YearEnd23
Hiscox Ltd
Report and Accounts 2023
About this report
For more information visit
hiscoxgroup.com
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Report and Accounts, or to
download all or portions of the full
report, please scan the QR code
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report-and-accounts-2023
Scan the QR code to view
‘the making of the Hiscox
community portrait’ video.
152
Read about the Hiscox
community portrait
Chapter 4
106 Remuneration
106 Annual statement from the Chair
of the Remuneration Committee
110 Summary of remuneration
arrangements
112 Annual report on
remuneration 2023
123 Implementation of remuneration
policy for 2024
126 Other remuneration matters
134 Remuneration policy
Chapter 5
148 Shareholder information
148 Directors’ report
151 Directors’ responsibilities
statement
151 Advisors
Chapter 6
165 Financial summary
166 Independent auditor’s report
174 Consolidated income statement
174 Consolidated statement of
comprehensive income
175 Consolidated balance sheet
176 Consolidated statement of
changes in equity
177 Consolidated statement of
cash flows
178 Notes to the consolidated
financial statements
246 Additional performance
measures (APMs)
247 Five-year summary
248 Glossary
Q&A:
Driving force
Q&A with Aki Hussain
Group Chief Executive Officer
2
In the chair
Q&A with Jonathan Bloomer
Chair
18
Market force
Q&A with Kate Markham
Chief Executive Officer,
Hiscox London Market
32
Claim to fame
Q&A with Steve Parry
Group Claims Director
42
Retro perspective
Q&A with Lisa Waters
Head of Retro, Hiscox Re & ILS
68
On brand
Q&A with Fiona Mayo
Chief Marketing Officer, Hiscox UK
78
Express delivery
Q&A with Sarah Bourdeau
Head of Distribution, Hiscox USA
102
Spanish lessons
Q&A with David Heras
Managing Director, Hiscox Spain
144
6
6
8
10
Chapter 1
Performance and purpose
Our key performance
indicators (KPIs)
At a glance
Our strategy and how we
create value
Key risks
12
16 Business priorities for 2024
Chapter 2
22 A closer look
22 Chief Executive’s report
36 Risk management
40
46 Sustainability
50
Stakeholder engagement
Task Force on Climate-related
Financial Disclosures (TCFD)
Diversity, equity and inclusion
(DEI)
62
Chapter 3
72 Governance
72 Board of Directors
75 Board statistics
76
82
84 Corporate governance
90
Group Executive Committee (GEC)
Chair’s letter to shareholders
Compliance with the UK
Corporate Governance
Code 2018
Nominations and Governance
Committee report
99 Audit Committee report
95
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.
The people behind the policy:
Hiscox community portrait
During 2023, we embarked on an exciting
engagement programme across the Group.
Everyone at Hiscox has a key role to play,
and working with globally renowned artist,
Tim Mann, we’ve been busy capturing that
sense of community in a piece of art.
Find out more about what ‘community’
means at Hiscox on the pages that follow.
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
1
1
Aki Hussain joined Hiscox in 2016 as
Group Chief Financial Officer, before
stepping up to the role of Group Chief
Executive Officer in January 2022.
Under his leadership the business has
undergone a ‘strategic tilt’, allowing it
to focus on realising the opportunities
in each of its geographies and
business segments, while managing
volatility through the market cycle.
Q&
A:
with Aki Hussain
Group Chief Executive Officer
Driving force
Since Aki was appointed Group Chief
Executive Officer of Hiscox two years
ago, he has refreshed the Group strategy,
established a new-look leadership
team and led the business to deliver
record profits and its highest employee
engagement scores in ten years. >
2
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
3
Q&
A:with Aki Hussain
Group Chief Executive Officer
Q: You’ve been Group Chief Executive
Officer of Hiscox for two years now.
How is it going?
A: It’s always a privilege, and it’s also
a lot of fun. It’s been a great time to
become the Group Chief Executive
Officer; market conditions have been
improving, which drives opportunity
on multiple fronts. We’ve refreshed
our leadership team, bringing together
veterans who have helped to build
the business, with new talent from
outside Hiscox and even outside the
insurance industry. Each one brings
fresh perspectives, new ideas and new
ways of thinking. Blending that deep
expertise and understanding of our
culture with fresh thinking is good for
our culture and our business; anything
that remains static for too long risks
losing its relevance, and that’s not
where I want us to be.
Q: What have been the major
highlights of your tenure so far?
A: Business performance is obviously
fundamental. Seeing the new leadership
team coming together has been another
highlight. That’s partly a result of the
culture here – we tend to be pretty open,
low ego, and good at both bringing our
views forward and listening to other
people, and I think that has helped us
quickly gel as a team. For me, though,
one of the most significant highlights
has been our employee engagement,
which is now at a record high. Without
colleagues who are happy and motivated
and believe in the strategy, we’re not
going to achieve a great deal, so that’s
something I’m especially proud of.
Q: What do you put that increase in
engagement down to?
A: Last year we made a big effort to
modernise our thinking. We relaunched
our strategy with what we refer to as a
4
Hiscox Ltd Report and Accounts 2023
‘strategic tilt’ – not a radical departure
from the past, but a refreshed approach
to our future. It provides clarity on our
direction of travel and priorities. We all
know what we’re doing and why we’re
doing it, and that’s so important. We have
also modernised some of our benefits
to make them more relevant to the
organisation we are now, with over 3,000
people and a changing demographic.
And we’ve been quite open about the
fact that work should be fundamentally
enjoyable; it shouldn’t be a chore. It’s so
important that we try to make the work
itself, and the environment in which we
work, as engaging as possible, and
I’m pleased to see how our people are
responding to our efforts.
Q: How important is it to you to be
engaging directly with people at
every level of the organisation?
A: Incredibly important. From day one I’ve
been travelling the world to get to know
people. It allows me not only to share my
priorities but also to listen to colleagues
in all of our different countries and to
understand what’s top of their mind.
When I travel to an office, I always do a
‘townhall’ where I get the whole team
together. I talk for five minutes, and leave
the bulk of the time for their questions.
It’s through those questions that I find
out what’s really on people’s minds. I can
never get enough of hearing from our
people. Those interactions are key to me
understanding the health of the business
from a people perspective.
Q: Is it useful to hear from people
outside the organisation too?
A: Definitely. When I took on the role,
I knew there would be what I call the
‘ambassador’ component, where
you’re out in the world promoting
Hiscox and absorbing information
from all kinds of places. I spend a
lot of time with brokers, who are an
incredibly important part of the insurance
ecosystem and a really good source of
information. I also attend a number of
industry roundtables where I absorb
as much as I can. The ones I’m most
drawn to are those where I’ll get to
meet and talk to CEOs from insurance
and other industries. You always learn
something new.
Q: What are your current priorities?
A: Our focus is on profitable growth
while managing volatility. We’re looking
to grow in a scaleable way, making
smart decisions about technology
and about people. We know that a
significant amount of technical expertise
in a range of professions is required
to be able to decide prices and fulfil
our promises to our customers. That
means investing in our people to ensure
we have the skills and competencies
needed not just today, but for the
future of our business.
And of course, the biggest priority for
us is delivering on our promise to our
customers, and being attuned to their
changing needs. It’s about evolving our
model, our products and our customer
journeys so that we’re easy to do
business with – whether you’re a small
business owner, an individual insuring
their home or a broker placing a risk for
a listed company.
Q: Where do you see those
opportunities for profitable growth?
A: For our big-ticket business, written
through Hiscox London Market
and Hiscox Re & ILS, the growth
opportunities are often cyclical. At the
moment both of those businesses are
in the upward part of the cycle, and we
have allocated additional capital which,
combined with our underwriting teams’
One of the things we, at Hiscox, have
an appetite for is experimenting
with and adopting new technologies
that we believe make our business
better. That has given us particular
advantages in building our digital
business globally, and we’ve also
seen how technology can improve
the way we do things – whether that’s
using data to enhance our products or
to streamline processes so our people
can focus on the areas where human
ingenuity and creativity really matter.”
capabilities, means we are growing
strongly. On the retail side, the paradigm
is a bit different. There, we have what
we call a structural growth opportunity,
where it’s much less cyclical. The market
is large, it’s fragmented, and we have a
particular expertise in the products we
offer and the way we distribute those
products. We want to grow in the areas
we already have expertise, and as new
compelling opportunities emerge where
we can specialise, we will look to invest
and grow into them. We’re always looking
to build new areas of expertise and
expand our universe of risk, but in a
highly specialist way.
Q: The speed of technological change
continues – are you more excited by
the potential of new technology or
concerned about its risks?
A: I have an optimistic view. All
technological change brings both good
and bad, but I believe that the good far
outweighs the bad. Generative AI is
bringing about another big transition,
but beyond that, new industries and
professions will emerge that we can’t
even imagine today.
One of the things we, at Hiscox, have
an appetite for is experimenting with
and adopting new technologies that we
believe make our business better. That
has given us particular advantages in
building our digital business globally,
and we’ve also seen how technology
can improve the way we do things –
whether that’s using data to enhance
our products or to streamline processes
so our people can focus on the areas
where human ingenuity and creativity
really matter. A good example of this
is the work we’re doing with Google
Cloud, where we’re using generative
AI technology – together with our own
proprietary AI platform – to automate
some of the underwriting process, which
is incredibly exciting. But, the important
thing to remember is that whatever
benefits these new technologies bring,
we still need that human touch where it
counts. Ultimately, you need people to
take responsibility and accountability
and the creativity needed to prosper –
a machine will not do that for you.
Q: Do you feel a sense of community
at Hiscox, and if so, how is that
best exemplified?
A: We are one community, even if we’re
dispersed over thousands of miles in
different continents. From everything
I’ve seen, people here care a lot for each
other. There is a genuine sense that we
are invested in each other’s success.
That might be the person sitting next
to you, or someone 4,000 miles away
across the Atlantic – it doesn’t matter.
You want them to be successful.
Hiscox Ltd Report and Accounts 2023
5
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Our key performance indicators (KPIs)
Financial KPIs
Insurance contract
written premium*†
$4,598.2m
Net insurance contract
written premium*†
$3,555.8m
Profit before tax
$625.9m
2023
2022‡
4,598.2
4,355.4
2023
2022‡
3,555.8
3,225.5
2023
2022‡
625.9
275.6
Undiscounted
combined ratio*†
89.8%
2023
2022‡
89.8
91.1
Basic earnings
per share
162.7¢§
2023
2022‡
162.7§
73.8
Net asset value per share†
951.1¢
Return on equity†
21.8%§
2023
2022‡
951.1
764.5
2023
2022‡
21.8§
10.1
Ordinary dividend
37.5¢
2023
2022
2021
2020
2019
37.5
36.0
34.5
0.0
13.8
* New KPI for 2023 due to the adoption of IFRS 17.
† Represents alternative performance measure
(APM) used by the Group. APM measure
definitions used by the Group are included within
the condensed consolidated financial statements
on page 246.
‡ Restated for the adoption of IFRS 17 and IFRS 9.
§ Excludes Bermuda deferred tax asset (DTA).
Including Bermuda DTA, basic earnings per share
is 206.1¢ and return on equity is 27.6%.
6
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
Our key performance
indicators (KPIs)
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Non-financial performance
UK gender pay gap
16.0%
In the UK, we have been annually disclosing our
UK gender pay gap since 2017, and have seen
steady progress over time in our UK gender pay
gap on a mean basis. Improving DEI at Hiscox is a
high priority; we enhanced our ethnicity reporting
in our 2022 Report and Accounts with the disclosure
of all-staff ethnicity data, and this year we have
disclosed a new ethnicity target in line with the
Parker Review (see page 66).
London Market broker
satisfaction 61%
The Hiscox London Market broker survey acts
as a barometer for how our brokers perceive
Hiscox London Market across each of our lines
of business. This year’s score is lower than
prior years, with some brokers moving from
‘satisfied’ to ‘neutral’, but at the same time
broker dissatisfaction has decreased and
continues to remain low.
UK customer satisfaction
90%
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.
2023
2022
2021
2020
2019
16.0%
16.0%
19.1%
21.2%
26.1%
2023
2022
2021
2020
2019
61%
79%
71%
69%
78%
2023
2022
2021
2020
2019
90%
92%
92%
92%
89%
0.0
12.5
25.0
37.5
50.0
62.5
75.0
87.5
100.0
Employee engagement
82%
In 2022, we reported our highest employee
engagement score in ten years and are proud to
have sustained such a high level of engagement in
2023. We continue to evolve our employee listening
strategy and how we gather feedback on specific
topics to ensure we have timely feedback on what
is working well and where we may need to make a
change. In 2023, our global pulse survey focused
on engagement levels and hybrid working and was
completed by 80% of our people (see page 47).
Germany customer
satisfaction 95%
US customer reviews
using Feefo 4.7/5
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.
2023
2022
2021
2020
2019
82%
82%
64%
68%
71%
2023
2022
2021
2020
2019
95%
96%
95%
90%
99%
2023
2022
2021
2020
2019
4.7
4.6
4.8
4.8
4.8
Hiscox Ltd Report and Accounts 2023
7
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
At a glance
Hiscox is a FTSE-listed, global specialist insurer with 1.6 million
retail customers, 3,000 employees and 34 offices across
14 countries.
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 purpose
We give people and businesses the
confidence to realise their ambitions.
To do this, we need differentiated
products and services that address
our customers’ needs, great talent
and energised and connected teams.
Success is measured in our reputation,
financial performance and customer
attraction and retention.
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.
Human
Clear, fair and inclusive.
Connected
Together, build something better.
Integrity
Do the right thing, however hard.
Ownership
Passionate, commercial and accountable.
Courage
Dare to take risk.
Our distinctive mix of
big-ticket and retail
business means we
are well positioned to
generate sustainable
and profitable growth
through the cycle.”
Paul Cooper
Group Chief Financial Officer
8
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
At a glance
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Strong track record of growth
$1.5bn
Returned to shareholders over the
last ten years.
11.1%
Average return on equity over the
last ten years.
327%
Growth in customer numbers over the
last ten years.
Our business model
The Hiscox Group has grown from its
roots as a niche Lloyd’s underwriter
into a diversified international specialty
insurance group, headquartered in
Bermuda. We have a powerful consumer
brand, strong balance sheet and plenty
of room to grow in each of our chosen
markets. Our strategy is focused on
high-quality growth (see pages 10 to 11)
and designed to provide opportunities
throughout the insurance cycle, reducing
undue reliance on any one division for the
Group’s overall profitability.
Hiscox London Market
Hiscox London Market uses the global
licences, distribution network and
credit rating of Lloyd’s to insure clients
throughout the world with large, and
often complex, insurance needs. This
business is written through a number of
our syndicates including Syndicate 33,
one of the largest syndicates at Lloyd’s
of London. Our product range includes
property, casualty, crisis management
(including terrorism and kidnap and
ransom), marine, energy and specialty
areas such as space insurance. We now
lead on more open market risks, with a
combination of underwriting and digital
expertise that differentiates us. See
pages 26 to 27 for more information.
Hiscox Re & ILS
Hiscox Re & ILS serves clients
worldwide in different ways. Hiscox
Re is our global reinsurance business,
written out of London and Bermuda
and offering property, specialty, cyber,
marine and aviation and risk excess of
loss reinsurance products, as well as
retrocessional cover. Hiscox ILS is our
alternative investment advisor, which
manages capital for third parties through
insurance-linked strategies. See pages
27 to 28 for more information.
Hiscox Retail
Hiscox Retail comprises our retail
businesses around the world: Hiscox UK,
Hiscox Europe (which operates across
five markets) and Hiscox USA. Our retail
operations focus on specialist areas
of personal lines, such as high-value
homes and fine art, and commercial
lines including emerging professions,
media and tech, and small business
insurance, and we aim to be available
however customers choose to purchase
– whether that’s through a broker, via
our website or over the phone. With each
of our retail operations at different stages
of maturity, we are focused on building
scale as the size of our addressable
markets is huge, so we continue to
invest in our brand, distribution and
technology. See pages 24 to 26 for
more information.
