 76 to 77.
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.
The Board is satisfied that 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 99 to 101 and in the risk
management section on pages 44 to 47.
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 is designed
to ensure 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,
three Executive Directors, and seven
independent Non Executive Directors
including a Senior Independent Director.
Hiscox Ltd Report and Accounts 2022
83
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Notable changes in the reporting
period include the appointment of
Paul Cooper as Group Chief Financial
Officer, effective 9 May 2022, and
Donna DeMaio’s appointment as
Audit Committee Chair, following the
retirement of Caroline Foulger at the
AGM in 2022, after the conclusion of
her nine-year term with the Company.
Biographical details for each member
of the Board are provided on pages
72 to 73.
In accordance with the Company’s
Bye-laws and the Code, all Directors
will seek appointment or re-appointment
(as applicable) at the 2023 Annual
General Meeting. 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. This will be the last
time Robert will seek reappointment,
having announced with the Group’s
2022 results that he will step down
as Chairman during 2023 following
37 years of service to the Group,
including ten years as Chairman. The
search for a successor is underway
and an update will be provided to the
market in due course.
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
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Hiscox Ltd Report and Accounts 2022
details on Board composition and
succession planning can be found
in the Nominations and Governance
Committee report on pages 94 to 98.
Board independence and
Director duties
The Nominations and Governance
Committee reviews 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.
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 reviews the findings and
determines if there is any conflict of
interest. 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 accepted
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
Director’s time. 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 can be found in
the Nominations and Governance
Committee report on pages 94 to 98.
The Board also has an ongoing training
programme with regular items on topical
issues. In 2022, this included, among
other things: sessions on ESG horizon
scanning; the impact of IFRS 17; strategic
planning; redefining our employment
proposition; workforce engagement;
information security strategy; and
control environment training. 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.
Board structure and decision-making
The Board operates within an
established structure which ensures
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
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 2022
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 Group
Chief Executive Officer and Company
Secretary, and taking into consideration
feedback from the individual Directors.
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 2022
In line with the agreed meeting schedule,
the Board held four comprehensive
meetings in 2022 (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
seven 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.
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.
All Directors were able to fulfil their
fiduciary responsibilities during 2022
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 the Company’s Bye-laws).
With respect to the four comprehensive
Board meetings in 2022, the Directors’
attendance (and the number of meetings
that they were eligible to attend) was
as follows: Robert Childs, Michael
Goodwin, Thomas Huerlimann, Colin
Keogh, Anne MacDonald, Costas
Hiscox Ltd Report and Accounts 2022
85
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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, Employee
Liaison, 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.
The chair of each Committee of the
Board is available for engagement with
shareholders when required and an
example of this during 2022, in relation
to our remuneration policy review, can
be found on page 132.
More information on how the Board
engages with key stakeholders can
be found on pages 48 to 49.
Board evaluation 2022
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 2022 was internally
facilitated, the details of which can be
found in the Nominations and Governance
Committee report on pages 94 to 98.
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
pursuant to the remuneration policy.
More information on Board remuneration
can be found in the remuneration section
on pages 106 to 143.
Miranthis, Lynn Pike, Joanne Musselle,
Aki Hussain (4/4); Paul Cooper (3/3);
and Donna DeMaio (2/3). In November
2022, Donna DeMaio was involved in a
medical emergency which prevented
her from attending the November Board
meeting. The Deputy Chair of the Audit
Committee, Thomas Huerlimann, fulfilled
her responsibilities for the meeting.
There were also four meetings of each
of the Committees of the Board during
2022. 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:
Michael Goodwin, Thomas Huerlimann,
Colin Keogh, Anne MacDonald, Costas
Miranthis, Lynn Pike (4/4); and Donna
DeMaio (2/3, for the same reason as
described above). Robert Childs is
a member of the Nominations and
Governance Committee, Risk Committee
and Investment Committee and he
attended all four 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. Paul Cooper is also a
member of the Investment Committee
and attended the three meetings he
was eligible to attend.
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
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Hiscox Ltd Report and Accounts 2022
opportunity to attend briefings with
Group Executive Committee members
and senior management, to understand
key issues and conduct deep dives on
specialist subjects.
Board activity in 2022
Board activity in 2022 was suitably
focused to ensure it covered the
appropriate strategy, performance
and governance items and considered
the needs and concerns of our key
stakeholders. This included:
• strategy and business
performance, including approval
of the 2023 business plan, the
agreement of business priorities
for the year ahead, oversight of
capital management measures
taken (including legacy portfolio
transactions and debt refinancing),
embedding the Group’s strategic
evolution, and further optimising
operational effectiveness;
• culture and engagement,
including reviewing the annual
employee engagement survey,
oversight of the employee
proposition work done to date,
and gaining new insights from
the Employee Engagement
Network facilitated by the
Board’s Employee Liaison;
• governance, including updates
on key underwriting exposures,
and approval of the updated risk
limits framework;
• oversight of all key risks,
compliance, internal controls and
governance matters, as outlined
on pages 44 to 46, 94 to 98 and
99 to 101.
More information on Board activities
is covered as part of the annual Board
evaluation process outlined on pages
97 to 98.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 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 99
to 101.
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 94 to 98.
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 112 to 121.
• 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 8 to 11 and 44 to 47.
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 2022
87
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Compliance with the UK Corporate Governance Code 2018
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 all its provisions, except in relation
to Provision 9 on Chair independence;
Provision 19 on Chair tenure (as explained
below) and part of Provision 25 regarding
the Chairman’s membership of the
Risk Committee.
The corporate governance statement
(pages 83 to 87), the remuneration report
(pages 112 to 131) and the Directors’
report (pages 148 to 151), 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.
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 Chairman in 2013. The Chairman
has been in post since 2013 and as
announced with the Group’s 2022
results, will step down as Chair during
2023. Prior to 2013, the Chair served as
an Executive Director (Chief Underwriting
Officer for the Group) and, as such at the
time of appointment major shareholders
were consulted ahead of the Chair
appointment and the Board set out its
reasons for his appointment. The Board
continues to believe that the Chairman’s
88
Hiscox Ltd Report and Accounts 2022
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 led by the Senior
Independent Director. The meeting
took place in November 2022 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 in this, his final year
as Chair.
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 of
the Chairman and the robustness of the
Non Executive Director succession plan;
the results of which were positive. This
will also be a focus again in the 2023
externally facilitated Board evaluation.
A similarly positive result was found in
the 2021 and 2022 Board evaluations
as detailed on pages 97 to 98. The Board
therefore retains complete confidence in
the Chair’s ability to act independently,
and unanimously supports his re-election
at the AGM. This will be the last time
the Chair will seek reappointment,
having announced with the Group’s
2022 results that he will step down as
Chairman during 2023, following 37
years of service to the Group including
ten years as Chairman. The search
for a successor is underway and an
update will be provided to the market
in due course.
The Company complies with all of
the provisions in Section 3 (audit, risk
and internal control) except for part of
Provision 25. The role and functions
of the Audit Committee are set out in
Section 3 of the Code. This includes
certain risk-related responsibilities.
These risk-related responsibilities
are undertaken by the separate Risk
Committee at Hiscox. The composition
of the Risk Committee does not comply
with Provision 25 of the Code, which
states that the Audit Committee should
comprise Independent Non Executive
Directors and that the Chair should not
be a member of the Audit Committee.