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Group
Re & ILS
London Market
Retail†
USA
UK
Europe
Property
Property
Commercial
Commercial
Commercial
Marine and
specialty
Marine, specialty
and energy
High-value
personal lines
High-value
personal lines
ILS*
Casualty
Crisis
management
Brokers
Brokers
Direct and
partners
Brokers
Direct
Direct
Brokers
Brokers
Insurers and
reinsurers
Corporates
SMEs
SMEs
SMEs
High net worth
High net worth
† DirectAsia is no longer regarded as part of the core Hiscox Retail portfolio and is classified
as a disposal group held for sale in the financial statements.
* Includes ILS, quota share and catastrophe bond funds.
Hiscox Ltd Report and Accounts 2023
9
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Our strategy and how we create value
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
• 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
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
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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
Attractive and sustainable returns for shareholders
Long-term
profitable growth
Operational leverage
Attractive and
sustainable ROE
Managed volatility
delivering lower
cost of capital
Progressive dividend
10
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
Our strategy and how
we create value
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Building through the cycle
54m SMEs
We currently have 1.6 million retail
customers against an addressable
market of 54 million SMEs across
the UK, USA and Europe, which
represents a huge opportunity to
build market share over time.
Two-thirds
We currently lead on two-thirds of the
London Market business we write,
enabling us to set terms and conditions,
and are leading the way in augmenting
underwriting through the use of digital
and AI.
Diverse capital
We doubled our fee income in 2023
in Hiscox Re & ILS and continue to
leverage the benefits that come from
our strong partnerships and diverse
access to capital which includes our
own balance sheet, ILS, quota share
and catastrophe bond funds.
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. As such, we are
well positioned to maximise both the
profitable, cyclical growth and the
structural growth opportunities
ahead, and to balance consistent
and progressive shareholder returns
with continued reinvestment into
the business to support long-term
growth and value creation.
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,
but we invest in local market knowledge
and experience to truly understand
the markets we operate in and provide
relevant products and services.
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. 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 and highly skilled 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 2023
11
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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.
12
Hiscox Ltd Report and Accounts 2023
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 2023, 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 2021, with clarity of focus on
consistent delivery from our big-ticket businesses, accelerated growth
in retail digital and balanced growth in retail traded. The Group strategy
remains unchanged with a strong focus on execution throughout 2023.
The external environment remains complex and uncertainties persist,
but our robust strategy means that despite the external headwinds there
is still tremendous opportunity for Hiscox in each of our chosen segments.
We continue to focus on maintaining and improving, where needed, the
quality and balance of our portfolios, strengthening our pricing and risk
selections, and growing where the opportunities are commensurate
with the risk.
During the year, we continued to navigate a set of complex external
conditions impacting underwriting risk. These ranged from the more
volatile geopolitical environment (notably, the Russia/Ukraine conflict and
more recently the conflict in Israel and the Gaza Strip), macroeconomic
shifts (particularly 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, the heightened threat of cyber
attacks, and emerging litigation trends, has continued to allow Hiscox
to respond promptly, ensuring our pricing keeps pace with costs. We
continue to monitor and evolve our view of property exposure risks from
natural catastrophes influenced by climate change through our set of
realistic disaster scenarios (see pages 38 to 39). Our underwriting
exposure remains well within our Board-approved risk appetite levels.
We also continue to invest in the underwriters of the future through our
award-winning faculty of underwriting training academy, which was first
rolled out in 2022 to help manage and mitigate underwriting talent risks.
Chapter 1
Performance
and purpose
Key risks
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
36
50
191
Risk management is also discussed
in our risk management section, TCFD,
and note 3.
We operate within a
complex and rapidly
evolving risk landscape,
and actively manage risk
through our embedded
policies, processes and
practices Group-wide.”
Fabrice Brossart
Group Chief Risk Officer
The risk
As an insurance group, specific risks related to our
business include:
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.
Credit risk
There remains an increased threat of global
recession, particularly given central
bank interest rate response to inflation,
which could, in turn, increase default
risk. There is also 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.
Market risk
There is 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.
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 remain resilient and we continue
to respond to the heightened inflationary environment through
maintaining and enhancing processes focused on reviewing our key
inflation assumptions against emerging experience and explicitly allowing
further reserve margins for uncertainty. Close monitoring of developments
will continue in 2024.
Many of our counterparties have faced the same external conditions
as we have, and there remains an increased threat of global recession,
particularly given central bank interest rate responses to inflation, which
would, in turn, increase default risk. We closely monitor our counterparty
exposures throughout the year, and while the risk factors have increased,
our credit exposures remain within the Group’s risk appetite. We also take
into account the economic outlook in our decision-making on outwards
reinsurance purchasing for 2024.
Whilst the economic environment has remained volatile, the rises
in inflation and accelerated interest rate increases, which drove
mark-to-market investment losses on our bond investment portfolio
during 2022, have now led to higher returns during 2023.
The Group also maintains modest exposure to selected non-fixed income
investments which provide diversification benefits to the overall portfolio.
We continue to look at incrementally improving long-term risk and
capital-adjusted outcomes through further diversification across the
wider investment universe.
Hiscox Ltd Report and Accounts 2023
13
Chapter 1
Performance
and purpose
Key risks
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
The risk
As an insurance group, specific risks related to our
business include:
Risk landscape and how we manage the risk
The Group’s liquidity risk appetite is designed to ensure that appropriate
cash resources are maintained to meet obligations as they fall due, both in
business-as-usual and stressed circumstances. This is measured using a
liquidity coverage ratio, which compares liquidity sources to stress-tested
liquidity requirements.
The Group’s liquidity position remains robust, with around $1 billion of
fungible liquidity at 31 December 2023 (including $600 million of undrawn
committed facilities). The Group has access to further liquidity through the
debt capital markets.
We monitor the regulatory, legal and tax compliance landscape for
emerging changes to local and international laws and regulations in the
jurisdictions in which we operate.
Regulatory developments during the year have included several ongoing
developments in relation to Solvency II (for example, Bermuda Solvency II
equivalence status and proposed changes to the application of Solvency II
in the UK), as well as the FCA Consumer Duty impacting our UK entities.
Our embedded sanctions management processes, supported by the
compliance team, have continued to ensure our business can respond
quickly and adhere to changes in the sanctions landscape, as was seen
during 2022 following the Russian invasion of Ukraine.
In relation to tax developments, 2023 saw the continued movement
towards implementation of the OECD’s Global Anti-Base Erosion Model
Rules (Pillar Two) at a local level; and in December 2023, Bermuda
enacted a new corporate income tax, effective 2025. Our preparations
for the incoming rules have included working with expert advisors and
industry bodies such as the ABI and the ABIR to ensure industry-specific
issues are identified and addressed, as well as working transparently and
collaboratively with our key tax authority stakeholders.
We invest in proactive engagement with all of our regulators, including
through our participation in the annual college of supervisors, hosted by
the BMA, which is an opportunity to update all of our regulators together
on strategic developments across the Group.
We continue to 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, in line
with emerging trends and updated with our in-house climate research.
We utilise investment dashboards for each of our insurance carriers and
we continue to embed our greenhouse gas targets for the Group, which
in 2023 has included progressing work on a supporting action plan.
More information on how we manage climate change-related risks can
be found in our TCFD disclosure on pages 50 to 61.
Liquidity risk
The risk of being unable to meet customer
or other third-party payments as they
fall due. This could result in high costs in
selling assets or raising money quickly to
meet our obligations.
Regulatory, legal and tax governance
This relates to the risk that the business
fails to act, or is perceived to have failed
to act, in accordance with applicable
legal, regulatory, and tax requirements
in all of the jurisdictions where the Group
operates. The regulatory, legal and tax
environment continues to be complex,
with frequent changes in rules and
expectations which increase complexity
in this area.
Climate change-related risk
This relates to the range of complex
physical, transition and liability risks
arising from climate change. It 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
low-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 the potential
to amplify each existing risk type.
14
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
Key risks
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
The risk
As an insurance group, specific risks related to our
business include:
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 are all examples of risks affecting the
operational risk landscape.
We continue to evolve our operational risk management processes
including our defences against, and response to, information security
and cyber threats. Our information security policy is updated annually
and approved by the Board. The policy sets out the Group’s approach
and commitment to information security, including the Group’s
requirements for a robust approach to protect, preserve and manage
the confidentiality, integrity and availability of the Group’s information
assets and information systems (including technology infrastructure).
It is supported by a suite of other policies including our acceptable use
policy, encryption policy, access control policy, data classification policy,
and third-party security policy. We also buy insurance against liabilities
including but not limited to those related to cyber and information
security risks.
We regularly reassess our information security standards and
methodologies to ensure appropriate governance and consistency has
been applied to our approach. For example, a maturity assessment
facilitated by an independent external third party was conducted in
2022, and another maturity assessment involving both our internal audit
team and an independent external third party will take place in 2024. Our
approach to information security risk management extends to third-party
providers, so through our procurement and claims teams we ensure third
parties receive notification of the security requirements expected of them
upon contract signing and at contract renewal.
2023 also saw a continued focus on Group-wide crisis management
response planning, which included performing a series of cyber crisis
simulations to test and enhance the response plans that are embedded
across business areas and functions including business continuity plans,
surge plans, people plans and communication plans.
The organisation has also established an enterprise portfolio management
(EPM) capability during 2023, aimed at strengthening operational maturity
and controls in relation to the Group’s change agenda over the next two to
three years.
Talent and capabilities risk is also being actively managed. We continue to
monitor and adapt our hybrid working policies and practices and ensure
that our workforce is equipped with the necessary technology to enable
this. In the second half of 2023, we also completed a ‘ways of working’
review. These measures have continued to be successful in addressing
the associated operational risks and we are pleased to have maintained
a high level of employee engagement in 2023 (see pages 7 and 47).
Please see the glossary on page 248 for definitions of acronyms.
Hiscox Ltd Report and Accounts 2023
15
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Business priorities for 2024
1.
Profitable growth and
managed volatility
2.
Technical excellence
We continue to pursue cyclical growth
and managed volatility in our big-ticket
businesses, while targeting structural
growth in retail. In big-ticket, we will
focus on the continued optimisation of
our underwriting portfolios, while also
prioritising innovation and digitisation.
In retail, we will continue to evolve
our digital SME ecosystems, invest
in our brand, and embed systems
transformation to further build our
reputation as a best-in-class insurer
for specialist classes, such as small
business insurance.
Technical excellence remains a
long-term priority for the Group,
and we continue to advance our
capabilities through the closer
alignment of underwriting,
claims, reserving and pricing.
In particular, we will continue to build
out and expand our Management
information and analytics capabilities,
to further enhance the timeliness,
volume and quality of data-driven
insights feeding into business
performance – driving earlier insights
into portfolio performance.
The underwriting
environment in 2023
and into 2024 is
attractive yet complex,
requiring balance
between capturing
the opportunity and
retaining discipline,
so we continue to
focus on technical
excellence, disciplined
profitable growth,
managing volatility,
and technology as a
competitive advantage.”
Joanne Musselle
Group Chief Underwriting Officer
16
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
Business priorities
for 2024
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
22
Find out more about our 2023
business performance in our
Chief Executive’s report.
3.
Operational leverage
4.
Connected and
energised teams
5.
Customer-centricity
During 2023, we made significant
progress in refining and maturing
our operating model, resulting in a
rebalancing of global versus local
capabilities and allowing us to
start to unlock the benefits of scale
and consistency. This year will see
a detailed review of key activities,
particularly across our retail
businesses, to identify opportunities
to further optimise structures,
processes, technology and tools
across the organisation.
Building connected and energised
teams has been a multi-year priority,
which, in 2022, resulted in our highest
employee engagement scores for
ten years. In 2023, we are proud to
have retained such a high level of
engagement. Our 2024 priority is the
development of a strategic workforce
plan that ensures we have the relevant
skills and capabilities in place to drive
future growth and build a diverse and
multi-talented employee base around
the world. We will also continue to
embed our new employee value
proposition, enabling us to attract
and retain top talent, while fostering
a high-performance culture.
Our Company purpose is to help
people and businesses realise their
ambitions, and understanding and
serving our customers continues to
be our top priority. In 2023, we enjoyed
strong customer service and claims
satisfaction scores in many of our
chosen markets, and in 2024 we will
continue to promote and embed our
customer-centric culture across the
Group. We will do this by evolving our
service and product offerings to keep
pace with customer needs and respond
to changing consumer behaviours.
Hiscox Ltd Report and Accounts 2023
17
Jonathan Bloomer was appointed
Hiscox Group Chair in July 2023. He
brings with him invaluable experience
as the former Chief Executive Officer
of several major companies in the
financial services and insurance
sectors, including Prudential Plc,
and as the Chair of several boards
across a range of industries.
Q&
A:
with Jonathan Bloomer
Chair
In the chair
In 2023, Hiscox appointed a new
Chair of the Board, the first Chair in
the Company’s history from outside
of the business. >
18
18
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
19
19
Q&
A:
with Jonathan Bloomer
Chair
Q: When did you first become aware
of Hiscox, and what were your
perceptions of the business from
the outside?
A: I’ve known of Hiscox for decades and
I always thought it was a high-quality
company. In fact, I’ve been a Hiscox
policyholder for ten years or more. That
came from a recommendation from a
broker, originally. Because I’ve grown
up in the insurance industry, I’m not a
normal buyer of insurance. Whenever
I get quotes or recommendations, I
always have a strong view on whether
it’s a company I want to be insured by, so
the decision to buy a policy is not one I
take lightly! One of the things I’ve noticed
since taking on this role is that lots of
people I meet say: “Well, I’m insured
with Hiscox”. And they’ve all given me
a brief anecdote, whether it’s about
underwriting, or claims or whatever, as
to why they think it’s a great business.
So it’s all been really positive.
Q: Is there anything that has
particularly surprised you about
Hiscox since you’ve joined?
A: One thing is the concept of the Hiscox
Partnership; something the business has
operated for years whereby significant
contributors are recognised by becoming
a Hiscox Partner. I’m struck by what
an interesting and important part of
the culture it is. In most companies,
partnership is a mark of seniority, but
here it’s a much broader church. It’s
about people’s commitment to Hiscox
over time. It’s about going the extra mile,
carrying the culture, and really influencing
people. Our Partners are very proud to
belong to it.
More generally though, I’ve been
extremely encouraged by the positive
attitude that people here have, and the
partnership is just one manifestation of
20
Hiscox Ltd Report and Accounts 2023
that as it shows that people are really
invested in the business.
but you know one when you see one and
I’ve certainly seen that here.
Q: What do you think the Board was
looking for in your appointment?
A: I’m the first external person to Chair the
business. With Robert Hiscox – well, the
clue is in the name – and my predecessor,
Robert Childs, had also been here many
years before taking on the role. Talking to
Robert Childs, he considered part of his
role for the past few years to be getting
the organisation to a point where they
could bring in an external Chair. I think
the Group was looking for someone
who was already an experienced Chair,
who has fulfilled this function at other
organisations. I arrived here having a
clear view of what chairing a business is
like, and what the role means. I think it’s
probably much easier coming in as an
outsider if you already know the industry,
and while I have a lot to learn about the
nuts and bolts of the business,
I do know the industry inside out.
Q: How would you characterise the
role of Chair?
A: It’s about making sure the Board is
focused on the right things, and that the
relationship between the Non Executive
and the Executive sides of the Board,
and the Executive more broadly, is
effective – that we’ve got a constructive
degree of challenge between the two.
As Chair, it’s also vital that you build
a positive relationship with the Chief
Executive. You need to act as a sounding
board, someone the CEO can discuss
issues and challenges with, and you
need to have a broad enough business
experience for that conversation to be
meaningful. Parts of the role, though,
are somewhat intangible. It’s tricky to
describe an elephant, but you know it
when you see it in the same way as it’s
tricky to describe an effective Board,
Q: How important then is that
Chair/CEO dynamic?
A: I wouldn’t be sitting here in this seat
if Aki and I hadn’t immediately had a
good connection and thought we could
work effectively together. From my
own experience as a Chief Executive, I
know that finding people you can talk to
about difficult topics in a safe way is so
important for any CEO. A CEO will find
a range of people they can do that with,
but one of them needs to be the Chair.
And I think we’ve already developed
that relationship. We also have very
similar views of where we want to take
this business and what the business
can achieve. That means really seizing
the opportunities we’ve got in our retail
markets, creating more volume and
handling that volume efficiently. On the
Lloyd’s side, we’re currently in a cycle
where it’s a strong market, and we think
we’re getting paid well for the risk we’re
taking on. But dealing with a cyclical
business like that, it’s about making sure
we see how the trends are going and
when we might want to pull back a bit.
We need to make sure we stay profitable
as the cycle changes. We have a clear
strategy; the key now is in its execution.
Q: Hiscox is also focused on
building a sustainable business with
a diverse workforce. How important
is that to you?
A: There’s an absolute imperative to do
it – not because we need to, but because
it’s the right thing for the business. It
comes back to the fact that at heart,
we’re a people business. We want the
best people to work for us and achieving
that means being open to a diversity
of people. We want a culture where
everybody feels welcome and involved.
We want the best people to work
for us and achieving that means
being open to a diversity of people.
We want a culture where everybody
feels welcome and involved. That’s
just critical.”
who we support. It’s their way of giving
back to their communities. To me,
that’s a big part of what Hiscox should
be about: supporting communities not
only within our business, but within the
wider ecosystem that our colleagues
are part of.
That’s just critical. And we want our
impact on people outside of Hiscox to be
a positive one too, so keeping that focus
on sustainability is a fundamental part of
our business.
Q: What have your initial areas of
focus been?
A: Financial services is ultimately a
people business, so you’re not just
learning about the business – you have
to understand the people working
within it. So that’s been one of my
priorities. Another focus for me has been
understanding IFRS 17, which has been
a big change in insurance accounting
standards, but which our Chief Financial
Officer, Paul Cooper, has done a great
job of explaining to our investors. I’ve also
been focused on understanding our US
business. The USA is a huge market, and
although I’ve run US companies in the
past, we’re functioning in a very particular
segment of it. So I’m spending some
time with our American team, becoming
familiar both with the people and with
the business we do there. The same is
true of parts of our European operations
and the segments of big-ticket business
we’re involved in. In all those areas, it’s
about making sure I understand the
details. Where are we strong now and
where do we want to be strong? Half the
fun of doing a role like this is learning the
particulars of the business – that’s what I
really enjoy.
Q: From what you’ve seen so far, what
has struck you most about the sense
of community at Hiscox?
A: I’ve taken over chairing the Hiscox
Foundation, which Hiscox has had since
the 1980s. A lot of the focus there is on
supporting charities and organisations
that our colleagues and people are
already involved with, or that do work
that’s important to them. They choose
Hiscox Ltd Report and Accounts 2023
21
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Chief Executive’s report
Our business has delivered excellent
results, with record profits of
$625.9 million underpinned by a 36%
improvement in the underwriting
result and a record investment
income. The Group combined ratio
below 90% and ROE of 21.8%1 have
led to very strong capital generation,
which we are deploying for further
growth in all parts of the business
in addition to a special return to
shareholders of $150 million.”
Aki Hussain
Group Chief Executive Officer
Strategic execution
Underwriting excellence and investment
result drive record profits
I am pleased to announce the Group
has delivered a record profit before
tax of $625.9 million. High-quality net
ICWP growth of 10.7% in constant
currency at expanding margins resulted
in an undiscounted combined ratio of
89.8% and an insurance service result
approaching half a billion Dollars, up
36% year on year. This is complemented
by a record net investment income
of $384.4 million, as higher bond
reinvestment yields are now earning
through. Group ROE of 21.8%1 is the
highest the business has delivered in
seven years. These record profits are
1 Excludes impact of Bermuda DTA.
22
Hiscox Ltd Report and Accounts 2023
underpinned by continued growth in
each of our business segments, as
we execute our strategy and capture
both cyclical and structural growth
opportunities across our portfolio.
Capital management strategy focused
on delivery of consistently strong returns
to our shareholders
Effective and judicious capital
management is core to our ability to
deliver consistently strong returns to our
shareholders. In 2023, Hiscox capitalised
on some of the best property pricing
conditions in decades and deployed
significant capital in both our London
Market and Re & ILS businesses,
alongside investing in continuing growth
in retail. This strategy, along with a record
investment performance, has resulted
in strong capital generation with an
estimated year-end solvency position of
212% (2022: 199%).
Capital allocation, together with our
expertise in our chosen lines of business
and strong distribution capabilities, is
a key driver of profitable growth. As I
look forward, there are three key factors
driving capital allocation decisions at this
juncture. Firstly, we expect favourable
market conditions in many of our big-
ticket lines of business to continue into
2024, most recently evidenced by the
strong January renewals. In addition, the
structural growth opportunity in retail
remains immensely attractive, and we
increased our investment in marketing by
29% in 2023 to support growth into 2024.
We will continue to allocate more capital
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
to support growth across all of these
opportunities in line with our strategy.
Secondly, we have continued to take
a conservative approach to reserves
and risk adjustment, and have taken
the decision to increase the Group
confidence level to 83% at year end
from 77% at half-year 2023. Reserves
have been strengthened across the
Group, although a significant part of the
strengthening relates to the US broker
business we exited in 2021, comprising
mostly standalone general and other
liability business written for customers
with revenues over $100 million.
Finally, our business has generated
record profits and has a strong balance
sheet. We are using the capital generated
to drive growth and strengthen the risk
adjustment. In addition, we recognise
that surplus capital beyond these
needs should be considered for return
to shareholders. In light of this, and
consistent with our disciplined capital
deployment strategy, medium-term
growth ambition, and the desire to
maintain high levels of financial flexibility,
the Board has recommended a final
dividend of 25 cents per share and a
further return of $150 million of capital to
shareholders in the form of a buyback.
The pro-forma Group Bermuda solvency
capital requirement (BSCR) post the final
ordinary dividend and the share buyback
is estimated at 200%. The Group’s
approach to capital management
ensures that it can invest in the many
attractive growth opportunities available
and maintain its balance sheet strength
and financial flexibility.
Enabling technological transformation
The pace of technological and societal
change continues to accelerate. To
maintain our market-leading position in
our chosen lines of business, we continue
to invest time and resources in building
out our technological capabilities. For
some time now we have been using
technology to make it easier for our
customers to do business with us; to drive
superior risk selection; and to improve,
streamline and automate our processes.
Hiscox London Market is collaborating
with Google Cloud to create the first
AI-enhanced lead underwriting model
in the Lloyd’s market. The proof of
concept was undertaken in Hiscox’s
terrorism line of business, although the
principles will apply to other lines of
business within and beyond big-ticket
insurance. The collaboration combines
our recently built in-house technology
platform called Hiscox AI Laboratories
(Hailo) with Google Cloud’s generative AI
technology to automate lead algorithmic
underwriting from submission to quote.
A manual quoting process that used to
take up to three days has been shortened
to just three minutes when using AI tools,
freeing up time for our underwriters to
focus on higher-value tasks. We are very
excited about the potential applications
of this new technology more widely
across our business.
In retail, we made good progress in
our technological transformation. In
US DPD, all new and renewal business
is now written on the new platform.
We are beginning to see evidence of its
benefits – most notably in direct, where
new business growth was up 31% year
on year. In Europe, the roll-out of the
new policy administration system is
nearing its completion in Germany and
is in progress in France. Europe is still
predominantly a broker-led market, so
the new platform will be accompanied by
digital broker portals. These will create a
seamless digital journey for our brokers
and increase scalability for our business.
In the UK, we continue to expand our
product and distribution capabilities
with solid progress in our e-broker
extranet roll-out.
Building the business of the future
At Hiscox we are proud to have grown
our business organically, and to
sustain this growth we are continuing
to innovate to expand our business
reach. In the USA, we aim to be the
destination brand for our customers’
insurance needs by building out an SME
insurance marketplace. In 2023, we took
a significant step in this direction when
we launched a workers’ compensation
product in partnership with a highly
reputable multi-line US insurer. With the
product set we had available prior to this
initiative, we could reach approximately
half of the total market. The addition of a
workers’ compensation product enables
us to reach a further third of the available
small business market. This partnership
increases our reach and relevance, and
creates a new capital light income stream
from the commission we receive from
selling our partner’s product.
We also see significant growth
opportunities as the ‘green economy’
transition accelerates. We have launched
a green consultant indemnity product
in the UK which covers businesses,
professionals, and their clients within
the environmental and sustainability
sector. Hiscox London Market’s ESG
sub-syndicate went live on 1 April 2023
and so far has exceeded our expectations,
as we bound risks underwriting offshore
windfarms in Europe, hydro in New
Zealand, battery energy storage systems
in the UK and solar in the USA. We are
continuing to build our capabilities in
this area, with the addition of a team of
engineers planned in 2024.
Hiscox Ltd Report and Accounts 2023
23
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
The Hiscox Retail
business has been
an organic endeavour.
Over the years we
have continued to
invest in building
this business and
becoming the leading
specialist insurer for
small businesses and
selective personal lines.
The long-term growth
opportunity ahead
remains extraordinary
and our objective is
to build a material
position and capture
this opportunity.”
A notable development in the reinsurance
market in 2023 has been a buoyant
natural catastrophe bond market.
The Group has taken the opportunity
to diversify our outwards reinsurance
programme by issuing our own
$125 million natural catastrophe bond
in December 2023, which provides
multi-year protection against North
American named storms and
earthquakes. The issue was upsized
due to strong demand and priced
attractively. In Hiscox Re & ILS, we
launched a new catastrophe bond
fund facility to complement our ILS
offering, in time for the January renewals.
People are at the heart of our success
Our ability to attract and retain talent is
key to our continued success. During
2023 we welcomed our new Chair,
Jonathan Bloomer, following Robert
Childs’ retirement after a long-standing
and extraordinary career at Hiscox
spanning 37 years. Jonathan is a very
experienced Chair with a wealth of
leadership experience in the insurance
sector. Beth Boucher also joined the
Board as an Independent Non Executive
Director in 2023, bringing with her
expertise in cyber security, people
management and transformation.
We have continued to build the
quality and capabilities of our Senior
Management team by adding some
fantastic new senior leaders to our
business during the year. Fabrice
Brossart joined us in November from
AIG as our Group Chief Risk Officer,
and his appointment completes my
Group Executive Committee. We also
welcomed Todd Isaac as our Chief
Investment and Treasury Officer, Chris
Loake as our Chief Information Officer,
and Steve Parry as our Group Claims
Director. We are already benefitting
24
Hiscox Ltd Report and Accounts 2023
significantly from their fresh thinking from
both inside and outside of our industry.
We remain focused on building a
connected and engaged workforce and
are pleased to have maintained a high
level of employee engagement of 82% in
2023, after posting this highest employee
engagement score in ten years for the
first time in 2022. Diversity, equity and
inclusion (DEI) is another constant area
of focus. We seek to recruit from the
whole talent pool regardless of gender,
ethnicity or background and to ensure
everyone who works at Hiscox feels a
sense of pride and belonging. We have
chosen to participate in the updated
Parker Review by setting an ethnic
minority representation target of 13%
for Senior Management to be achieved
by the end of 2027. This is part of our
efforts to build transparency, and to
ensure that everyone has an equal
opportunity to make the most of their
potential and progress to the highest
levels in their business careers.
Business performance
Hiscox Retail
Hiscox Retail comprises our retail
businesses around the world: Hiscox
USA, Hiscox Europe and Hiscox UK. In
this segment, our specialist knowledge
and ongoing investment in the brand,
distribution (including broker relations)
and technology reinforce our strong
market position in an increasingly
digital world.
Retail ICWP of $2,368.5 million
(2022: $2,273.1 million) increased by
4.2% in constant currency. We continue
to see strong momentum in Europe
and accelerating growth in US DPD,
although overall retail growth is below
our expectations. In US broker, ongoing
competitiveness of cyber pricing
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Hiscox Retail
Insurance contract written premium
Net insurance contract written premium
Insurance service result
Investment result
Profit before tax
Combined ratio (%)
Undiscounted combined ratio (%)
*As restated under IFRS 17.
2023
$m
2,368.5
2,197.7
180.2
203.9
267.3
91.6
96.2
2022*
$m
2,273.1
2,071.3
182.5
(98.9)
130.2
91.0
93.7
impacted growth, as we chose pricing
discipline over short-term growth.
In the UK, we exited some non-core
underwriting partnerships which
were outside of our risk appetite, and
fourth-quarter growth fell short of
Management expectation following
later than expected activation of signed
broker distribution deals. However, the
issues in both US broker and the UK are
transient and we have taken action to
reverse these trends. As result, we are
seeing positive momentum build early
in 2024. Adjusted for cyber headwinds
in the USA and the exit of underwriting
partnerships in the UK, retail growth was
within the 5% to 15% target range in 2023.
On an undiscounted basis, Hiscox
Retail’s headline combined ratio was
96.2% (2022: 93.7%). This reflects the
Group taking the opportunity to increase
investment in marketing to build
momentum for growth into 2024 and
strengthening reserves for the business
exited in US broker ($160 million of annual
premiums), which was announced in
March 2021 and completed by half-year
2022. This exited business, comprising
mainly large-ticket standalone general
liability and cyber, benefits from some
LPT cover for years 2019 and prior,
which the Group purchased at the
time we decided to exit. However, the
general liability part of this exited book is
experiencing higher loss trends, and as
a result we have added IBNR reserves
for the portion of the book that does not
benefit from LPT cover.
The Hiscox Retail business has been
an organic endeavour. Over the years
we have continued to invest in building
this business and becoming the leading
specialist insurer for small businesses
and selective personal lines. The
long-term growth opportunity ahead
remains extraordinary and our objective
is to capture it and build a material
position. In doing this we will remain
disciplined, as we have done in 2023
when we increased our investment in
marketing by 29% and strengthened
reserves, while achieving a Group RoE
of 21.8%2. Our intention remains to run
our retail business within the 89%-94%
operating range for the long-term benefit
of our shareholders.
On 27 September 2023, the Group
announced its agreement to divest
DirectAsia to Ignite Thailand Holdings
Limited. The transaction remains
subject to customary conditions and
regulatory approvals.
Hiscox USA
Hiscox USA provides commercial
insurance for small businesses with
distribution through brokers, partners
and direct-to-consumer. Our ambition
is to build America’s leading small
business insurer.
US ICWP grew by 1.0% to $909.4 million
(2022: $900.2 million), with ongoing
positive momentum in the digital
business tempered by a deceleration
in the broker channel. The broker
deceleration was driven by challenging
market conditions in cyber and the
business taking longer than expected
to pivot to growth after the book was
decisively re-underwritten. To reverse
this trend, we executed a growth
campaign focused on our most profitable
classes, which has moderated the
decline in the fourth quarter. We are
seeing some green shoots and cyber
headwinds are expected to alleviate in
the coming year, although the outlook
remains uncertain.
2 Excludes impact of Bermuda DTA.
US DPD ICWP increased 8.5%
year on year to $504.4 million,
crossing the half a billion-Dollar
threshold (2022: $465.0 million). The
second-half growth run rate of 9.2%
is an acceleration versus 7.8% in the
first half. With increased investment in
marketing and increased production
from digital partners, positive momentum
has continued into 2024.
The direct business has been live on the
new technology platform since June
2022 and continues to show excellent
progress, growing at a double-digit rate
with new business up in excess of 30%
in 2023. In the coming year we expect
growth momentum to remain strong,
supported by a new brand campaign
and the expansion of our social
influencer programme. The accelerating
growth in direct provides an excellent
base for the full digital launch of our
workers’ compensation partnership
in February 2024. Our customers are
now able to quote and bind a Hiscox
policy and a workers’ compensation
policy underwritten by our partner
without leaving the Hiscox website. It is
a seamless, convenient and easy user
experience, allowing Hiscox to capture
a bigger share of the small commercial
market. The collaboration has performed
ahead of expectations since its soft
launch in June.