This is because the Chairman sits on the
Risk Committee. However, the Board
considers the Chairman’s expertise
in underwriting and risk management
remains a valuable asset and the
Chairman is a valuable member of this
Committee because of the insight he
brings, which the Board considers to
be beneficial to that Committee.
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
72
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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
Section 172 of the UK
Companies Act which
is not applicable to
Hiscox as a Bermuda-
incorporated
company. However,
the material provisions
of Section 172 of the
UK Companies Act are
substantively covered
by the Bermuda
Companies Act, which
is the applicable
legislation that the
Company is required
to comply with
under Bermuda law.
Compliance against
Bermudian Director
duties is detailed on
page 74.
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 24 to
37 demonstrate the Company’s strong performance and position. In the
corporate governance overview on pages 83 to 87, we detail the governance
arrangements in place which contribute to the delivery of our 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: 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 2 to 3).
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 44 to 46). 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, examples of which can be found on pages 48 to 49.
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 2022 results
can be found on page 3. The Board also engages with the workforce
through its established employee engagement network, which supports
the pre-existing engagement infrastructure.
Provision 1:
pages 44 to 47
(risk management),
pages 6 to 7
(business model).
Provision 2:
page 86
(Board activity),
pages 106 to 143
(chapter 4,
remuneration).
Provision 3:
pages 48 to 49
(shareholder
engagement).
Provision 4:
No AGM votes
below 80%.
Provision 5:
pages 48 to 49
(stakeholder
engagement),
page 86
(Board activity).
Provision 6:
page 83
(corporate
governance
framework).
Provision 7:
pages 83 to 86
(Non Executive
Director time,
corporate
governance
framework).
Provision 8:
Group governance
manual and Director
appointment letters.
Hiscox Ltd Report and Accounts 2022
89
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
72
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 88).
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 85. 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 83 to 86 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 87).
No individual or small group has unfettered powers of decision. The Board
has a majority of independent Directors.
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 94). 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:
page 88 (Chair
independence
and tenure),
page 87
(CEO and Chair
separate roles).
Provision 10:
page 72 to 73
(Board of Directors).
Provision 11:
page 72 to 73
(Board composition).
Provision 12:
page 72 to 73
(Board composition),
page 97 to 98
(Board evaluation).
Provision 13:
page 85
(Board cycle).
Provision 14:
page 87
(structure of Board
decision-making),
page 85 to 86
(Board attendance
in 2022).
Provisions 15 and 16:
Group governance
manual and Director
appointment letters.
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Chapter 2
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72
Chapter 3
Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 88).
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 is detailed on pages 95 to 97.
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 leads on
the delivery of this principle on behalf of the Board as detailed on pages
94 to 98.
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 72 to 73
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 94 to 98.
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 97 to 98).
Provision 17:
pages 94 to 98
(key responsibilities
and membership,
Nominations
and Governance
Committee report).
Provision 18:
pages 72 to 73
(Board composition).
Provision 19:
See explanation above
(Chair independence
and tenure).
Provision 20:
pages 94 to 98
(talent review and
Board composition
and succession,
Nominations
and Governance
Committee report).
Provisions 21 and 22:
page 94 to 98
(Board evaluation,
Nominations
and Governance
Committee report).
Provision 23:
pages 94 to 98
(Nominations
and Governance
Committee report).
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Chapter 2
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Governance
Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 part of 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
2022 can be found on pages 99 to 101.
The Directors’ responsibilities statement, going concern and viability
statements are set out on pages 148 to 151.
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 99 to 101.
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 risks (referred to in this document as key
risks) and the emerging risks faced by the Company. An overview of risk
management can be found on pages 44 to 47. 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 99 to 101
(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 148 to 150
(going concern and
viability statements,
Directors’ report).
Provisions 28, 29
and 31:
pages 44 to 47
(risk management).
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Chapter 2
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Compliance with the
UK Corporate
Governance Code 2018
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 106 to 109
(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 119 and 125
(Non Executive
Director fees,
Chair remuneration).
Provisions 35:
page 126
(consultants are
highlighted in
chapter 4:
remuneration).
Provisions 36, 37,
38, 39:
pages 132 to 143
(remuneration policy).
Provisions 40 and 41:
pages 106 to 143
(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, culture
and vision (see pages 2 to 3).
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 128).
The remuneration policy was reviewed during 2022 and is being put to a
shareholder vote at the May 2023 AGM. Changes are being proposed to
reward the delivery of Hiscox’s wider strategy by introducing a scorecard
approach to the short- and long-term incentives. Bonus deferral and
post-employment shareholding guidelines are being further aligned with
market practice and the circumstances that may trigger use of malus and
clawback have been extended. Major shareholders’ views on proposed
changes to the policy were sought and they have indicated broad support
for the approach.
The Employee Liaison facilitates discussion with respect to the content of
the remuneration policy and how this aligns to wider Company pay policy,
and shares 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 106 to 143. The
Remuneration Committee comprises 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 2022
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Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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, equity 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
intragroup 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 2022
were as follows.
• Board Director succession, which
in 2022 included ensuring a
smooth transition to a new Group
Chief Executive Officer, Group
Chief Financial Officer and Audit
Committee Chair.
• Review of the Board
evaluation outcomes.
• Ongoing diversity monitoring of the
Board and senior management.
• Consideration around Chairman
and Director succession planning.
Talent reviews
The Committee leads on Executive
succession planning via an established
and robust talent review process.
As required, the Committee reviews
key talent plans throughout the Group.
The Group review focuses on the
Group Executive Committee, and
their direct reports, and the Company
Secretary. 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.
Board composition and succession
As part of the annual Board succession
planning process, the Committee
reviewed the composition of the Board
in 2022. This included a skills and
experience review – encompassing
independence, length of service,
the balance of skills and experience,
diversity, and the 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
focused on Non Executive succession
was aligned to the talent reviews for the
Executive Directors. Following these
formal reviews, the Board remains
confident that the current skills and
Succession was a key area
of focus for the Committee
again in 2022, at both
Executive Director level and
in relation to key leadership
positions. The positive
effects of new talent and
fresh perspectives are
already being felt.”
Robert Childs
Chair of the Nominations and
Governance Committee
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Chapter 2
A closer look
20
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Governance
Committee report
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Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 72 to 73 demonstrate the nature
and breadth of each Director’s relevant
skills and experience. Additionally, all
Directors have demonstrated that they
have adequate capacity to fulfil their duties.
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.
Diversity, equity and inclusion (DEI)
DEI has been a strategic priority for a
number of years and remains critical
to our development as a sustainable
and resilient 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 a workforce that reflects
the make-up of our customers, the
communities we serve, and the
communities in which we live
and work, ensuring that we have
employees with different backgrounds,
perspectives and experiences, with
a working environment where all our
people can thrive. Our belief is that
diverse teams and an equitable and
inclusive workplace are critical to
resilience as well as sustainable
growth, which in turn makes us a
stronger partner for our customers.
We believe it is important that the name
of the function appropriately reflects the
intent and work being done, which is
why in 2022 we evolved from ‘diversity
and inclusion’ to ‘diversity, equity and
inclusion’. We have a Global Head of
DEI and a DEI Executive Sponsor for
the Group, who together drive our DEI
strategy and progress. This includes
our DEI approach to building culture,
the alignment of policies and processes
with inclusion principles, building
community and belonging via employee
networks, and ensuring alignment to
credible external DEI commitments.