The recovery of our digital partnerships
business from its low point in the first
quarter of 2023 has continued, although
at a slightly slower pace than we initially
anticipated. After a two-year pause, we
onboarded over 30 new partners in 2023,
taking the total to over 180. From our
prior experience, it often takes 12 months
for partners to achieve the appropriate
cadence and momentum, and consistent
with this, momentum has improved
Hiscox Ltd Report and Accounts 2023
25
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Hiscox London Market
Insurance contract written premium
Net insurance contract written premium
Insurance service result
Investment result
Profit before tax
Combined ratio (%)
Undiscounted combined ratio (%)
*As restated under IFRS 17.
in sequential quarters with the trend
continuing into 2024.
Hiscox Europe
Hiscox Europe 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 Europe continues to be the
strongest growing business in the retail
segment, with ICWP of $606.7 million
(2022: $545.6 million) and growth of
10.6% in constant currency, with all
countries enjoying strong momentum.
Both commercial and personal lines
have seen double-digit growth
year on year, demonstrating the
opportunities that Hiscox has across
its European markets – most notably in
professional indemnity and specialist
sectors such as technology. We continue
to market our small commercial defined
benefit cyber product across all the
countries we operate in, which we
believe responds to the needs of our
target customer base. The cyber market
remains competitive and we are focused
on maintaining pricing discipline and
the high quality of our portfolio. The
European DPD business in Germany,
France and the Netherlands is still
nascent, but is growing at a high
double-digit rate.
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 ICWP grew by 2.4% in
constant currency or 2.0% in US Dollars
to $793.8 million (2022: $778.2 million),
26
Hiscox Ltd Report and Accounts 2023
2023
$m
1,243.4
908.5
176.0
109.9
251.4
79.1
83.8
2022*
$m
1,114.7
789.2
123.3
(54.4)
101.0
84.5
86.7
with the premium growth impacted
by the planned exit from non-core
delegated authority business which is
now complete.
Our art and private client (APC)
business returned to growth in 2023.
We continue to innovate to maintain this
momentum and are planning to launch
a new digital high-value household APC
product for brokers that will reduce their
administrative burden and improve ease
of doing business with Hiscox.
The UK broker commercial business
continued to enjoy excellent retention,
illustrating the underlying quality of the
business and the loyalty of our customers.
However, new business growth was
below Management expectation,
particularly in the fourth quarter. This
was primarily due to a delay in the
activation of several broker distribution
deals signed in the latter part of the year.
In September we launched our new
brand campaign, titled ‘Your story…
underwritten by Hiscox’, a concept
focused on recognising the people
and stories behind every policy. It is
a significant milestone as we look
to further increase awareness and
recognition of Hiscox in both our
direct and broker channels. The initial
response has been positive and
we intend to increase brand spend
through key media channels in 2024.
Hiscox UK also has a new Chief
Distribution Officer, Gareth Hemming,
who is bringing a new and higher
intensity to the distribution teams’
operating rhythm. The combination of the
marketing campaign noted above and
the activation of new distribution deals is
increasing the flow of business into the
UK, resulting in a strong start to 2024.
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
strong growth in ICWP of 11.5% to
$1,243.4 million (2022: $1,114.7 million).
Net ICWP grew by 15.1% to
$908.5 million (2022: $789.2 million),
as we deployed more capital in
property and benefitted from
significant opportunities within
renewables and energy construction.
Hiscox London Market benefitted
from an average rate increase of 7%,
contributing to a cumulative rate
increase of 70% since 2018. While
this is ahead of our expectations,
different lines of business are at
varying stages in the cycle. Property
saw significant rate strengthening,
with property binders and major
property rates up 26% and 21%
respectively, and terrorism rates up
15%. In contrast, cyber and D&O
have seen double-digit rate decreases,
following several years of strong
re-rating. We continued our strict
underwriting discipline to maintain the
high quality of our portfolios in these
lines by only writing the business that
fits within our risk appetite and return
expectations. General liability rates are
being sustained and we continue to
grow the book selectively, where we see
attractive new business opportunities.
Upstream energy has benefitted
significantly from the extensive amounts
of construction taking place in the
renewables sector, and new business
more than doubled in 2023. The ESG
sub-syndicate, ESG 3033, launched
earlier this year, is already exceeding
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Upstream energy
has benefitted
significantly from the
extensive amounts of
construction taking
place in the renewables
sector, and new
business more than
doubled in 2023. The
ESG sub-syndicate,
ESG 3033, launched
earlier this year, is
already exceeding our
expectations and the
majority of risks written
in 2023 are in the
renewables space.”
Hiscox Re & ILS
Insurance contract written premium
Net insurance contract written premium
Insurance service result
Investment result
Profit before tax
Combined ratio (%)
Undiscounted combined ratio (%)
*As restated under IFRS 17.
2023
$m
986.3
449.6
136.1
70.6
221.4
68.3
69.8
2022*
$m
967.6
365.0
55.1
(34.0)
46.9
84.5
85.6
our expectations and the majority
of risks written in 2023 are in the
renewables space.
Overall, we remain focused on
profitable growth through effective
cycle management. While it has been
an active loss year with a number of
weather events, wildfires in Hawaii and
Canada, and several satellite losses,
our London Market business delivered
a strong undiscounted combined ratio
of 83.8% (2022: 86.7%), marking its
fourth consecutive year of delivering
a combined ratio in the 80s.
Hiscox Re & ILS
Hiscox Re & ILS comprises the Group’s
reinsurance businesses in London and
Bermuda and insurance-linked securities
(ILS) activity written through Hiscox ILS.
Hiscox Re & ILS achieved excellent net
ICWP growth of 23.2%, increasing to
$449.6 million (2022: $365.0 million)
as the business deployed additional
capital into the favourable hard market.
ICWP grew more modestly by 1.9% to
$986.3 million (2022: $967.6 million) as
less ILS capital was deployed throughout
this year, reflecting broader ILS fund
market conditions.
Hiscox Re & ILS benefitted from an
average rate increase of 31% on a
risk-adjusted basis, and cumulative rate
increases now stand at 90% since 2018.
Rate growth is beginning to plateau in the
US property catastrophe market, having
achieved significant improvements in
terms and conditions during 2023. The
international property catastrophe book
continues to see a broad rate hardening.
Retrocession rates saw the greatest
increases in 2023, up 42% on prior year,
and are now starting to soften slightly
as more capacity returns to the market.
Despite this, we believe that rates
remain attractive.
Hiscox Re & ILS has delivered an
excellent undiscounted combined
ratio of 69.8% (2022: 85.6%) and a
record profit before tax of $221.4 million
(2022: $46.9 million) in an active year
for natural catastrophe losses. The
business continued the trend of recent
years of reducing exposure to secondary
perils by materially reducing exposure to
aggregate programmes.
Hiscox ILS funds delivered a record
performance with assets under
management of $1.8 billion
(2022: $1.9 billion) as at 31 December 2023.
These decreased to $1.6 billion on
1 January 2024 after a planned capital
return of $270 million. In total, the
business raised $140 million of new
capital ahead of the January renewals,
including capital from new ILS investors
and a newly-launched side-car. The
pipeline of further opportunities
remains strong. The impact of 2023
ILS net outflows was offset through
a combination of increasing Hiscox’s
own allocation of capital and by a
significant increase in ceded quota share
capacity. As a result, gross income
was maintained, net income increased
materially and the excellent underwriting
result has not only generated a 69.8%
undiscounted combined ratio, but a near
doubling of fee income year on year.
We also launched our first catastrophe
bond fund in January to diversify our ILS
funds’ product offering. All of these will
contribute to the bottom line through
fee income that will earn through in 2024
and beyond.
The Hiscox Re & ILS business model
has access to several sources of capital
Hiscox Ltd Report and Accounts 2023
27
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
ranging from Hiscox own capital to
third-party capital through a number
of different mechanisms including
strategic quota share partnerships,
ILS funds, and more recently a
side-car and catastrophe bond
fund. This strategy enables the
business to compete effectively in
our specialist areas through providing
scale and lowering the cost of
capital, while providing valuable
fee income for risk origination and
performance-dependent profit
commissions. Following the excellent
underwriting performance in 2023,
fee income has risen from $51.1 million
to $101.7 million as substantial profit
commissions are generated.
Strong foundations
Reserves
Consistent with the Hiscox conservative
reserving philosophy, we have decided
to further strengthen reserves. As at
31 December 2023, the Group’s net
reserves are at the 83% confidence level
(HY 2023: 77%) and a risk adjustment
above best estimate of $272.93 million
(HY 2023: $211.134 million).
Our reserve philosophy is evident
in the consistently positive reserve
development we have reported over
many years. In 2023, net reserve
releases stood at $122.8 million
(2022: $209.4 million), as the
strengthening of the reserves covering
the exited US broker business was
more than offset by reserve releases
across multiple classes of business.
Over recent years we have been
proactive in executing LPTs to protect
3 Allows for the reclassification of LPT recoveries
into claims.
4 Excludes impact of Bermuda DTA.
28
Hiscox Ltd Report and Accounts 2023
certain lines of business, in particular
those lines we have exited. These LPTs
provide protection for over 31% of
Group gross reserves and 42% of
casualty gross reserves for 2019
and prior years from inflationary and
other pressures. We will continue to
pursue similar transactions to manage
volatility and optimise capital.
Capital
The Group remains strongly capitalised
from both a regulatory and a ratings
agency perspective, allowing us to
pursue our ambitious business plan
while being sufficiently protected
against market events. The Hiscox
Group BSCR ratio at 31 December
2023 is estimated at 212%. The BSCR
currently excludes any benefit from
the $150 million Bermuda deferred tax
asset, as the treatment for capital is
currently uncertain.
Given the strong operational capital
generation in 2023, the Group intends
to return $150 million of capital to
shareholders by means of a share
buyback, in addition to the final ordinary
dividend of 25 cents per share. The
total capital return is equivalent to
12 percentage points of the 2023
year- end BSCR ratio. The Group
continues to see opportunities to
deploy capital at attractive returns
in big-ticket and to invest in the
structural growth opportunity in retail.
We remain comfortably above the S&P
‘A’ rating threshold and significantly
above the regulatory capital ratio
requirement. The Group remains
robustly capitalised, as demonstrated
by its regulatory capital ratio and
continued strong results, from its
three rating agency assessments
(S&P: A, AM Best: A and Fitch: A+).
In November 2023 S&P released the
final details of its long-awaited new
capital model, which gives more credit
for diversification. It has now been
confirmed that the impact on the Group’s
S&P capitalisation was positive and that
Hiscox’s ‘strong’ operating rating with
stable outlook remains unchanged. S&P
has also removed credit watch from
Hiscox’s debt issuance rating with no
change to its rating, following its review
of structural subordination in Bermuda.
Liquidity
The Group, at the holding company level,
continues to retain a significant level of
liquidity with fungible assets in the region
of $1 billion, comprised of liquid assets
and undrawn borrowing facilities. A
full-year 2023 leverage for the Group
on a pro-forma basis post share buyback
of $150 million is 17.5%5, comfortably
within the range that the Group chooses
to operate in.
Investments
The total investment result was a gain of
$384.4 million (2022: loss of $187.3 million),
or a return of 5.2% (2022: negative return
of 2.6%). Assets under management
at 31 December 2023 were $8.0 billion
(2022: $7.1 billion).
Inflation continued to fall over the
course of 2023, while employment
remained resilient and economic growth
avoided the more severe adverse
outcomes that can accompany a
sharp rise in interest rates. The robust
economic backdrop gave central banks
room to first raise and then hold interest
rates at restrictive levels until inflation was
back on course to meet policy objectives.
Market expectations shifted several
5 Leverage defined as borrowings over borrowings
and shareholder equity.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
3.640
3.276
2.912
2.548
2.184
1.820
1.456
1.092
0.728
0.364
0.000
Projected capital requirement
$3.32 billion available capital
Economic
Regulatory
S&P
Hiscox
integrated
capital model
(economic)
Hiscox
integrated
capital model
(regulatory)
Bermuda
Bermuda
enhanced
enhanced
solvency
solvency
capital
capital
requirement
requirement
Rating agency assessments shown are internal Hiscox assessments of the agency capital requirements
on the basis of projected year-end 2023. 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 basis has been updated
for IFRS 17 and comprises net tangible assets and subordinated debt. Benefit of IFRS 17 discounting is
allowed for within the internal capital model position.
times during the year as to the likely
timing of peak rates and when
the interest rates may be cut.
Other than at the very short end,
government bond yields ended 2023
broadly where they started. However,
this disguised significant volatility during
the year, as bond markets reacted to the
US regional banking crisis, inconsistent
economic data and central bank
statements. Yields then fell sharply
towards the year end and corporate
bond spreads tightened to historically
narrow levels as markets moved to
price in the first rate reductions in
early 2024. The bond portfolio made
significant mark-to-market gains
which recovered a large proportion
of 2022’s mark-to-market losses.
Our bond portfolio remains relatively
conservative with an average credit
rating of A and an average duration
of 1.6 years.
Bond coupons of $186.1 million
combined with $49.7 million earned
from our cash and cash equivalents
contributed the majority of the return.
The reinvestment yield on the bond
portfolio fell in the final quarter to 5.1%
as at 31 December 2023, down from
5.7% at the end of September 2023,
and is in line with 5.1% at the end of
2022, a trend which supports strong
forward-looking returns. The book
yield is at 4.3% and is still rising,
underpinning the cash component
of income.
Despite slowing growth and central bank
policy uncertainty, equity markets made
surprisingly strong gains over 2023,
albeit skewed by the performance of a
handful of the largest companies in the
USA. The Group’s exposure to riskier
assets remains modest and we reduced
Hiscox Ltd Report and Accounts 2023
29
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
our equity allocation over the second half
of the year, giving us room to add risk
should appropriate opportunities arise.
may also have the effect of partially
mitigating the economic cost of the CIT,
although these are yet to be finalised.
my focus is on execution and delivery
to build a material position in the small
business insurance market.
Tax
The Group’s tax credit for the year
of $86.1 million (2022: expense of
$21.7 million) reflects income taxes
payable for 2023, offset by the impact
of the initial recognition of DTA generated
by the introduction of Corporate Income
Tax (CIT) in Bermuda.
In December 2023, Bermuda passed
into law a new 15% CIT, which will take
effect for periods from 1 January 2025.
Broadly, the tax applies to those
Bermudian companies which
are in scope of the Organisation
for Economic Co-operation and
Development (OECD) global minimum
tax, and closely follows the OECD
‘Pillar 2’ model rules, which have
also been passed (or are currently
being legislated), in many other
jurisdictions globally. Bermuda has
announced that this measure forms
part of a wider tax reform programme,
including the introduction of qualifying
refundable tax credits to incentivise
business investment on the island,
which is intended to be designed
and implemented during 2024.
Hiscox will be in scope of the Bermuda
CIT when it comes into effect in 2025,
and we therefore expect our effective
tax rate for 2025 and subsequent years
to increase relative to recent years
with a normal range closer to 15-20%
on average. However, in 2023, as a
consequence of the enactment of the
CIT, Hiscox has recognised a DTA of
$150 million, representing tax assets
which will be available to bring into
the new regime at commencement.
Further legislation anticipated in 2024
30
30
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
Outlook
Our diversified business portfolio is
well positioned to deliver high-quality
growth in revenue and earnings and
strong capital generation through the
cycle. We continue to benefit from the
investments we are making in our people,
brand and technology infrastructure
to drive disciplined growth in positive
market conditions across our big-ticket
segments, and to pursue the attractive
long-term structural growth opportunity
in retail, combined with investment
income tailwinds.