In addition, each business unit Chief
Executive Officer and functional leader
has established a DEI action plan which
is aligned to our Board-approved global
DEI strategy and includes aspects such
as recruitment, career development, and
DEI skills and capabilities development.
These plans are monitored centrally
and also via specific local reports to
subsidiary boards. This approach is
supported by an annual report on DEI
which this Committee receives.
DEI policies, progress and disclosure
After we reviewed and updated our
Board diversity policy in 2021, we built
upon this in 2022 by refreshing our Group
DEI policy which applies to our entire
workforce to more clearly articulate DEI
governance, refresh our principles and
approach to DEI, and align with the Board
DEI policy and other documentation.
This iteration more appropriately reflects
our intent and strategy and better
meets the expectations of our industry
and marketplace.
The Hiscox Ltd Board DEI policy and
Group DEI 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. The specific
objectives of the Hiscox Ltd Board DEI
policy, as well as how they have been
implemented and the results during the
reporting period, are set out on page 96.
We have also fulfilled our UK obligations
to report our gender pay gap ratios with
respect to our UK subsidiaries, and
published our sixth annual gender
pay report during the year. This report
sets out in detail the gender-related
programmes and initiatives we pursued
during 2022 and can be viewed at
hiscoxgroup.com/gender-pay-
report-2022.
We voluntarily report our Board and
Executive management diversity data
as at 31 December 2022 in accordance
with the new UK Listing Rules targets
and associated disclosure requirements
– see page 59 for further details.
As at 31 December 2022, the Board
comprised 36% women and there
was one Director from an ethnic
minority background. None of the four
FCA-specified positions on the Board
(Chairman, Group Chief Executive
Officer, Group Chief Financial Officer or
Senior Independent Director) was held by
a woman. However, the UK Listing Rules
targets do not consider other executive
roles in the context of these senior Board
positions and one of the three Executive
Directors on the Board, our Chief
Underwriting Officer, is a woman.
The Board is fully committed to ensuring
diversity at all levels of the Group, as
evidenced by the existence of both the
Board DEI policy and the Group DEI
policy. The Board continues to work
towards building a pipeline of diverse
candidates and this, combined with the
new UK Listing Rules targets, underlines
the importance of the Company’s efforts
in this area. The Company will continue
to monitor its progress against these
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Chapter 2
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Governance
Committee report
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Chapter 4
Remuneration
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Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Board DEI objectives and 2022 progress
Board objective
Implementation
Progress
1.
Ensure a
diverse1 and
effective Board
1 Diversity of gender,
social and ethnic
backgrounds,
cognitive and
personal strengths.
• 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.
• Annually review Board diversity as part of the
Board evaluation process.
• Ensure the values of the Company promote an
open and inclusive environment.
Page 75 of the report demonstrates the diversity of
our Board as at 8 March 2023.
Via the delivery of our Board diversity, equity and
inclusion policy, we have:
• maintained a gender balance in line with the
Davies and Hampton-Alexander reviews
since 2015 and intend to work towards the
current FTSE Women Leaders Review target
and UK Listing Rules target for gender balance
at Board level;
• had one ethnic minority Director since 2016.
2.
Ensure that
all Board
appointments
are considered
on merit within
the context of
the strategy
requirements
and diversity
considerations
3.
Ensure that
the overall
workforce is
diverse and
inclusive
• 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.
• Gender and ethnic diversity will be taken
Each June, the Board and Committee review the
talent plans for senior management and, each
November, the Board succession plans. Diversity
is taken into account as part of this process. Talent
reviews are replicated throughout the business.
into consideration when evaluating the skills,
knowledge and experience desirable to fill
each role and when considering the methods
to attract diverse candidates.
• 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.
• All appointments must be made on merit
as aligned to the needs of the Board, the
Company, and its strategy and values.
• Review the execution of the Group diversity
and inclusion policy2.
• Ongoing Board and Committee review of
matters relating to employee retention,
engagement and culture.
2 hiscoxgroup.com/diversity-and-inclusion-policy.
The Committee has an annual report from the
Global Head of DEI. We have a Head of DEI and a
DEI Executive Sponsor for the Group, who together
drive our progress which includes a commitment
from every business unit and functional area
leader to deliver on our employee DEI targets.
These plans are monitored centrally and also via
specific local reports to subsidiary boards.
The tables on page 59 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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A closer look
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Governance
Committee report
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Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
targets over the course of 2023 and will
provide a further update in the 2023
Annual Report and Accounts.
Our employee networks (ENs), which
focus on building communities and
support around a variety of employee
populations, expanded in 2022 to include
disabilities and neurodiversity. Along with
our Pan-African, Generations, Latino,
Parents and Carers, Pride (LGBT+),
WeMind (mental health), and Women’s
ENs, these groups support our DEI
strategy by helping to drive positive
employee engagement and promoting
a culture of inclusion.
We are committed to improving our
diversity at all levels, to ensure our
workforce reflects the customers and
communities that we serve and the
communities where we live and work.
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.
In 2022, we expanded the diversity data
we collect in Bermuda, the UK, and
the USA to include more categories
and expand some of the options within
the categories for better coverage of
diversity characteristics. Expanding the
categories and options we offer helps us
make the invisible more visible, build a
more complete picture of our workforce
(including intersectionality), understand
our progress against our strategy, and
better enables us to make smarter,
more inclusive programme and policy
decisions. As such, improving the volume
of voluntary disclosure from employees
remains a focus area and while that
work continues we are pleased to be
disclosing all-employee ethnicity data,
as far as we are able to currently, for the
first time in this report.
We will look to build on this good work
in 2023 and beyond by strengthening
our ability to leverage data and insights,
building our DEI skills and capabilities,
inspiring others with our story, and
embedding DEI into business as usual.
Together, these initiatives will strengthen
the diversity measures we already have
in place and build the maturity of the DEI
landscape at Hiscox.
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.
2022 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, 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 is
addressed in turn below.
2022 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 effectiveness of
systems; Board accountability, focus
and priorities for the coming year;
Board composition; culture of the Board
and the broader organisation; Board
and Chair independence, expertise,
decision-making and dynamics;
succession planning; Board progress
on diversity, climate change approach
and digitalisation; communication
with shareholders; clarity on purpose,
direction and values; and Board support.
The format of the evaluation was a
confidential survey of the Board. This
review was completed by all Directors,
with the results analysed by the
Company Secretary, shared with the
Chairman and discussed with 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.
2022 Board review outcomes
The 2022 Board results demonstrated
continued strong Board, Director, Chair,
and Committee performance and
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. Directors were fully
engaged with the Board, Committee and
Director evaluation process. The review
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Chapter 5
Shareholder
information
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Chapter 6
Financial
summary
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• devoted time to considering
changes in the external
environment and their impact
on Hiscox, including competitor
activity in key markets, further
work on the Company’s strategic
response to climate change
and further deep dives on social
and governance matters, as
well as oversight of the Group’s
compliance with new accounting
standards (IFRS 17) to understand
the business and financial changes
required, in addition to peer
positioning; and
• maintained a focus on talent
management, employee
engagement and the retention
of high performers including
further focus on workforce DEI
and employee engagement.
Robert Childs
Chair of the Nominations and
Governance Committee
was positive with continued robust
decision-making and a Board culture
which fosters constructive discussion.
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 2023:
• people and succession planning
– further focus on workforce DEI,
employee engagement, and
long-term succession planning for
senior management, Independent
Non Executive Directors and
the Chairman;
• strategy – continue to review
iterations of the strategy to further
address risk, operations and
the competitor environment in
a fast-changing world;
• IFRS 17 – oversight of IFRS 17
and understanding the business
changes and peer positioning
on this in addition to the
financial changes;
• ESG – further focus on the
development and communication
of ESG initiatives in line with
changing expectations and
regulation. This will also include a
continued focus on the diversity of
the Board, particularly given that a
number of Directors will be coming
to the end of their term on the Board
over the next three years.
Additional topics for review were
identified as part of the Board evaluation
which will influence the agendas and
training plans for the year.
there will be any changes to Board
composition as a direct result of the
Board effectiveness review conducted
this year. However, as set out in more
detail on page 96, the Board is cognisant
of its commitment to diversity in all its
forms and intends to work towards the
current FTSE Women Leaders Review
target and UK Listing Rules target for
gender balance at Board level.
The Board welcomed the review’s
conclusions with the feedback directly
linking to ongoing Board developments.
The Chair owns the response to the
findings, and will report on their delivery
in the 2023 Annual Report and Accounts.
2021 Board effectiveness review –
progress against identified actions
The Board and its Committees have
made tangible progress against the
action points identified during 2022:
• focused on the succession of
Executive Directors and other key
leadership positions as detailed
in this report, including ensuring a
smooth transition to the new Group
Chief Executive Officer, Group Chief
Financial Officer and Audit Chair;
• continued the review of the
Group’s strategy to further
address risk, operations and
competitor environment in a
fast-changing world;
• continued to drive accountability
and excellence in execution,
including the continued monitoring
of progress against the Company’s
business priorities and key projects,
and building on new management
information to further increase the
linkage between objective setting
and monitoring;
In light of the finding that the Board
continues to perform well and function
effectively, it is not anticipated that
• continued discussions on
strategy, including business
mix and capital allocation;
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Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 to coincide with key points in
the Company’s financial calendar.
Working with both management and
the external auditor, the Committee
reviewed the appropriateness of the
interim and annual financial statements,
concentrating on:
s the quality and acceptability of
accounting policies and practices;
s the clarity of the disclosures
and compliance with financial
reporting standards and relevant
financial and governance
reporting requirements;
s material areas in which significant
judgements and estimates have
been applied or where there has
been discussion with the external
auditor; and
s any correspondence from
third parties in relation to our
financial reporting.
Following the transition of the Committee
Chair role to Donna DeMaio in May 2022,
the Committee is comprised of seven
independent Non Executive members.
The Committee has recent and relevant
finance expertise and competence
relevant to the insurance sector.
that the external auditor, PwC, displayed
the necessary professional scepticism
its role requires. The significant issues
considered by the Committee in relation
to the 2022 Annual Report and Accounts
were as follows.
i) Reserving for insurance losses
As set out in our significant accounting
policies on pages 179 to 180, 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 the key
judgements within those estimates. The
Committee reviewed and challenged the
key judgements and estimates in valuing
the insurance liabilities.
During the year, the Group was impacted
by two major events, Hurricane Ian
and the Russia/Ukraine conflict. 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.
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
The Group is also impacted by the
current high inflation environment, with
explicit allowance for this added into
reserves over the year. The Committee
received presentations from the Chief
Actuary and management on the
process undertaken, and the judgements
arrived at, to establish these explicit
loadings. The Committee is satisfied with
both the process that was conducted
and the reporting and disclosure of the
resulting estimates. The Chief Actuary
also detailed the remaining insurance
risk given the significant uncertainty
in future inflation rates, however, the
Committee notes that the Group
continues to adopt a prudent
approach where uncertainty exists.
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
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
Hiscox Ltd Report and Accounts 2022
99
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Audit Committee report
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 2022 was appropriate.
ii) The recoverability of reinsurance assets
The Committee received an update
on the credit risk exposures to
reinsurers. 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 noted the Group’s
going concern statements included
in the Interim Statement and in this
Annual Report and Accounts, and
the assessment reports prepared
by management in support of such
statements. More information on the
going concern and viability statements
can be found on pages 148 to 149.
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
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Hiscox Ltd Report and Accounts 2022
macroeconomic factors underlying
the valuation process. The Committee
received updates on impairment
testing and the analysis performed
by management, and assessed the
appropriateness of the assumptions
made. The Committee is satisfied with
the approach taken and the recoverability
of the goodwill and intangible assets.
v) Accounting for the defined
benefit scheme
As explained in note 2.15 to the financial
statements, 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 key
judgements and estimates used to
measure the pension scheme net liability
or asset position, and the results of the
independent pension valuation report.
A new funding agreement was signed
in 2022 and the impact of this was
assessed, with specific analysis of the
minimum funding requirements of IFRIC
14 and the asset ceiling requirements of
IAS 19. The Committee is satisfied that
the assumptions used to measure the
pension scheme are reasonable and that
appropriate disclosures are provided in
the Annual Report and Accounts.
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 impact of the Ukraine conflict on
a small number of investments was
reported to the Committee.
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 to the financial statements) of
the Annual Report and Accounts.
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 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 reviewed the underlying
assumptions for the recognition of deferred
tax assets, principally the availability of
future taxable profits and utilisation period.
Controls and corporate governance
The Committee received quarterly
updates on the effectiveness of the
financial control environment. In addition,
the Committee was updated on expected
changes to governance and audit with a
focus on internal controls and enhancing
the financial control framework. An
approach to assess and implement the
new requirements was proposed. The
Committee was also given updates on
various FRC papers published in 2022
on corporate reporting.
Environmental, social and governance
(ESG) reporting
The Committee was updated on ESG
reporting matters including external
developments such as activity by the
International Sustainability Standards
Board (ISSB). As the demand for
ESG-related disclosures increases, it
is important that Hiscox demonstrates
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
Audit Committee report
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
its commitment to environmental, social
and governance factors. The Committee
will play a key role in assessing the
controls and assurance over these
disclosures going forward.
Insurance contracts (IFRS 17) and
financial instruments (IFRS 9)
The Committee received regular updates
on the Group’s IFRS 17 Insurance
Contracts programme with an increasing
focus on the preparedness of the Group
to implement the new standard.
The Committee monitored the
implementation of the systems,
communication plan, processes and
operating model to support the delivery of
the new financial reporting requirements.
In addition, the Committee reviewed
and approved material methodologies,
policies, assumptions and reporting
metrics, supported by a number of
Board technical training sessions. This
included reviewing and challenging
the methodology and key judgements
underpinning the preparation of the
opening balance sheet under IFRS 17.
The Committee received regular updates
from PwC in relation to the progress and
findings from their assurance work.
The Committee concluded that the
disclosures in respect of IFRS 17
included in note 2, basis of preparation,
are appropriate for inclusion in the
Annual Report and Accounts.
The accounting policy changes and
implementation impacts of adopting
IFRS 9 Financial Instruments from
1 January 2023 were presented to
the Committee.
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
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 2022, key
themes included core underwriting and
claims controls, pricing, business and
IT operations, change, financial control,
data governance and controls, ESG and
various regulatory themes.
External auditor
PwC has been the Company’s external
auditor since 2016 following a tender
process. 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.