The retail outlook for 2024 is positive,
and we have delivered a strong start
to 2024 with US DPD ICWP growing
double-digit in the two months to
29 February. The quarter-on-quarter
growth acceleration in US DPD reflects
the impact of marketing initiatives in
2023, which will be further increased in
2024. The business is also benefitting
from several new partners being fully
activated. In the UK, the combination
of a new marketing campaign launched
in September 2023 and activation of
several distribution deals signed in the
last quarter of 2023 is raising growth
levels and in Europe strong growth
momentum continues. The US broker
business remains challenging due to
cyber-related headwinds, although
they are beginning to dissipate. With
multiple drivers of growth in retail,
we expect to deliver full-year 2024
growth within the 5% to 15% target
range. Our intention remains to run the
retail business within the 89% to 94%
operating combined ratio range for the
long-term benefit of our shareholders.
This opportunity remains immense and
For Hiscox London Market, the
outlook for 2024 is positive, with rates
and premium growth ahead of our
expectations in January. We continue
to prioritise underwriting discipline
and effective cycle management,
investing capital in lines where the
return is attractive and shrinking
in those lines where the market
is softening.
Reinsurance market conditions are
expected to stabilise and remain
attractive after the significant
improvements in 2023. We have
allocated additional capital to this
segment as Hiscox Re & ILS continues
to seize the opportunities created by
the hard market conditions and
focuses on growing our net book.
Our portfolio of businesses and our
people position us well to continue
delivering high-quality disciplined
growth and earnings. I would like to
thank our people for their hard work
and our partners and shareholders
for their continued support.
Aki Hussain
Group Chief Executive Officer
5 March 2024
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Chief Executive’s report
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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.
† Historic amounts have not been restated
for IFRS 17, but are presented as gross
written premiums on an our-share basis.
4,598
4,355
4,269
4,031 4,033
3,777
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
3,258 3,286
2,973
2,894
l
i
a
t
e
R
x
o
c
s
H
i
Total Group insurance contract written premium†
($m)
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,494 1,482
1,419
1,500
1,000
500
2,656
2,481
2,397
2,326
2,254 2,215
2,072
2,123
0
2003
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021 2022
Restated
2023
Hiscox Ltd Report and Accounts 2023
31
Kate Markham joined Hiscox in
June 2012 to run the UK Direct
business, after 12 years at Vodafone.
She took over as Chief Executive
Officer of Hiscox London Market
in 2017 and since then has been
responsible for leading the Group’s
big-ticket insurance business through
the ever-changing market cycle.
Q&
A:
with Kate Markham
Chief Executive Officer, Hiscox London Market
Market force
By committing to being a leader
in key insurance classes, Hiscox
London Market is seeking to maximise
opportunities in the highly specialised
London insurance marketplace. >
32
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
33
Q&
A:
with Kate Markham
Chief Executive Officer,
Hiscox London Market
Q: How would you characterise the
condition of the Lloyd’s marketplace
over the past year?
A: What’s been notable about the past
few years is that each class of business
has been at its own distinct point in
the cycle. So, some of the classes we
write are in strong hard-market territory,
where pricing is going up and terms and
conditions are improving. At the same
time though, literally across the table,
we’re seeing other classes coming off a
hard market, where prices are falling and
terms and conditions are softening.
Q: Faced by those contrasting
extremes, what is your
overarching strategy?
A: The whole strategy in London Market
is about balance. Where we’re seeing
opportunity, we’re saying: “Yes, we
want to support that, we’ve got capital
behind us, and we’re going to make the
most of that opportunity.” In property,
for example, where we’re seeing hard
market conditions, we’re really stepping
forward. But in D&O and cyber, where
the market has been much softer,
we’ve had the courage to pull back.
We’ve shrunk our business and had the
confidence to say no. That’s a tough
thing to do but striking that balance
is important for our business.
Q: Are you able to predict with
any certainty when those market
conditions are likely to change?
A: It’s not easy, for lots of reasons. That’s
because the conditions of each market
are triggered by so many factors beyond
our control. I can’t control where the
Atlantic storms may or may not make
landfall, but where they do will have a
material impact on the property market.
I also can’t control what goes on in the
reinsurance market, but that has a direct
impact on what we can do because what
34
Hiscox Ltd Report and Accounts 2023
it does impacts our economics. What
we can control, however, is our level of
preparedness. What metrics should
we be looking at now to know when the
market is turning? What actions are we
going to take to protect the profitability
of the book? We need to make the most
of good times while preparing for the
market to turn, so that’s been a focus
for 2023 and will be for 2024 too.
Q: How do you set yourselves up to
be successful in the classes you’re
stepping into?
A: It’s a big market and there’s a lot going
on. In every market, there are leaders and
followers and we’ve made the strategic
choice to be a leader. But to be a market
leader, there’s a level of expertise and
experience you need to have. We can’t
do that in all classes, so we pick the
classes we intend to lead in and make
sure we’re building the deep technical
expertise, credibility and capability
required. Our starting point is to hire the
best people: the best underwriters, the
best pricing people, the best actuaries,
the best claims people. Then, to give
them an edge, we’re building the right
ecosystem around them with the right
operational and tech capabilities;
an ecosystem that harnesses our
data to give them the best insights,
an ecosystem that means they don’t
spend half their time doing admin. We’re
working hard to automate manual tasks
so that our people can use their brain
power on managing the complex risks
we see.
A great example of how we’re doing this
is through our collaboration with Google
Cloud, where we’re using generative
AI technology to automate lead
underwriting from submission to quote.
That might sound incredibly technical,
but what it’s enabling us to do is take
the data and insights we receive from
email submissions and turn that into a
policy quote – a process that could take
up to three days traditionally, but with
this technology can now be done in just
three minutes. We completed the proof
of concept during 2023 in our sabotage
and terrorism line of business, where
it worked really well, and we’re excited
about other potential applications in
other lines of business but also beyond
big-ticket insurance, so that’s something
we’ll be exploring more throughout 2024.
Q: In 2023, you launched a Lloyd’s
sub-syndicate, ESG 3033, which
provides additional capacity
for companies with strong ESG
credentials. What was the thinking
behind that?
A: Energy transition is a source of
massive opportunity, and insurance is
one of the key enablers of that transition.
Trillions of Dollars of investment are
coming in to build more renewable forms
of energy, so the demand for insurance
capacity is huge – and that’s something
we’re keen to be part of. We’re building
the capabilities we need to underwrite
those risks within our main syndicate,
Syndicate 33, using our own capital,
but right now there are lots of financial
backers out there that are keen to
provide capital to support the transition,
backers who don’t have the underwriting
capabilities to deploy their capital on
their own. That’s what we can offer.
By creating a sub-syndicate, we can
underwrite those risks on behalf of third-
party capital providers, and we can do it
in a way that means we’re not competing
against Syndicate 33, so we’ve got skin
in the game, but we’re not competing
with ourselves.
We wrote our first risk in June so it’s still
relatively early days, but so far it’s going
Energy transition is a source of
massive opportunity, and insurance
is one of the key enablers of that
transition. Trillions of Dollars of
investment are coming in to build
more renewable forms of energy, so
the demand for insurance capacity
is huge – and that’s something we’re
keen to be part of.”
really well. The brokers love it, and the
clients love it as well, to an extent we
hadn’t anticipated. When they attract
capacity from 3033, they see it as a gold
star for what they’re doing around ESG,
which is just the icing on the cake for us
and for them.
I know that we’re doing lots of the right
things to make sure our people do feel
empowered in this way. We’re all owners
of the business, and ownership is one of
our values, and these things actually go
a long way to seeing the right behaviours
modelled in every part of the business.
Q: You’re also the Executive Sponsor
of DEI at Hiscox. What made you want
to take up that role?
A: I’m just a massive believer in all forms
of talent. For us to win, we need to be
able to attract, develop and retain the
very best talent. We need to create
a culture where talented people with
different perspectives and experiences
can thrive. And that’s a work in progress.
On diversity and equity, which is about
having the right mix of people and then
ensuring there is a level playing field, I
think we’re making progress. There is
always more to do, but we’re making
sure we have the right recruitment
strategies in place, the right policies, the
right sponsorship. The bit I think is more
complex, and the part I’m particularly
passionate about, is the inclusion piece.
How can we make sure everybody feels
truly comfortable and valued in their
working environment? How can we make
sure people feel appreciated for who
they are? That’s the part that takes the
longest time.
Q: As a leader, what can you do within
your own area to bring that to life in a
meaningful way?
A: It’s about creating an environment
where people do the right thing, and if
people don’t do the right thing, others
instantly spot it and call it out. We all
want this to be a great place to work for
everyone, so you’ve got to make sure that
when it’s not, you’ve got a culture on the
ground where people feel able to call it
out. I’ve seen our culture in practice so
Q: What do you think best exemplifies
the sense of community at Hiscox?
A: I see it all the time, but it’s even
more palpable when things go wrong.
It might not happen to you, or to your
team, but people really rally round
when times are tough. I’ve been in other
businesses where people would have
just gone home, but here they don’t
because they care about their colleagues
and they care about making things right
for our customers. When times are tough,
it’s not: “Well, thank God it’s not me.”
It’s: “What can I do to help?” That type
of community spirit is something I think
you see all the time in Hiscox and is
as strong today as when I first joined
the business.
Hiscox Ltd Report and Accounts 2023
35
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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:
• we maintain underwriting discipline;
• we seek balance and diversity
through the underwriting cycle;
• we are transparent in our approach
to risk, which allows us to
continually improve awareness
and hone our response.
Risk management framework
The Group takes an enterprise-wide
approach to managing risk. The risk
management framework provides
a controlled system for identifying,
measuring, managing, monitoring
and reporting risk across the Group.
It supports innovative and disciplined
underwriting across many different
classes of insurance by guiding our
appetite and tolerance for risk.
Exposures are monitored and evaluated
both within the business units and at
Group level to assess the overall level
of risk being taken and the mitigation
approaches being used. We consider
how different exposures and risk
types interact, and whether these may
result in correlations, concentrations
or dependencies. The objective is to
optimise risk-return decision-making
while managing total exposure, and in
doing so remain within the parameters
set by the Board.
The risk management framework is
underpinned by a system of internal
control, which provides a proportionate
and consistent system for designing,
implementing, operating and assessing
how we manage our key risks. This
framework is regularly reviewed and
enhanced to reflect evolving practice
on risk management and governance.
During 2023, we have continued to
maintain and further 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
reduction 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 37. Risk is also
overseen and managed by formal and
informal committees and working groups
across the first and second lines of
Having an effective risk
management culture,
while continuing
to evolve our risk
management maturity,
is key and both have
been areas of focus
for the Risk Committee
during 2023.”
Lynn Pike
Independent Non Executive Director
and Chair of the Risk Committee
36
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Risk management
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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
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.
The Risk Committee relies on frequent
updates from within the business and
from independent risk experts. At each
of its meetings during the year, the Risk
Committee reviews and discusses a
risk dashboard and a critical risk tracker
which monitors the most significant
exposures to the business, including
emerging risks and risks that have
emerged but continue to evolve. The
Risk Committee also engages in focused
reviews on our key risks and monitors
emerging risks throughout the year.
In 2023, additional risks considered
include risks associated with adapting
to emerging technologies, AI and
ESG. An overview of the processes
for identifying emerging risks through
the Grey Swan Group is described on
page 57. Stress tests and reverse
stress tests (scenarios such as those
shown on pages 38 to 39, 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.
defence. These focus on specific risks
such as catastrophe, cyber, casualty,
sustainability, reserving, investments
and credit, as well as emerging risks.
The Group Risk and Capital Committee
and the Group Underwriting Review
Committee are sub-committees of
the Risk Committee and make wider
decisions on risk. More information
on these Committees can be found
on pages 56 to 57.
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 2023
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 also provided
input into a number of important
risk management developments
during 2023:
• the risk management maturity
framework, introduced during
2022 to help set the organisation’s
maturity goals against six key
dimensions of risk management,
continued to be further embedded.
This included continuing to monitor
progress made against risk
management maturity goals
during the year;
• processes to assess risk culture
have been maintained, including the
risk culture survey for all staff, which
is completed as part of annual risk
management training and was first
rolled out at the end of 2022;
Hiscox Ltd Report and Accounts 2023
37
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Risk management
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Our risk management policies can
be found at hiscoxgroup.com/
about-hiscox/group-policies-
and-disclosures.
• there has been a continued focus
during the year on performing
targeted risk reviews at both Group
and legal entity level. Reviews
have focused on risk management
maturity, capital model validation
deep dives, regulatory risk and
change, as well as specific topics
such as inflation.
The Risk Committee also supports the
Board in its review of the effectiveness
of the Group’s risk management and
internal control systems through key
activities that took place over the course
of 2023, including reviewing its annual
declaration of compliance with the BMA’s
Group Supervision Rules, reviewing the
results of the annual Group-wide risk and
control self-assessment and associated
second-line review, reviewing changes
to Hiscox Group risk policies and the
Hiscox Risk and Control Register, as
well as considering risk management
and internal control effectiveness as a
specific topic at a 2023 meeting.
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. During
2023, Hanna Kam was succeeded as
Group Chief Risk Officer by Fabrice
38
Hiscox Ltd Report and Accounts 2023
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-$850 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.$2.2bn
Pandemic
Cyber
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 exposures from outside the cyber
product line†
$245m
$400m
$850m
$125m
$400m
Marine
scenarios
Range of events covering collision and
sinking of vessels and any resultant pollution
up to $75m
Offshore platform
Total loss to a major offshore platform complex
up to $100m
Terrorism
Aircraft strike terror attack in a major city
up to $350m
Property
catastrophe‡
1-in-200 year catastrophe event from $280bn
US windstorm
$650m
*Losses spread over multiple years.
†Losses incurred from non-cyber product lines from a cyber event.
‡As a point of comparison.
Brossart, and more information on
Fabrice can be found on page 76.
The team works with the first-line
business units to understand how
they manage risks and whether they
need to make changes in their approach.
It is also responsible for monitoring
how the business goes about meeting
regulatory expectations around
enterprise risk management.
During 2023, a target operating model
review was completed for the
second-line Group risk and compliance
function. This has resulted in a
re-organisation of the function into
dedicated business unit and Group-level
second-line teams, as well as an increase
in second-line resource, which further
enhances the function’s ability to provide
critical challenge to the business and to
ensure robust risk management oversight.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Risk management
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
12
Read more about our key risks.
Property extreme loss scenarios
Boxplot and whisker diagram of modelled Hiscox Ltd net loss ($m) January 2024.
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.
1000
900
Upper 95%/lower 5%
Modelled mean loss
Hiscox Ltd net loss ($m)
1000
900
800
700
600
500
400
300
200
100
0
Industry loss return
period and peril
800
700
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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
46
06
08
14
09
89
13
14
23
24 154
22
20
31
49 227
36
29
41
88 319
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 2023
39
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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 feel a sense of belonging
and 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, Europe
and USA and participate in a range of
investor conferences. During 2023,
the Company conducted over 400
meetings and met with over 170
investors, representing approximately
78% 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 2023 AGM,
all resolutions were passed with a
significant majority.
40
Hiscox Ltd Report and Accounts 2023
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 representative employee
engagement network to ensure that
workforce views are considered in
Board decision-making.
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.
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
Executive Directors, who contribute
to discussions and 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 Executive 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 of all of our Board
Directors also attend.
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 2023, this included our cyber
readiness report which examines
the cyber threat landscape, and HAT
100 which explores key trends in the
contemporary art market.
We also conduct broker briefings and
workshops for our crisis management
brokers, which this year included
‘The Control Room’ – a broker-focused
experiential event to help better
educate brokers about our malicious
attack product.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Stakeholder
engagement
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Customers
We have over 1.6 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.
More information on our customer
satisfaction scores for 2023 can be
found on pages 7 and 47.
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.
Customer-focused products and tools
We use a combination of customer
insight and claims experience to develop
our risk transfer products and risk
mitigation tools. These include our cyber
exposure calculator and the Hiscox
CyberClear Academy, an NCSC-approved
cyber training programme for customers,
as well as Leakbot, an early warning leak
detection tool that we offer to all of our
UK high-value home customers to help
mitigate escape of water claims.
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. This includes the annual
supervisory college, hosted by the BMA
as our Group supervisor, which gives an
important annual opportunity for us to
present a consistent message to all of our
regulators on issues of common interest,
and in 2023 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 ABIR and the 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.
Regulatory reporting
The Group and its subsidiaries met all
material regulatory reporting obligations
for 2023.
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, and
to do the right thing when it comes to
issues such as DEI, progressive labour
practices and environmental practices,
in line with our regulatory requirements.
These expectations form the basis of our
supplier code of conduct, which applies
to all suppliers and subcontractors.
Measuring and monitoring
sustainable practices
During 2023, we started working with a
global provider of business sustainability
ratings to further reflect sustainability in
our procurement practices. Suppliers’
ESG ratings will become part of how we
manage the performance of our suppliers
and, over time, our decision-making.
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 2023
41
Steve Parry arrived at Hiscox in
July 2023 from AIG, where he had
been working as their Global Head
of Technical Claims. At Hiscox, he
is responsible for driving Hiscox’s
Group-wide claims strategy, setting
standards, performance metrics and
controls, and providing market-leading
technical expertise through a
number of centres of excellence.
Q&
A:
with Steve Parry
Group Claims Director
Claim to fame
When you’re in the business of
paying claims, having an effective
and efficient claims function, with
the right expertise, as well as a
human touch, is absolutely vital. >
42
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
43
Q&
A:
with Steve Parry
Group Claims Director
Q: What is it that first drew you into the
insurance world?
A: So, I’m originally from Manchester. My
dad’s a builder. He owns a construction
firm, and all my family work there –
everybody. The funny thing is, I can’t
even wire a plug, I’m just useless at
anything like that, so I applied for jobs
in banks, insurance companies and
financial institutions instead. I really
wanted something with a customer-
centric approach, and that’s what I found
with insurance. I was offered roles in
underwriting and claims, but I was most
interested in directly helping people
with their problems, so I went down
the claims route. I initially worked for
AIG as a roaming casualty investigator
around North West England, then moved
to London, where I ended up leading
property and energy clients for AIG
internationally. I left them and joined
ACE, which then became Chubb, but
AIG tempted me back five years ago into
a global role. Having held both global
and regional leadership roles gave me
a real focus on how I could provide a
global lens into claims, which will help
retain and attract customers through
our differentiated claims service.
Q: Has your experience at the
coalface, dealing directly with
customers in a crisis, informed
how you think about claims?
A: Completely. I’ve spent a lot of time in
rooms with people whose faces have
been drained of all colour, helping them
navigate some really problematic issues.
You’re saying: “Don’t worry, we’re going
to help with this. We’re going to do the
following things to help in the short
term and the long term.” It’s almost
like everybody fires back up again,
the colour comes back. That moment
of truth is really powerful. I remember
flying out to Japan after the Fukushima
44
Hiscox Ltd Report and Accounts 2023
earthquake. There were only two or three
flights out of London, so the plane was
full of emergency services, Red Cross
personnel, all these people who do such
important work. They were asking me:
“What do you do? Who do you work for?”
I was like: “Oh, I’m the insurance guy.” At
first, it felt really embarrassing. But then I
thought, actually I’m here to help as well,
but in a different way. The work we do
keeps people and businesses going and
gives them reassurance when they need
it most. It’s important we remember that.
Q: What have your first impressions of
the Hiscox approach to claims been?
A: In some ways, Hiscox is quite
traditional in its approach in that we like to
hold people’s hands all the way through
the claims process. My thinking is that a
lot of people like that, but not everybody
does. If I’m a high net worth customer I
might expect a concierge service, a white
glove service at every point, which is
what we offer. But if I’m a small business
owner, I might want to buy my insurance
through digital channels when it suits me,
and then expect to be able to notify my
insurer of a claim through the same route.
People’s expectations can be slightly
different, so my goal is to always exceed
those expectation levels. That’s really
good service.
Q: How does what you learn through
your interactions with customers
feed into the rest of the business?
A: Claims is basically the early warning
system for the whole organisation.
It’s really important that we take the
actionable learnings from claims and
get them into the business quickly,
so we can reflect them in reserving,
wording and pricing. I’m currently
heavily involved in a project called
‘trilogy’, which covers the relationship
between claims, underwriting and
actuarial. We’re building some real
momentum, and I think it could lead us
to some interesting places, particularly
around thought leadership with our
customer base.
Q: How do you see the evolution of
technology impacting on the claims
process in the coming years?
A: Look, there’s no doubt there is some
real potential out there, especially when
it comes to AI. Firstly, it’s helping us
with our data – having AI pointing to the
golden nuggets in our dataset is really,
really powerful. And then there’s the
customer journey piece. Any AI that
will enhance the customer journey is
something I’m really interested in – and
I don’t mean a bot asking you pre-set
questions and then exploding because it
doesn’t understand your answers. I’ll give
you an example: you ring to make a claim
on your mobile phone, and because
we have your number in our dataset,
it already knows all your customer
details and what cover you have, so it
can enhance your claims journey from
acknowledgment to resolution using
technology-based adjudication or,
where needed, referral to a Hiscox
claims professional who can provide
that technical help and support to our
customers. Technology can be a real
accelerator and enabler, but it has
to come at the right time and for the
right customers.
Q: In claims, what are you looking for
in your people?
A: Basically, we employ people who are
good at solving problems for customers.
That means we need to employ experts
who know their fields inside out: the
energy claim, the art theft, the house fire,
the intellectual property issue, whatever
it is. Customers buy that deep expertise
from us: that’s why they come to Hiscox.
We employ people who are good at
solving problems for customers. That
means we need to employ experts
who know their fields inside out: the
energy claim, the art theft, the house
fire, the intellectual property issue,
whatever it is. Customers buy that
deep expertise from us: that’s why
they come to Hiscox.”
We need claims professionals who can
really help sort that tricky problem out for
them, but also hold their hand through
the journey – people who are good with
customer interactions, and don’t just
talk in insurance language. That industry
expertise is so important, because the
knowledge base needs to be there, but
so too is the communication part. So
when you have a team of people that
can do both, that’s pretty special.
Q: Looking ahead to next year, what
do you expect your focus to be?
A: A lot of it is about sharing learnings
across the Group, looking for
consistency in the way we run claims,
whether you’re in London, the USA or
wherever. At the moment, everyone
does things slightly differently so we
can probably make better use of some
of the natural synergies where they
exist. There is also a real focus on the
customer and how we leverage the
touchpoints we have with them. My
bank, for example, will message me on
different things throughout the year,
which is something we don’t really do.
Without overdoing it, we could have far
more of a feedback loop, rather than:
“Take out your insurance, we’ll see you
in a year’s time.” The only potential
break in the cycle is if you have a claim.
I touched upon ‘trilogy’ earlier and
it’s something I’m passionate about
embedding across the whole business.
It has the ability to help accelerate
our growth plans and learnings with
claims, underwriting and actuarial
working together as a constant learning,
feedback and business barometer.
And the last thing is our people: investing
in our people and making sure we have
the right people in the right seats, doing
the right things, thinking in much the
same way. Getting that people piece
right is really important to me.
Q: How have you felt a sense of
community since you arrived
at Hiscox?
A: Do you know, there isn’t one person
on the Group Executive Committee who
hasn’t said to me: “We really want to help
you and the claims teams be successful.”
Before I presented at the GEC for the
first time, members reached out to me
in advance to offer advice and support.
That was really powerful – they were
setting me up for success, sharing their
knowledge and experience to help me.
The other thing that almost made my
voice go croaky was when I went into a
Hiscox claims ‘townhall’ meeting, and
there were about 45 or 50 people sat
there, staring at me. I was pretty nervous,
but they seemed genuinely interested
in what I was going to say. There was a
real sense of anticipation and excitement
in the room. It was a bit overwhelming,
actually. I wish I could bottle that and
share that energy with everyone.
Hiscox Ltd Report and Accounts 2023
45
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Sustainability
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. We have established many
of the structures, policies and processes
that it takes to build a responsible business,
but the sustainability landscape is rapidly
evolving and so too must our approach.
During 2023, we reviewed our sustainability
strategy in the context of not only our
Hiscox sustainability strategy
growing business and regulatory
requirements, but also the changing
expectations of some of our key
stakeholders including customers, brokers
and investors, as we want to understand
the areas that matter most to them.
to be a great place to work, deliver
exceptional customer experiences,
adapt effectively to the changing risk
landscape, do business in a responsible
and ethical way, and play our part in the
net-zero transition.
Our five strategic pillars – people,
customers, governance, risk adaptation
and impact – each represent important
areas of focus for the Group. We want
Activities, progress and oversight of each
pillar will continue to be driven through
our embedded sustainability governance
structures, under GEC leadership.
Group purpose
We give people and businesses the confidence to realise their ambitions.
Sustainability ambition
We want to be here for the long term, for our customers, colleagues and communities, operating in a sustainable way for
the future.
Strategic pillars
People
Customers
Governance
Risk
adaptation
Impact
We aim to be a great
place to work, attracting,
nurturing and retaining
talent through:
— strong culture, lived
values and sense of
belonging;
— diverse, equitable and
inclusive practices;
— continuous learning
as a skills-based
business;
— differentiating benefits;
— supporting our people
and communities
to thrive.
We want to give people
and businesses the
confidence to realise
their ambitions through:
— delivery of our brand
promise across the
customer life cycle;
— best-in-class
claims service;
— championing SMEs;
— effective products
for risk transfer
and mitigation.
We are committed to
doing business in the
right way through:
— robust and
embedded
structures,
policies, processes;
— adherence to local
laws and regulation
wherever we
operate;
— responsible
investing;
— active risk
management.
We continually adapt
to an evolving risk
landscape through:
— sustainable
underwriting;
— understanding
climate impacts on
our underwriting;
— effective products
and services
for risk transfer
and mitigation;
— use of data and
technology
for changing
underwriting needs.
We are committed
to having a positive
impact by:
— reducing our GHG
carbon footprint;
— contributing to the
net-zero transition,
including through
responsible
operational
practices;
— using robust data
to drive a sustainable
and scaleable
operating model.
46
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Sustainability
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
My passion is people and
creating a framework
that allows everyone to
succeed and flourish,
which to me is part of our
sustainability narrative.”
Nicola Grant
Chief People Officer and Sustainability
Steering Committee member
and SEO London. In 2023, we provided
nine UK summer internship placements
and welcomed 20 new recruits through
our global graduate programme. We
also launched a new apprenticeship
programme in Hiscox London Market,
partnered with the London Market
Association to host work experience
students as part of VisionPath’s Futures
Academy, and ran an Insight Week in
London, offering places to students from
under-represented backgrounds.
Building a diverse and inclusive
workforce matters to us and is a
long-term priority. More information
on our focus on DEI can be found on
pages 62 to 67.
Beyond our own people, we also care
about positively contributing to the
diverse communities in which we live and
work. We donate to good causes through
the Hiscox Foundations in the UK and
USA, and we fundraise and volunteer
for the causes we care about through
Hiscox Gives. In 2023, our collective
efforts resulted in us supporting over
260 charities with donations totalling
just over $2 million and 1,400 hours of
volunteering. Find out more about our
social impact in our impact report at
hiscoxgroup.com/impactreport2022.
Customers
We are in the business of paying
claims, and during 2023 we paid out
$2 billion to customers around the
world. Delivering a best-in-class claims
service really matters to us, and this
work was recognised not only through
our customer and claims satisfaction
scores, but also through industry awards
including Insurance Post’s Counter
Fraud Team of the Year Award, Insurance
Times’ Claim Champion of the Year
Award and, most recently, Consumer
Intelligence’s Claims Satisfaction Award.
2023 also saw the introduction of the
FCA’s new Consumer Duty rules in the
UK. While we took a structured approach
to implementing the new rules, we very
much welcomed them as they not only
aligned to our new UK strategy and
overarching customer promise, but
also provided an opportunity to
strengthen our ability to deliver
good outcomes for retail customers.
Throughout 2023 we assessed and
enhanced the way we deliver for our
customers – including those with
characteristics of vulnerability – and
aligned the outputs with our own values
as well as the FCA requirements. As
a result, we have introduced a new
overarching Customer Framework,
the key features of which include:
a more insightful set of customer
metrics, outcome testing capabilities,
enhanced root cause analysis and
feedback loops, customer-driven
insights and, perhaps most importantly,
a cultural positioning of the customer
at the centre of our decision-making
and governance arrangements. This
approach will contribute to the delivery
of simplified customer journeys,
reducing friction points and improving
our ability to consistently deliver good
customer outcomes.
More information on customer
satisfaction, including some of our
2023 customer and broker satisfaction
scores, can be found on page 7.
Hiscox Ltd Report and Accounts 2023
47
People
Building connected and energised
teams was a business priority for us in
2023 and we are proud of the progress
we have made. We have evolved our
employee listening strategy, as we look
to capture more real-time feedback on
what we’re getting right and what we may
need to change, replacing our annual
employee engagement survey with more
concise pulse surveys. In 2023, 80% of
our people participated in our first pulse
survey, in which 83% told us they would
recommend Hiscox as a great place to
work and 83% said they felt proud to
work for Hiscox. We also maintained
our overall engagement score of 82%,
the same as 2022, which at that stage
represented a ten-year high.
Providing continuous learning
opportunities for our people also
remained a significant focus in 2023
with 66 of our colleagues enrolling
in the Hiscox Data Academy, an
apprenticeship programme focused
on increasing the data literacy of
employees, and seven benefitting from
our finance apprenticeship programme
to support them in achieving their ACA
qualification. All of our people have
access to our learning management
system for personal development and
technical training, and in 2023, our
people completed over 44,000 hours
of training worldwide – that’s almost
15 hours per person. We also provide
on-the-job training, for example through
our established internship and graduate
programmes, where we continue to
target a diverse pool of students. We do
this through a range of partnerships with
organisations such as the Bright Network
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Sustainability
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Find out more about our double
materiality assessment process,
including more information on
the material issues it contains, at
hiscoxgroup.com/responsibility/
doublemateriality.
issues and opportunities of rising
importance, and in support of emerging
regulatory requirements including
CSRD and ISSB’s IFRS S1 and, to a
lesser extent, S2.
Double materiality assessments are
increasingly common practice: they
are used by companies to help shape
sustainability strategies, and by
external consumers including investors
to understand company thinking on
sustainability – including areas of
potential risk and significant opportunity.
They look both outwards at our impact on
people and the planet, such as our GHG
emissions, and inwards at the impact of
specific issues on our business, such as the
effects of climate change on the frequency
and severity of extreme weather events
and, as a result, our claims experience.
Governance
We continue to enhance our understanding
of the material sustainability issues facing
our business, and in 2023 we conducted
a double materiality assessment to help
us identify the most pressing sustainability
topics we need to address, as well as the
Hiscox materiality map
People
Customers
Governance
Risk adaptation
Impact
Monitor and manage
Biodiversity and our
impact on nature
h
g
H
i
t
n
e
m
n
o
r
i
v
n
e
e
h
t
d
n
a
y
t
e
c
o
s
n
o
t
c
a
p
m
i
I
w
o
L
Ongoing importance
Priority
Customer and
broker experience
Digital transformation
and operational excellence
Corporate governance
and business ethics
Responsible
underwriting
Being a great
place to work
Climate
change
Responsible
Investment
Data privacy and
information security
Resilience to
volatility– market,
political, economic,
social, other
Reducing our
environmental footprint
Positively contributing
to our communities
Low
Impact on Hiscox
High
Key
Manage and monitor: topics of relatively lower
impact at the point of assessment, but which are
managed and monitored with a readiness to adapt
to evolving internal and external requirements.
48
Hiscox Ltd Report and Accounts 2023
Ongoing importance: topics of ongoing
importance due to their influence on our strategy,
performance and stakeholder relationships and so
require continuous focus and active management.