To safeguard auditor independence and
objectivity, 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
has assessed the independence,
effectiveness and quality of the external
audit process. This assessment
considers the Committee’s interactions
with the external auditors and considers
a variety of issues, including: the external
auditors’ experience and expertise; their
professional scepticism and approach
to challenging management where
necessary; their efficiency in completing
the agreed external audit plan; and the
content, quality and robustness of their
reports. The Committee also takes
into account the perspectives of those
in senior management who interact
with the external auditors on a regular
basis. This process forms the basis for
the Committee’s recommendation to
shareholders to reappoint the external
auditor and no substantive concerns
were raised by the Committee this year.
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.
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.
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.
Donna DeMaio
Chair of the Audit Committee
Hiscox Ltd Report and Accounts 2022
101
Q&
A:
with Nicola Grant
Group Chief Human Resources Officer
People person
It’s been a busy year for Hiscox – refining
its employee proposition and evolving
its hybrid-working model – and now the
Company is looking to better promote its
unique culture to potential employees. >
102
Hiscox Ltd Report and Accounts 2022
Hiscox Ltd Report and Accounts 2022
103
Nicola Grant joined Hiscox in
September 2022 after 17 years
with ING, bringing considerable
experience in HR transformation,
organisational development and
design, talent management and
diversity, equity and inclusion.
Based in London, her role involves
developing the Group’s people
strategy and leading a team of 95
HR professionals around the world.
Q&
A:
with Nicola Grant
Group Chief Human Resources Officer
Q: Before joining Hiscox you
worked for ING in New York, then
Amsterdam. How did that experience
of working abroad prepare you for
overseeing HR in a company with a
global footprint?
A: Working abroad, you learn a lot
about yourself, and you learn a lot about
adapting to the environment in which you
work. You also learn how important it is
to think in an inclusive, global way. For
example, hosting calls in the morning on
the East Coast of the USA when people
have to dial in from the West Coast
doesn’t create good experiences for
all. You’d get up at 5am for these calls,
absolutely exhausted, then they’d be
cancelled ten minutes before. I became
much more aware of simple things like
that, which make such a big difference
to how people feel. In Amsterdam, I had
to work very hard to build relationships
and gain buy-in from people in an office
where English wasn’t the first language,
so I learnt what that feels like. What really
sticks with me though is how intentional
you have to be to make everyone feel
included. That’s something I’m very,
very passionate about.
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Hiscox Ltd Report and Accounts 2022
Q: What persuaded you to make the
leap to Hiscox?
A: I’d been with ING for 17 years and I
loved it there. I needed the next move
to be the right one. I’d talked with other
financial institutions, but culturally we
weren’t aligned. When I got a call about
Hiscox, my first thought was: “I don’t think
insurance is for me”. But I remembered
that, 20 years ago, I’d heard about Hiscox
having a forward-thinking sabbatical
policy, so I agreed to have a conversation.
I met with Aki, and there were a couple
of things about that conversation that I
found exciting. Hiscox is going through
this transformation from a big-small
company to small-big company, and the
opportunity to influence that shift was
something really compelling. He was
also completely authentic, and that was
true of all of the people I talked to here. I
genuinely felt that the culture would align
with my own values, and for me that’s the
most important thing.
Q: Based on your own experience,
does more need to be done to
promote Hiscox’s employer brand
to potential employees?
A: Hiscox is at a really exciting point
in time, where I think the opportunity
to shout about our employer brand is
huge. As someone coming in with a fresh
perspective, I can honestly say that I
do think Hiscox is unique, and so we
mustn’t undervalue just what a special
thing our culture is. That ‘human’ value
is really lived, it’s such a lovely, friendly,
caring organisation, but also one filled
with smart individuals performing at an
incredibly high level. Had I not heard
about our sabbatical policy all those years
ago, and remembered it because it was
ahead of its time, I might have thought:
“Insurance, boring, I’m not interested”.
I think a lot of people have that thought
process, so we need to invest in branding
ourselves as an employer of choice,
which is where we want to be, and getting
there is absolutely a priority of mine.
Q: How do you go about getting that
message out there?
A: It’s a number of things. We’ve been
busy refining our employee proposition
– our promise to employees, if you like –
and we have to start activating that in the
external environment. One thing we need
to do is leverage our alumni in a stronger
way. Throughout the organisation, we
have a lot of what we call ‘boomerangs’.
These are people who leave Hiscox but
come back, which I think says a lot about
the Company and its culture. I also think
we have to be intentional about how we
position ourselves in universities and in
other places in the community where
there’s the potential to start hiring. I think
we have a real opportunity to differentiate
ourselves there.
Q: You mentioned the employee
proposition. How has that
been changing?
A: We’ve made some quick tactical
interventions to improve the employee
proposition while we work on the bigger,
more strategic piece of work. One of
the main things is the concept of ‘time
out’, which includes a more modern
sabbatical policy, so that instead of
having to wait ten years, we now offer a
four-week sabbatical for every five years
of employment. We also introduced
‘Hiscox days’: people can take two extra
days off every year for whatever they
want – religious holidays, birthdays or
just a duvet day. So far, we’ve seen them
used on everything from school sports
days to people renewing their wedding
vows and I just love to hear those stories.
Then, from January 2023, people can
buy additional holiday. People want more
flexibility, they want more choice, and
Hiscox is at a really exciting point in
time, where I think the opportunity to
shout about our employer brand is
huge. As someone coming in with a
fresh perspective, I can honestly say
that I do think Hiscox is unique, and
so we mustn’t undervalue just what
a special thing our culture is. That
‘human’ value is really lived, it’s such
a lovely, friendly, caring organisation,
but also one filled with smart
individuals performing at an incredibly
high level.”
that and we have to be more intentional
about talent and career development for
staff. That’s something that is definitely a
priority for next year.
Also, we continue to build our digital
capabilities and from a people perspective
that’s something I’m interested in – how
can we free people up from what I’d call
analogue tasks in a way that’s exciting for
our people, but that also enhances our
abilities to develop our talent?
Q: The introduction of hybrid working
has been a big change in recent years.
How is that evolving?
A: We’ve moved away from what
employees told us was ‘rigid flexibility’,
where we said: “You need to return to
the office x-days a week”. Instead, we’ve
introduced a much more collaborative
approach within the teams where they
work things out according to their
needs and define this through a
co-created team charter. That’s gone
down incredibly well. I really do believe
all leading organisations will continue to
move towards activity-based working.
We’re not going to go back to five days a
week in the office – that ship has sailed.
I think the challenge is: how do you create
the community and the connection, and
maintain our amazing culture, when you
don’t see each other very often? I think
orchestrating that is quite challenging,
so that’s where we’re going to spend the
time over the next year.
Q: Looking across the Group, are you
able to maintain a consistent culture
that crosses borders?
A: A strong internal culture can live in
all places. Everything we do needs to
be congruent. We have to signpost our
values and culture, and the context in
which we operate needs to support
them. So, for example, our offices –
We also introduced ‘Hiscox days’:
people can take two extra days off
every year for whatever they want –
religious holidays, birthdays or just
a duvet day. So far, we’ve seen them
used on everything from school
sports days to people renewing their
wedding vows and I just love to hear
those stories.”
they want more time out of the office, so
that’s what we’ve tried to deliver with this
new suite of benefits.
The other differentiating benefit is the
introduction of HSX:26, which extends
the concept of ownership – one of our
values. Every permanent employee has
been issued with stock that will vest in
2026, so every employee is now an owner
of the Company. HSX:26 is still open, so
we can offer a pro-rated grant to new
hires up until 2024, which is phenomenal.