Priority: current mission-critical sustainability
topics due to their potential to impact our reputation,
financial performance, and ability to attract and
retain customers, business partners and investors.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Sustainability
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
There are many aspects
to building a sustainable
business, and the one
that I will personally be
driving in 2024 is our
customer-centricity.”
Jon Dye
Chief Executive Officer, Hiscox UK and
Sustainability Steering Committee member
We consider it a five-step process.
1. Planning and stakeholder identification.
2. Horizon scanning, landscape review
and issues identification.
3. Stakeholder engagement
and consultation.
4. Analysis, mapping and validation.
5. Embedding in planning and
governance structures.
The material issues mapped on page 48
were selected following a comprehensive
review of strategic documents, such as
the risk and control register; the external
reporting and regulatory landscape, such
as GRI; and through a process of media
and peer review. This created an initial
longlist of proposed material sustainability
risks and opportunities, which through a
period of internal review became a shortlist
of 13 material topics that we then used
to gain both qualitative and quantitative
insights from key stakeholders. We did this
through a range of one-to-one interviews,
focus groups and targeted online surveys
with over 200 stakeholders including top
shareholders, investment managers,
brokers, customers and representative
internal stakeholders to capture a range of
views and perspectives on the materiality
of our prescribed range of sustainability
issues. These insights were subsequently
prioritised and weighted by stakeholder
group in line with common weighting
practices, which informed the positioning
of each issue in the matrix and resulted
in the 13 proposed material topics being
distilled into the final 12 material topics
mapped on page 48.
In line with our sustainability governance
structure (see page 51), our materiality
map was approved by the Sustainability
Steering Committee, and will be refreshed
periodically. The valuable insights we have
gained through our first sustainability
materiality assessment have already
informed our sustainability strategy and
2024 activity plans. During the year ahead,
we will focus on aligning our materiality
assessment with our established risk
management processes, as well as
our longer-term sustainability plans.
• we provided over 1,400 Leakbot
devices to our UK home insurance
customers, giving them an early
warning leak detection system
that can help them avoid
damaging cost of water claims.
Risk adaptation
We are passionate about risk adaptation
in all its forms – from product innovation
to risk mitigation tools – and as the
underwriting risk landscape continues to
evolve, so too does our approach. In 2023:
• we enhanced our sustainable
underwriting strategy, with four key
areas of focus: how we articulate
our underwriting appetite and
exclusions; how we understand,
manage and seek to mitigate
sustainability-related underwriting
risks; the role of innovation and
product development in the net-zero
transition; and our data capture
and measurement capabilities;
• we set out our ambition to grow
our exposure to renewables
through our new ESG 3033
sub-syndicate, which during 2023
has written risks ranging from
offshore windfarms in Europe,
hydro in New Zealand, battery
energy storage systems in the
UK and solar in the USA;
• we continued to support
customers through the Hiscox
Risk Academy, our free online
risk management platform with
e-modules tailored to business
type, which has now been used
by over 15,000 employees at over
2,700 businesses since it was
established in 2022, with almost
36,000 courses completed;
More information on climate-related risk
adaptation can be found in our TCFD
disclosure on pages 50 to 61.
Impact
We continue to enhance our
responsible operational practices in
support of our sustainability ambition
and net-zero goals.
During 2023, this included changes
in our procurement and supplier
management practices to ensure
that, over time, we are able to
consistently assess and track supplier
performance against a wide range
of sustainability issues. As such, we
have commenced a pilot with a global
provider of business sustainability
ratings, starting with our largest
suppliers. Our intention is that, over
time, these ratings will form part of
our buying decisions, as well as
how we manage the performance
of our suppliers.
In addition, we also continue to
carefully monitor our GHG emissions.
The half-year footprint process we
introduced is proving effective,
improving the quality of our data and
providing oversight beyond a single point
in time. A copy of our full GHG inventory
for 2023, along with our SECR table,
can be found in our TCFD disclosure
on pages 50 to 61.
Hiscox Ltd Report and Accounts 2023
49
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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 FCA for
all premium-listed firms on a ‘comply
or explain’ basis, and the mandatory
climate-related financial disclosures by
publicly listed companies, large private
companies and LLPs.
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 in the pages that
follow, so for more information go to:
hiscoxgroup.com/2023climatereport.
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 have been provided, and where we
have not yet disclosed fully against the
recommended TCFD disclosure, we have
flagged this and where possible outlined
current and planned actions being taken
towards full disclosure.
Governance
Board 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)
50
Hiscox Ltd Report and Accounts 2023
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 51 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. Climate-related
responsibilities are embedded across
Board and Management committees,
and where appropriate within job roles.
The Board has oversight, with the Group
Chief Executive Officer holding ultimate
accountability. This ensures that climate
action and ambition are driven by the
Group’s senior leaders as well as by
individuals with day-to-day management
responsibilities.
Sustainability governance structure
We have embedded climate into our
sustainability governance structure, and
the structure on page 51 shows how
information flows between the working
group, committees and the Board.
areas that matter most to our business –
our people, our customers, governance,
risk adaptation and impact – but crucially
it has also enhanced Management
ownership and accountability for
sustainability issues as we now have
a member of the GEC leading each
pillar. Risk adaptation and impact are of
particular relevance to climate issues,
so while our 2024 focus will be on
embedding our new sustainability strategy
and associated ways of working, we will
also provide updates on climate-related
progress against these pillars over time.
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). As climate becomes
further embedded in our business,
and regulatory requirements continue
to evolve, we may consider whether a
similar approach is required in other
parts of the business in the future.
Management responsibilities
In 2023, we created a new Sustainability
Manager role for the Group, to further
enhance our coordination of sustainability
and climate-related activities across the
business and drive progress. Embedding
this role within our business will be a key
focus for 2024 to ensure climate-related
commitments and objectives set by
the Board and SSC are integrated into
our operations.
We also reviewed our sustainability
strategy in 2023 in line with our own
ambitions and also taking into account
our most material sustainability issues
(see pages 46 to 49). The new Group
sustainability strategy, outlined on
page 46, has sharpened our focus on the
Climate-related governance discussions
While this structure also covers broader
sustainability matters, climate-related
matters are an important component
of this and as such are regularly
debated and discussed. Examples
of climate-related discussions during
2023 include:
s discussion and approval at the SSC
of the 2023/24 ambitions outlined in
our 2023 climate report;
s annual review of the ESG exclusions
policy and the responsible
investment policy, coordinated by
the sustainability working group
(and, in the case of the responsible
investment policy, the Group
Investment team) and approved
by the SSC;
Chapter 1
Performance
and purpose
6
22
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
165
Environmentally focused commitments
ClimateWise
Principles for Sustainable Insurance (PSI)
Paris Agreement 2015
Sustainable Markets Initiative
Principles for Responsible Investment
(PRI)
Task Force on Climate-related Financial
Disclosures (TCFD)
Sustainability governance structure
This is how we manage and monitor sustainability issues, including climate issues, to ensure appropriate accountability and
oversight. This structure is supported by other established roles and teams, including our employee-led networks and our
green teams, our governance committees, and Management forums, such as those outlined on pages 56 and 57. While not
explicitly shown here, these also feed into elements of this structure.
Board
s Oversight of long-term sustainability vision, strategy, priorities and performance against agreed metrics and targets.
s Ensures governance and accountability in place with sufficient support.
s Meets quarterly and discusses sustainability strategy, trends, opportunities, vulnerabilities, and emerging issues
including climate issues at least annually.
Risk Committee
s Advises Board on sustainability strategy, key priorities, risk profile, risk exposures and opportunities.
s Meets quarterly and recommends proposals for consideration by the Board as required.
Group Risk and Capital Committee (GRCC)
s Quarterly reporting on sustainability and climate matters
from the SSC.
s Sets high-level Group strategy, priorities and ensures
delivery across the Group.
Group Executive Committee (GEC)
s Periodic sustainability sessions.
s Sets business unit or function sustainability-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 sustainability strategy, driving actions and delivery
at a Group level.
s Typically meets quarterly and oversees the embedding of 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.
Sustainability working group
s Operational body, providing a central point of coordination and expertise for sustainability and climate-related activity
across the Group.
s Manages sustainability-related Group reporting, disclosures and communications.
s Meets monthly and provides input and recommendations to Management on sustainability matters.
s Focuses on sustainability-related research, including external monitoring and expectations.
Please see the glossary on page 248 for definitions of acronyms.
Hiscox Ltd Report and Accounts 2023
51
Chapter 1
Performance
and purpose
6
22
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
165
More information on our approach
to sustainability and, in particular,
climate can be found at
hiscoxgroup.com/responsibility.
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 by constantly
evolving our climate modelling
approach (see page 39);
s defining the Group’s most
material sustainability risks and
opportunities, including
climate-related risks and
opportunities as part of the
development of a double
materiality assessment for the
Group, which can be found on
page 48;
s development of ‘climate action
plans’ in our UK legal entities,
which are a standing agenda
item at the SSC to ensure full
governance oversight. During
2023, these plans were the subject
of a comprehensive review and
embedded actions moved into
‘business as usual’ activities.
Training and building expertise
We also consider the training and
development requirements of those
with oversight responsibilities and
accountability for climate-related
matters to ensure we have appropriate
awareness and expertise to drive
progress. In 2023, this included an
externally facilitated climate training
session for the SSC and other
relevant leadership team members,
to explore the changing external
landscape, with a specific focus on
the evolving ESG sentiment, and the
associated risks and opportunities.
Externally facilitated climate-focused
training is now an annual feature in
our plans so we will continue to build
out our expertise in this area in 2024.
52
Hiscox Ltd Report and Accounts 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
gained accreditation in the form of the
CFA Certificate in ESG Investing, while
members of our central strategy and
Investor Relations teams have also
upskilled through the Sustainability in
Insurance course for senior leaders, run
by the LMA through the ESG Academy
they established during 2023.
We will consider further ESG or
climate-specific training in 2024
as appropriate.
Policies and processes
The governance structure we have
embedded for climate-related 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 policies
are all published on hiscoxgroup.com
and include the following:
s the Hiscox Group ESG exclusions
policy, which outlines our ambition
to reduce steadily and eliminate
by 2030 our (re)insurance and
investment exposure to thermal
coal, oil sands, Arctic exploration
(beginning in the ANWR region) and
controversial weapons. Oversight
of this policy occurs at the SSC,
as well as through the relevant
underwriting and investment
committees, with implementation
of it driven at a business unit
and function level across both
underwriting and investments. The
policy is reviewed annually and its
2023 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 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
SSC and the Group Investment
Committee. The policy is reviewed
annually and its 2023 review
resulted in no changes;
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 2023, it was reviewed
and further enhanced in line with our
evolving environmental practices;
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
Chapter 1
Performance
and purpose
6
22
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
165
Our climate-related policies can be found
at hiscoxgroup.com/about-hiscox/
group-policies-and-disclosures.
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 and shared with suppliers
during our procurement and supplier
review processes. During 2023, we
continued to review our supplier
code of conduct and evolved our
procurement and supply chain
management practices with the
introduction of a new independent
ESG ratings assessment for new
and existing suppliers.
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
2023 performance resulting from these
disclosures can be found on page 60.
These scores are used to inform areas
of improvement for the year ahead,
alongside our own sustainability plans,
with the resulting action plans driven
by the sustainability working group and
overseen by the SSC in line with our
established governance structure
(see page 51).
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 36 to 39), both through our
own established internal programme
of stress testing and scenario analysis
and also as participants in market-wide
activities when they occur, 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 38, 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 36 to 39.
Strategy
Climate-related strategic objectives
Strategic climate-related objectives are
considered in the Board-approved Group
business plan as each business area or
function considers the climate-related
elements that affect them – for example,
from an underwriting, investment or
operational perspective. The Group
business plan outlines the strategic
priorities for the business and is used
by Senior Management to guide the
Group’s annual business strategy and
financial planning.
Specific climate-related strategic
objectives for the Group in 2023
included further thinking on the
Group’s sustainable underwriting
strategy (including the management
of climate-related underwriting risks
and how we will realise climate-related
underwriting opportunities), and the
development of a double materiality
assessment for the Group which
included identifying the most material
climate-related risks and opportunities
for the Group (see page 48).
Process for identifying climate risks
and opportunities
Climate-related risks and opportunities
are identified and either progressed
or managed and mitigated in much
the same way as any other risks and
opportunities facing the Group. The
relevant structures involved in identifying
climate-related risks and opportunities in
particular are outlined on page 54.
Climate scenario analysis
The governance and risk management
structures we have in place are critical
to the delivery of the annual Group
operating plan 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 a range of
short-, medium- and long-term time
horizons. We consider short term to be
0-2 years, medium term to be 2-5 years,
and long term to be five years and over,
which aligns with some of our business
planning timeframes.
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
Hiscox Ltd Report and Accounts 2023
53
Chapter 1
Performance
and purpose
6
22
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
165
Identified climate-related risks and opportunities
Risk type
Time horizon
Risk
Risk to Hiscox
Mitigation
Physical
Short,
medium and
long term
Transition
Short,
medium and
long term
Litigation
Medium and
long term
Increased
frequency
and severity
of natural
catastrophes
including
floods and
storms.
Increased claims from
customers and 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.
Given the majority of the
policies we write are annual
(re)insurance policies,
we regularly consider our
exposures to physical
climate change risks which
gives us the opportunity
to adjust pricing and
appetite accordingly.
Slump in
the price
of carbon-
intensive
financial
assets.
Financial market dislocation
could have a negative
impact on our investment
portfolios if we do not
actively reduce our exposure
to carbon-intensive
financial assets.
Increased
cases of
legal action
against those
that are seen
as being
responsible
for climate
damage.
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.
Our ESG exclusions policy,
which will see us reduce
steadily and eliminate by
2030 our exposure to the
worst carbon emitters in
both underwriting and
investments, prepares us
for this, as do our GHG
emission reduction targets.
Given the majority of the
policies we write are annual
(re)insurance policies,
we regularly consider
our exposures to climate
litigation risks which gives
us the opportunity to
adjust pricing and appetite
accordingly. We could also
consider specific policy
exclusions over time.
Associated metrics
and targets
–
ESG exclusions
policy to 2030.
GHG targets
to 2050.
–
Time horizon
Opportunity
Opportunity to Hiscox
Associated risk
Associated metric
and target
Opportunity
type
Reducing
GHG
emissions
Short,
medium and
long term
Realise
efficiencies
through
reducing
GHG
emissions.
Product
development
Short,
medium and
long term
Development
of climate
impact-
focused
products and
services that
effectively
address
evolving
customer
needs.
54
Hiscox Ltd Report and Accounts 2023
Continued exposure to
volatile carbon offset costs.
GHG targets
to 2050.
Loss of customers as a
result of lack of relevance
in our product and
service offering.
–
Reducing our GHG emissions
would reduce our exposure
to volatile carbon offset costs
and is likely to allow us to
realise operational efficiencies
across the Group, including
in our operations in terms
of what we consume and in
areas such as business travel.
Supporting our customers
with risk adaptation products,
tools and services that meet
changing customer needs
represents a significant
growth opportunity,
particularly in the UK and
the USA where we already
serve the markets with
flood insurance products,
and in the London Market
where our ESG 3033
sub-syndicate is increasing
capacity for insurance cover
in high-growth areas such as
renewable energy.
Chapter 1
Performance
and purpose
6
22
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
investment portfolio which lends itself to
constant adjustment. This flexibility is our
key tool for managing the multi-decade
challenge of climate risks holistically.
We also conduct our own in-house
stress testing and scenario analysis
and contribute to industry events which
can help us manage the risks related to
climate impact. While there was not an
industry-wide exercise in 2023, in 2022
Hiscox Syndicate 33, Syndicate 3624
and Hiscox Insurance Company (HIC)
participated in the Bank of England’s
General Insurance Stress Test (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, with the risks and
opportunities identified contributing to
the table on page 54.