Q: What’s next?
A: The work around employee
proposition won’t stop. We’re hosting
some focus groups to further refine our
employee proposition promise. There are
a couple of other things we need to look
at too. One is around capabilities. Which
capabilities are we going to invest in in
the future, which of those capabilities
will differentiate us as an employer and
give us the edge in the market? The other
is our approach to talent management.
More people than we would like say that
their primary reason for leaving is career
development, so we have to learn from
the look and feel – should be similar
throughout the organisation. Our
managers should have the same level of
capability throughout the organisation
and the same approach to management.
Our tooling, whether it’s performance
management or our approach to talent,
should be uniform. All of these things tell
a story. I’ve been to quite a few countries
now and my observation is we do this
well and they’re all pretty consistent,
so maintaining this will be a priority as
we scale.
Q: Outside of work, what gives
you energy?
A: Walking my dog in the fields in the
morning. That’s a really important little
bit of ‘me’ time and sets me up for the
day ahead.
Hiscox Ltd Report and Accounts 2022
105
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Annual statement from the Chair of the
Remuneration Committee
Dear fellow shareholder
2022 was a year of progress for Hiscox.
The Group delivered a strong underwriting
profit of $269.5 million, the highest for
seven years, representing an ROE of
10.8% from the core business, in a year
which has included a range of significant
natural and man-made catastrophes.
Hurricane Ian losses were much
lower than they would have been
had we not reduced our exposure to
under-priced business. Hiscox has
achieved a combined ratio for retail
within its target range a year ahead of
market expectations and internal targets;
the bench strength of talent at a senior
leadership level was bolstered with a
number of new appointments, including
Paul Cooper who joined the Executive
team earlier in the year as the new Group
Chief Financial Officer, bringing fresh
thinking to the top table; and employee
engagement scores reached their
highest level in ten years.
The Remuneration Committee has been
busy reviewing our remuneration policy
and consulting with shareholders in light
of the forthcoming policy review. As a
result of this process, we have proposed a
number of changes which we believe will
ensure that our executive remuneration
fully supports achievement of our strategic
objectives and motivates continued high
performance on behalf of shareholders
– including our financial results but also
our wider role as a responsible employer,
insurer and corporate citizen.
The Committee is focused on ensuring
that we are rewarding performance
that is sustainable. As such, we plan to
introduce non-financial performance
measures under our incentive plans for
the first time as we look to further focus
Executive Directors on leading measures
of performance. Our customers
are at the heart of what we do and
their experience of dealing with us is
becoming an increasingly key part of our
overall performance, particularly given
our growing retail focus. Likewise, we
know that there is a strong relationship
between employee engagement and
company performance, and we believe
that making Hiscox a great place to work
is in shareholders’ long-term interests,
in addition to being valuable in its own
right. We are also conscious of the
impact we can have as a business on the
environment, which is why we propose to
allow scope within our long-term incentive
plan for the addition of ESG-related
targets. We anticipate that our use of
non-financial measures will evolve as we
continue to develop our approach over
the coming years, in line with our strategic
aims and evolving market practice.
The 2021 Annual Report and Accounts
included details of the Group’s strategic
evolution as Hiscox seeks to build more
balanced portfolios in the big-ticket
businesses, alongside the significant
structural growth opportunities that exist
in our retail operations. This strategic
evolution means that the profile of our
returns is expected to change over time
and this – along with the continuing
volatility in market conditions – formed
part of the Committee’s decision-making
around incentive targets and how they
calibrate with pay outcomes for 2023 and
beyond (described below). Our objective
was to ensure the strongest possible
ongoing alignment between Executive
pay outcomes and shareholder interests
in the context of market change.
Remuneration policy review
The comprehensive policy review
confirmed that, overall, our framework
continues to operate effectively,
supporting our aims of delivering strong
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
106
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Chapter 4
Remuneration
Annual statement
from the Chair of
the Remuneration
Committee
returns across the insurance cycle and
creating sustainable long-term value for
our shareholders. Nevertheless, we are
proposing some improvements, set out
below, with three key objectives in mind:
A to align the policy with good
remuneration practice among
UK-listed companies;
A to reduce any unnecessary
complexity and volatility within
the framework; and
A to appropriately reinforce our
environmental, social and
governance (ESG) responsibilities.
Throughout the review process,
shareholders have provided valuable,
constructive feedback on the proposals
and on behalf of the Committee, I would
like to thank all those who contributed.
Performance measures for incentives
Our incentives have previously been
based only on financial measures, with
a discretionary overlay to account
for non-financial performance. The
Committee intends to add formal
non-financial metrics into the framework
of both the bonus and long-term
incentive plan to reflect the Group’s
wider strategic objectives and align
with developing market practice among
UK-listed companies. The non-financial
metrics have been carefully selected to
be relevant to business performance.
Annual bonus
The annual bonus is intended to align
reward with the achievement of key annual
objectives. We are proposing in the policy
to base up to 25% of annual bonus awards
on non-financial performance measures.
The majority of the bonus opportunity
(75% of the total) will still be based on
financial metrics which remain the
primary driver of bonus awards. Given
the importance of our customers and
colleagues, for the 2023 annual bonus
we propose the introduction of employee
and customer engagement metrics –
each weighted at 5% of total bonus.
The customer and employee metrics
are direct drivers of business growth
and performance, so fully aligned with
shareholder value.
Employee engagement will be measured
by considering our annual employee
engagement survey scores, and
customer engagement will be considered
through quarterly claims transactional
NPS results across our retail businesses.
Alongside these engagement metrics
will be an individual personal objectives
scorecard weighted at 15%, taking the total
non-financial component of the bonus for
2023 to 25% for each Executive Director.
Long-term incentive plan (LTIP)
The LTIP is intended to incentivise and
reward our Executives for delivering
against long-term objectives that are
focused on growth in Company value and
aligned with the interests of shareholders.
The current metrics of growth in net
asset value (NAV) per share plus
dividends and relative total shareholder
return (TSR) measured against a group
of our main peers, remain key measures
of our long-term success and are
therefore being retained.
To complement the existing structure
we are proposing to include in the policy
the capacity to base up to 30% of LTIP
awards in future years on non-financial
measures, including an element related
to our environmental impact in order
to ensure that the LTIP supports the
delivery of our wider corporate strategy
and recognises the impact that we can
have as an insurer and an investor.
As work continues in this area and
having considered shareholder
feedback, for 2023 LTIP awards we
propose to retain our past focus on
financial measures only, with a 50%
weighting proposed for relative TSR
and 50% for NAV growth. We will
consult with shareholders again ahead
of introducing an environment-related
measure in future years.
Good governance changes
We are also proposing a number of
smaller changes to the policy in order to
ensure its continued alignment with good
governance practice.
A Bonus deferral mechanism: the
current policy includes a cash
deferral structure which applies for
up to two years following the end
of the financial year, with a variable
amount deferred depending on
bonus quantum. In order to align
Executive interests further with
shareholders, align with market
practice and make deferral simpler,
we propose that deferral be applied
at a flat rate of 40% of bonus with
amounts deferred into Hiscox
shares and released three years
following the end of the relevant
performance year.
A Post-employment share ownership
guidelines: post-employment
share ownership under the
current policy tapers by 50% at
one year post-termination. We
propose to align to the Investment
Association’s principles of
remuneration, to extend the full
post-employment shareholding
guideline to two years with a
requirement to hold shares in line
with the in-service guideline in place
immediately prior to departure,
or the actual shareholding on
termination if lower.
Hiscox Ltd Report and Accounts 2022
107
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Chapter 4
Remuneration
Annual statement
from the Chair of
the Remuneration
Committee
A Malus and clawback: we propose
to extend our current provisions
by adding to the existing list of
circumstances that may trigger the
use of malus or clawback. Further
details are included on page 140.
Target setting
The strategic evolution of the Group
(see pages 6 to 7) has two important
consequences – first, more consistent
earnings growth should, over time,
narrow the range of performance
outcomes and, secondly, the planned
increase in the contribution from retail
should, again over time, reduce NAV
volatility arising from underwriting.
Therefore, the Committee felt it was
important to incentivise Executives to
deliver long-term incremental and stable
growth in earnings. We will therefore
seek to incorporate these factors as
we set incentive targets. For 2023 this
will involve:
A slightly lower parameters for the
ROE outcomes that underpin our
bonus targets; and
A a narrower range of NAV growth
outcomes applicable to the LTIP.
In setting the targets, we have also moved
away from referencing the risk-free rate
to absolute thresholds for ROE and NAV
growth, reflecting both broader market
practice and also the fact that the
risk-free rate is forecast to remain volatile.
strategy of building more balanced
portfolios to drive reduced earnings
volatility. Hiscox has achieved strong
organic capital generation, enabling
deployment of additional capital into a
very favourable rating and underwriting
environment while continuing to maintain
a strong balance sheet and solvency ratio,
and preserving a progressive dividend.
However, an excellent underwriting
performance was masked by significant
unrealised investment losses in our bond
portfolio. This was driven by the high level
of volatility in the global bond markets
this year and some of the sharpest rises
in interest rates on record. Most of the
bond portfolio losses are mark-to-market
losses, and thus accounting rather than
cash losses. Given that our portfolios
typically hold these investments until
maturity, and the portfolio is of very high
quality, we expect that these losses
will unwind as the bonds mature.
Remuneration outcomes for 2022
2022 annual bonus
Pre-tax ROE, our performance
metric for both Executive Director and
wider workforce profit bonuses, was
materially impacted by the unrealised
investment losses on the bond portfolio.
The Committee is firmly of the view
that unrealised gains and losses in
such a volatile external environment
are not a helpful or fair reflection of
management performance.
2022 business performance
The Group has delivered a strong
result in an active year of geopolitical
uncertainty, economic unpredictability
and natural catastrophe losses. An
underwriting profit of $269.5 million
(2021: $215.6 million) and combined ratio
of 90.6% (2021: 93.2%) is a testament
to the disciplined execution of a refined
For the wider workforce, the Committee
has decided that the fairest course is
to pay bonuses on the pre-tax result
after excluding the impact of unrealised
investment losses on bonds in their
entirety. As those bonds return to par
over the next three years, we will adjust
future bonus pools to remove the impact
of any future gains. This smoothing
effect of an accounting impact on
the maturity profile of our bonds is,
we feel, appropriate from a short-term
incentive perspective.
For the three Executive Directors,
without adjustment they would not
receive a bonus in respect of 2022.
Given the Group reported its strongest
underwriting profit since 2015 during
what has been a turbulent year, and
considering the broader contribution
and impact made by Executive
Directors, after careful consideration
the Committee determined that it
would be appropriate to exclude 50%
of the unrealised investment losses on
bonds ($107.5 million) for 2022, from the
bonus calculation. This results in an
adjusted pre-tax ROE result of 6.1%.
The Committee is of the view that
paying 25% of the maximum bonus
opportunity to Executive Directors is
a fair outcome and that payment of
this level of bonus is aligned with the
shareholder experience. The Committee
also noted the improvement in share
price performance seen during 2022
and the payment of dividends which
were not impacted by unrealised
investment losses.
As with the wider workforce, we will
adjust the bonus pools over the next
three years to remove the unwinding
of the unrealised investment losses,
so that there is no future benefit.
2020-2022 LTIP
Growth in NAV per share plus dividends
is our performance metric for awards
made in 2020, vesting in 2023.
Performance averaged over 2020,
2021 and 2022 has not met the vesting
threshold and therefore awards made
to Executive Directors will lapse in full.
108
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Chapter 4
Remuneration
Annual statement
from the Chair of
the Remuneration
Committee
2023 remuneration
Executive Directors will receive salary
increases of 5% which is below the
average across other Hiscox employees
in the UK of 6.1%.
Award opportunities under the bonus
and LTIP arrangements remain
unchanged from 2022.
Proposed changes to the performance
metrics and the assessment process for
both plans are outlined above. Further
detail on the measures and targets are
set out on pages 123 to 124.
Wider workforce
Engagement
We recognise the importance of
engaging with and seeking feedback
from employees on issues including
remuneration to inform decision-making.
One of the ways we do this is through
our Employee Engagement Network,
a representative group from across
functions and geographies, whose
sessions are facilitated by Employee
Liaison and Non Executive Director
Anne MacDonald and whose anonymised
views are shared with the Board
throughout the year. In 2022, a range of
people-related topics were discussed
in this forum, including new ways of
working, diversity, equity and inclusion
(DEI) and remuneration.
Another way in which we do this is
through the Group’s annual employee
engagement survey, and the Committee
is particularly pleased with the positive
improvements in employee engagement
during the year, reflecting the strategic
importance placed on building connected
teams post-pandemic. More information
on the Group’s 2022 employee
engagement scores, the highest in
ten years, can be found on page 3.
Rewards and benefits
Another of the Group’s strategic
priorities for 2022 was to take a fresh
look at the experience of working at
Hiscox, ensuring it remains a great
place to work and build a career.
This was a consultative process,
with views collected from across the
Group, and resulted in some significant
improvements to the global benefits
offering during 2022:
A the introduction of HSX:26
– an all-permanent-staff share
ownership grant, in line with
our ownership value and in
recognition of the critical role
that all employees play in
achieving our strategic
objectives between now and
2026, when the shares vest;
A a refreshed sabbatical policy
– giving all permanent staff a
four-week paid sabbatical for
every five years of service; and
A the introduction of Hiscox
days – giving our people two
additional days of leave to allow
them to mark occasions that
matter to them – from religious
holidays, to family events, or
something else important.
These days may also be
donated to a colleague.
Pay
Financial well-being is a core pillar
of our benefit philosophy and is why
Hiscox has been an accredited Living
Wage employer in the UK since 2019.
In 2022, we recognised the additional
challenges of high inflation levels and
an increased cost of living, and made
cost of living lump sum payments
of £1,500/$1,500/€1,500 to the
lowest-earning portion of our workforce
– with 38% of our people benefitting from
a one-off payment.
Pay reporting, measurement
and monitoring
In 2022, Hiscox published its sixth annual
gender pay report for the UK, and the
mean pay gap of 16.0% (2021: 19.1%)
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 15 percentage points
lower than when reporting commenced.
While gender pay gap reporting is a
UK-specific disclosure requirement,
internally we measure and monitor
the gap globally. This supports our
continued focus on DEI and is reflected
in how we nurture talent and build a
pipeline of diverse leaders. For example,
each business unit and function across
the Group has an action plan in place
that is measured and monitored and
ensures we are building gender diversity
into succession planning and career
development as we seek to realise
women’s leadership potential across
our business.
In summary
The Remuneration Committee is satisfied
that the 2022 remuneration outcomes
are aligned with the experience of
shareholders and reflective of business
performance. Our policy has served
us well to date, but we believe that the
proposed amendments reflect good
market practice, align incentives with our
wider strategic objectives, and will enable
us to continue to retain and recruit the
high-calibre leadership required to deliver
in a highly competitive global sector.
Colin Keogh
Chair of the Remuneration Committee
Hiscox Ltd Report and Accounts 2022
109
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
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 2022
Bonus of c.25%
of maximum
opportunity for the
Executive Directors.
Long-term performance
impacted by Covid-19
events and catastrophe
claims. PSP awards
granted in 2020 will
not vest.
Single figure of
£1,390,959 for the CEO.
110
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration summary
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
132
Read our updated remuneration policy.
Implementation of policy for 2022
Implementation for 2023
Base salary
Competitive fixed pay.
Salaries for 2022:
— Aki Hussain: £750,000
— Paul Cooper: £525,000
— Joanne Musselle: £525,000
Salaries for 2023:
— Aki Hussain: £787,500
—Paul Cooper: £551,250
—Joanne Musselle: £551,250
Salary increase of 5% in line with the
average UK employee increase of 6.1%.
Benefits
Same as majority of employees.
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.
Annual bonus
Aligned to shareholder interests.
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 awarded to the CEO has been equivalent
to 26% of the current maximum opportunity.
Performance metrics: disclosure of the ROE target ranges and detail around
the individual performance factors used to determine outcomes for 2022 is
provided on pages 114 to 117.
Deferral: part deferral of amounts in excess of £50,000.
2022 actual as a percentage of maximum opportunity:
— Aki Hussain: 25%
— Paul Cooper: 25%
— Joanne Musselle: 25%
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.
Vesting subject to: net asset value per share growth plus dividends (60% weighting)
and relative TSR (40% weighting).
Shareholding guidelines
Aligned to shareholder interests.
2022 award as percentage of salary:
— Aki Hussain: 250%
— Paul Cooper: 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.
2022 actual:
— Aki Hussain: 212%
— Paul Cooper: 62%
— Joanne Musselle: 243%
Paul Cooper was appointed in May 2022.
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.
Maximum opportunity unchanged.
Performance metrics: 75% weighting
on ROE and 25% on non-financial
performance metrics. Further details
are provided on page 123.
Deferral: flat rate of 40% of bonus with
amounts deferred into Hiscox shares
and released three years following the
end of the relevant performance year.
Maximum opportunity, time horizon and
holding period all unchanged.
Vesting subject to: net asset value
per share growth plus dividends
(50% weighting) and relative TSR
(50% weighting).
2023 award as percentage of salary:
Aki Hussain: 250%
Paul Cooper: 225%
Joanne Musselle: 225%
Share ownership guideline unchanged.
Post-employment shareholding
requirement: maintain the level of the
in-employment shareholding guideline
(or the actual shareholding on stepping
down, if lower) for two years following
stepping down from the Board.
Hiscox Ltd Report and Accounts 2022
111
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Annual report on remuneration 2022
This report explains how the remuneration policy was implemented
for the financial year ended 31 December 2022.
PwC has been engaged to audit the sections in the annual report on remuneration 2022 below entitled ‘Executive Director
remuneration’ and ‘additional notes to the Executive remuneration table’, ‘annual bonus’, ‘performance outcomes for 2022’,
‘long-term incentive plan’, ‘Non Executive Director remuneration table’, ‘Directors’ shareholding and share interest’,
‘Performance Share Plan’ and ‘Sharesave Schemes’, ‘payments to past Directors’, ‘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 table (audited)
2022
Name
Aki Hussain1
Paul Cooper2
Joanne Musselle
Salary
£
750,000
340,057
522,125
Benefits
£
10,593
6,009
8,890
Bonus
£
562,500
237,182
525,000
Long-term
incentive
plan4
£
0
0
0
Retirement
£
67,866
30,732
43,527
Other3
£
Total
£
Fixed
remuneration
£
Variable
remuneration
£
0 1,390,959
620,273 1,234,253
0 1,099,542
828,459
376,798
574,542
562,500
857,455
525,000
Total split
2021
Name
Aki Hussain
Joanne Musselle
Salary
£
511,000
511,000
Benefits
£
8,308
9,060
Bonus
£
462,150
550,000
Long-term
incentive
plan
£
0
0
Retirement
£
46,453
46,938
Total
£
1,027,911
1,116,998
Fixed
remuneration
£
565,761
566,998
Total split
Variable
remuneration
£
462,150
550,000
¹Aki Hussain was appointed as Group Chief Executive Officer on 1 January 2022 (he was formerly the Group Chief Financial Officer).
2 Paul Cooper was appointed as Group Chief Financial Officer on 9 May 2022 and appointed to the Hiscox Ltd Board as an Executive Director on 12 May 2022.
Details of his joining package are contained on page 107 of the 2021 remuneration report.
3 Includes Sharesave scheme discount to market value of £4,500 (see page 121), plus 2021 bonus buy-out of £253,470 paid in May 2022, plus partial 2022 bonus
buy-out of £119,318, plus share buy-out of £242,985 using the middle market quotation of £9.142 on the 20 September 2022 vesting date. Dividend equivalents
were added. The share price had dropped 5% between the date of grant and vest. See page 117 for more details of buy-out arrangements.
4 2022 long-term incentives for Aki Hussain and Joanne Musselle relate to performance share awards granted in 2020 where the performance period ends on
31 December 2022. The award is due to vest on 15 May 2023. Based on the performance achieved, the awards will not vest. As the award will lapse in full there
is no part of the award attributable to share price appreciation.
112
Hiscox Ltd Report and Accounts 2022
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2022
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Additional notes to the Executive Director remuneration table (audited)
Salary
Salary reviews take place in the first quarter of the year, effective from 1 April. As noted in last year’s remuneration report,
Joanne Musselle’s salary was increased by 2.2% from April 2022, which was below the average UK-based employee salary
increase. Aki Hussain’s salary remained unchanged from his 1 January 2022 starting salary. Paul Cooper’s salary was effective
from him commencing employment on 9 May 2022.
Base salaries for Executive Directors from 1 April 2022 were as follows:
Aki Hussain
Paul Cooper
Joanne Musselle
April 2022
£
750,000
525,000
525,000
Benefits
For 2022, benefits provided for Executive Directors included the healthcare scheme, life insurance, income protection insurance
and critical illness policies, as well as a Christmas gift and fitness cash allowance.
Retirement benefits
Aki Hussain and Paul Cooper 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 are shown in the Executive Director remuneration table on page 112. 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.
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.
Hiscox Ltd Report and Accounts 2022
113
Chapter 1
Performance
and purpose
2
Chapter 2
A closer look
20
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2022
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
157
Annual bonus (audited)
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. 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. 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.
The bonus is structured in a way that ensures significant variability in outcomes, including the possibility of no bonus being paid.
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 and for 2022
was set at a pre-tax ROE of risk-free-rate plus 2.5%.
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. Details of the key objectives for 2022 and individual achievements by the Executive Directors are
shown on page 116. The Remuneration Committee also seeks input from the Chief Risk Officer and Chief Actuary. To aid
the Committee’s assessment of bonus outcomes, the following framework was in place for 2022.
Pre-tax return on equity
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