Climate-related product development
We are continuously developing products
that are necessary for our customers in
the short, medium and long term and
that consider changing needs including
in relation to a changing climate. What
that looks like varies by business area;
for example, through our participation
in Flood Re in the UK, we are better
positioned to provide flood insurance to
some clients that are in high-risk flood
areas, and in the USA our FloodPlus
products similarly improve market
access to affordable flood cover.
Hiscox UK flood insurance
In UK retail, where our climate-related
exposures are relatively low, we have
been supporting homeowners and small
businesses with effective flood insurance
for a number of years. As such, we are
a longstanding participant in Flood Re,
the government-backed scheme
designed to improve both the access
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
and affordability of flood insurance
for high-risk properties. Through our
participation in Flood Re, we also
support the ‘Build Back Better’ provision
introduced to Flood Re in 2022. This
provision enables customers to access
further funds, above reinstatement
costs, after a flood to install flood
resilience measures that are designed
to reduce the cost and impact of future
flooding. However, for our high-value
home insurance product this is an
approach we have taken for some time
because we have always believed that
prevention is better than cure.
Hiscox UK sustainability and
environmental professional indemnity
In UK retail, we offer a suite of tailored
professional indemnity (PI) products
for specific emerging professions and
sectors. Given the continued growth
in environmental and ESG-related
professions, in recent years our PI
product suite has included a bespoke
product for green consultants – designed
specifically for businesses, consultants
or freelancers who are providing
professional advice and consultancy
on environmental goals and practices
to protect them against claims arising
from any poor or negligent advice given.
During 2023, we reviewed our green
consultants product offering and have
evolved the product in line with the
changing risk landscape, consumer
expectations and feedback, and our
own claims insights. The result of
this work is our new sustainability
and environmental PI product, which
better reflects the current landscape
of climate-related, environmental and
broader sustainability professions which
are emerging. As such, it is designed
specifically for those professionals
providing advice and services in the ESG
sector, and who use their professional
expertise to help clients reach their
sustainability goals. In addition to the
standard elements of PI cover, the policy
provides more tailored elements of cover
for risks associated with sustainability
or climate-related incentives and tariffs,
or environmental certificate providers
– whether these risks relate to our
customer’s own practice, or those of
their client.
Hiscox London Market FloodPlus
We also support clients with effective
flood cover in our big-ticket London
Market business, where our
award-winning FloodPlus product
offers higher limits and wider coverage
than those provided by the National
Flood Insurance Program (NFIP), the US
government-backed scheme. Through
FloodPlus, we also offer premium
discounts for those who take steps
to minimise the risk to their property
from flood. Our pricing capabilities for
FloodPlus are significant, as we use a
combination of in-house modelling and
additional model sources to identify
location level pricing, and we work
with data providers to augment the
information we receive from vendor
flood hazard maps which enhance our
ability to view first-floor elevation data.
Hiscox London Market ESG 3033
During 2023, we launched ESG 3033 –
a sub-syndicate of our Lloyd’s Syndicate
33 – to recognise those businesses we
provide insurance for who can show they
have a positive ESG record. It is industry
agnostic and brings additional insurance
capacity to those clients to help them
cover ESG-positive risks, such as wind
and solar farms. In time, this should lead
to premium savings for those businesses
who show how their ESG performance
makes them a more attractive risk.
Climate risk exposure management
Our natural catastrophe team uses
catastrophe models, paired with
atmospheric models, that are created
with the latest IPCC science to achieve
a quarterly risk review of Hiscox ‘s
exposure to peril impacts. The team’s
work also results in a one-year
forward-looking model of relevant
natural catastrophe risks, which reflects
the fact that the majority of the policies
we write are annual in nature, and
supports our ability to rapidly respond to
emerging trends as required. The team
includes historical claims data in the
model to produce a realistic likelihood of
risk exposure to Hiscox, and alongside
other functions this work contributes
to the development of UK entity level
climate action plans which are reviewed
and approved at both entity-level and
through the SSC. One example of how
an identified risk has been managed
with the help of the natural catastrophe
team relates to Japanese typhoon risks,
where through modelling we identified
changing typhoon patterns in terms of
both size and intensity, which we were
then able to reflect in how we price this
particular business.
Decarbonisation
We are committed to reducing our
emissions to minimise our impact on the
environment and the impact of climate
on our business, and we understand that
Hiscox Ltd Report and Accounts 2023
55
Chapter 1
Performance
and purpose
6
22
Chapter 2
A closer look
Task Force on
Climate-related
Financial Disclosures
(TCFD)
12
36
More information on our broader
risk management structures and
processes, of which climate-related
risk management is one component,
can be found in the key risks and risk
management sections.
by reducing our emissions, we
are reducing our impact to some
climate-related risks as our exposure
to some transition risks will decrease.
The business has set internal near-term
targets that are aligned with the Paris
Agreement, and our current focus
includes reducing Scope 2 emissions
by switching to renewable electricity
across our office estate. We aim to build
on this work in 2024 with the continued
development of our decarbonisation (or
low-carbon transition) plans.
Risk management
Approach to climate risk management
While there are certain nuances to
climate risk, we consider it to be a
cross-cutting risk with the potential to
impact each existing risk type rather
than a stand-alone risk. We look at how
climate interacts with different risks and
whether this may result in correlations or
concentrations of exposure that we need
to know about, monitor and manage.
Climate-related risks, among other major
exposures, are monitored and measured
both within our business units and at
Group level. 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 is structured
in a way that allows us to continually
and consistently manage the various
impacts of climate risk on the risk profile.
Examples of the climate-related risks
identified can be found on page 54,
and for more information on the risk
management framework, see page 37.
Our risk and control register, risk and
control self-assessment process, and
risk policies include relevant climate
considerations against each of our
56
Hiscox Ltd Report and Accounts 2023
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Climate risk management and oversight
Ltd Board
Risk Committee
Group Underwriting Review
(GUR)
Group Risk and Capital Committee
(GRCC)
Natural
Catastrophe
Exposure
Management
Group
Casualty
Exposure
Management
Group
Grey Swan
Group
Sustainability
Steering
Committee
(SSC)
existing risk types, including our key risks
which can be found on pages 12 to 15.
Therefore, climate-related risk drivers are
not considered a single risk factor but are
assessed and recorded against the risks
on our risk and control register.
Climate risk appetite
In line with regulatory requirements,
we have developed a climate risk
appetite statement for the Group,
which articulates our risk appetite when
it comes to climate and guides our
approach to climate risk. The climate
risk appetite statement was formally
approved by the SSC and during 2023
we undertook further work to measure
and track our climate-associated risks
where such risks are modelled and where
the Group has the capabilities required to
manage them. This work will continue to
be a focus during 2024.
Climate risk management and oversight
Our Risk Committee is responsible
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,
and from independent risk experts for its
understanding of the risks facing both
our business and wider industry.
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 Chief Executive
Officer, and attended by other senior
leaders including the Group Chief Financial
Officer, Group Chief Underwriting Officer
and the 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.
Deep dive – the Natural Catastrophe
Exposure Management Group
The Natural Catastrophe Exposure
Management Group reviews natural
catastrophe risk at least quarterly. This
group is chaired by the Group Chief
Underwriting Officer and attended
by other Hiscox senior managers
responsible 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.
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
The models are reflected with changes
to Hiscox’s modelling policy, historical
claim data and all of our research
prioritisations. The results from the
updates are signed off and authorised by
Chapter 1
Performance
and purpose
6
22
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
165
Climate Value-at-Risk (CVaR)
Warming scenario
CVaR (%)
CVaR ($m)
Data as at year-end 2023.
1.5°C
(4.6)
(367)
2.0°C
(3.7)
(296)
3.0°C
(3.0)
(244)
Percentages above are calculated as a proportion of total investable assets.
This analysis aggregates the bottom-up exposure of our investee companies to policy risk, technology
opportunities and physical climate risk to produce a holistic view of the Group’s risk exposure in different
plausible scenarios. The modelling uses the AIM CGE model for future carbon prices and assumes
aggressive physical risk scenarios.
These stress tests are updated quarterly and are run for each entity, portfolio and at Group level.
The calculated values are also compared to the outcomes for a globally diversified equity index and
are included within our internal ESG investment dashboard in order to highlight any Management
actions required.
this group, resulting in recommendations
of changes to Hiscox’s policies to
mitigate the potential impact of
climate-related losses to the Group.
A number of committees feed into the
GRCC, including some with particular
climate relevance such as the SSC and
the Grey Swan Group (see below).
Deep dive – the Casualty Exposure
Management Group
This Group develops and manages
the systemic risk that may arise in
our casualty portfolio. Extreme loss
scenarios are run to better understand
and manage the associated risks
throughout Hiscox. The risks that the
team review include possible climate
litigation covering topics such as
greenwashing, energy litigation and
mis-statement of disclosures. There
is potential exposure in all business
units, particularly in our London Market
business in areas such as general liability,
marine and energy liability and D&O. The
team continues to track developments
in climate cases, new legislation and
corporate reporting requirements to
understand potential risks, and these are
taken into account when setting business
plans across the Group.
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 12 to 15 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.
Deep dive – the Grey Swan Group
Grey swan risks are defined as being
those risks with a potentially large
impact, but a low perceived likelihood of
happening. Therefore, 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 address them. Several 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 sustainability and climate change
are considered as part of this group, in
addition to other matters unrelated to
sustainability 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, forward-looking assessment
scenarios, stress tests, and reverse
stress test scenarios.
Metrics and targets
Metrics
We recognise the need to establish
climate-related metrics that can inform
and incentivise the management of our
identified climate risks and opportunities.
While we have established metrics
in areas such as GHG emissions,
investments, and underwriting exposure,
we have more work to do in other
areas and as such we are committed to
expanding our disclosures in the near
future to ensure we can further quantify
our progress over time.
Climate Value-at-Risk (CVaR)
Hiscox’s investment exposure to climate
risk in different global temperature
scenarios can be analysed through
the lens of CVaR. This form of stress
and scenario testing is designed to aid
our identification, assessment, and
management of climate-related risks
as they arise and complements our
participation in market-wide activities
such as the Bank of England’s Climate
Biennial Exploratory Scenario (CBES)
in 2021 and the PRA General Insurance
Stress Test (GIST) in 2022.
Current models do not forecast any
loss in cash or government bonds, and
generally do not cover asset-backed
securities at present. Therefore the
stress impacts mainly derive from climate
risk exposure within our corporate bond
portfolio, and within our equity portfolios
to a smaller extent.
For Hiscox’s investments as a whole
the CVaR results for the different
scenarios, as of year-end 2023, are
shown in the table above.
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
Hiscox Ltd Report and Accounts 2023
57
Chapter 1
Performance
and purpose
6
22
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
165
Water and waste
Waste (tonnes)
Waste water (m3)
Activity data (UoM)
Emissions (tCO2e)
2023
2022
84.6
29,002.1
141.2
37,646.8
2023
23.9
5.8
2022
49.1
10.5
Total GHG emissions inventory 2020-2023*
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†
2023
(tCO2e)
2022
(tCO2e)
2021
(tCO2e)
2020
(tCO2e)
2023 vs. 2020
baseline
408.9
1,043.1
1,452.0
677.5
866.2
1,543.7
17,116.2
5.8
786.6
926.1
1,712.8
23,495.1 19,298.1
5.8
615.2
1,110.7
1,725.9
27,461.0
8.9
24,947.1 21,010.8 18,659.9 29,186.9
14,559.3
7,046.0
129,526 127,497.0 125,156.0 135,275.0
8,458.0
9,862.2
6.7
-33.5%
-6.1%
-15.9%
-14.4%
-24.7%
-14.5%
106.6%
-4.2%
Our Scope 1-3 emissions (excluding investments) are independently verified to a reasonable assurance
level. A limited level of assurance has been attained for Investments emissions. A copy of the verification
statement can be found at hiscoxgroup.com/responsibility/environment.
* 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 GHG reduction target. Scope 1 includes natural gas, fugitive emissions (leakage of gases from
air conditioning and refrigeration systems) and company cars, while Scope 2 includes electricity and
district heating/cooling. Operational Scope 3 includes 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 Scope 3 includes emissions that do
not directly contribute to the emissions associated with daily business activity, including non-operational
purchased goods and services, transportation and distribution and downstream leased assets.
An assessment across all categories of Scope 3 emissions has taken place and the relevant categories
are disclosed as part of our full GHG inventory (above). Note some emissions totals may not tally due to
rounding. A copy of our Streamlined Energy and Carbon Reporting (SECR) GHG emissions table can be
found on page 59.
The investment emissions are calculated using the Enterprise Value Including Cash (EVIC-based)
method of attributing financed emissions to investors, and calculations use Morgan Stanley Captial
International’s (MSCI) carbon data† as the ultimate source. Our 2020 operational emissions baseline for
business travel has been restated to project pre-Covid travel patterns.
† 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.
We are currently making good
progress towards the first of our interim
targets, with approximately 24% of
our corporate bond portfolio having
net-zero/Paris-aligned targets as at
year end and we will continue to engage
with our managers on further net-zero
plans and action.
2023 GHG emissions
We continue to focus on managing
and reducing our carbon emissions.
We have been engaging with our
landlords to move towards renewable
electricity and other sustainable
measures, and saw a decrease in
our Scope 1 and 2 market-based
GHG emissions in 2023 vs 2022.
With our Scope 3 operational emissions,
we have seen an increase compared to
the previous year, driven in part by an
increase in operational emissions from
purchased goods and services, in line
with heightened overall spend in this area
in 2023. There is also a corresponding
increase in upstream transport and
distribution (T&D) emissions. We will look
to further enhance our supplier emissions
data in 2024 through our partnership with
a global sustainability ratings provider.
Business travel emissions also increased
this year. This reflects our improved data
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.
Our GHG targets are important as they
will help us to reduce our exposure to
volatile carbon costs in the future, for
example, the cost of offsetting, and
therefore help to mitigate the financial
risks associated with our GHG emissions.
Interim GHG targets
We recognise that achieving these
targets will take collective, consistent
effort and continue to work towards
achieving them.
s In addressing our Scope 1 and
Scope 2 targets, we continue
to produce a half-year carbon
footprint process in order to further
enhance data transparency and
accuracy and provide a midpoint
for internal tracking and review.
s We continue to review all electricity
contracts across the Group to
further improve our evidence base
and oversight as we migrate to
renewable electricity contracts
wherever possible.
s On Scope 3, where emissions are
dominated by our investments, we
have set a number of interim targets:
s we aim for more than 25% of
our corporate bond portfolio
by invested value to have
net-zero/Paris-aligned targets
by 2025;
s we are targeting an additional
25% by AUM coverage every
five years as we aim to be on
a linear path to 100% portfolio
coverage by 2040.
58
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
22
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
165
Streamlined Energy and Carbon Reporting (SECR) GHG emissions
Fuel consumption – stationary
(Scope 1) (tCO2e)
Fuel consumption – mobile
(Scope 1) (tCO2e)
Fugitive emissions
(Scope 1) (tCO2e)
Scope 1 total (tCO2e)
Electricity (Scope 2)
– location-based*† (tCO2e)
Electricity (Scope 2)
– market-based*‡ (tCO2e)
District heating and cooling
(Scope 2) (tCO2e)
Scope 2 market-based
total (tCO2e)
Total Scope 1 and Scope 2
(location-based)
Total Scope 1 and Scope 2
(market-based)
Scope 1 and 2 intensity ratio
– location-based (tCO2e/FTE)
Scope 1 and 2 intensity ratio
– market-based (tCO2e/FTE)
Total energy consumption
(kWh)§
Current reporting year (2023)
Previous reporting year (2022)
UK
Global
(excluding UK)
Total
UK
Global
(excluding UK)
% Change
in emissions
(total)
Total
269.5
45.5
315.0
397.2
48.0
445.2
-29.3%
–
44.4
44.4
–
250.2
250.2
-82.3%
32.3
301.7
17.3
107.2
49.6
408.9
58.5
455.7
32.7
330.9
91.2
786.6
-45.6%
-48.0%
514.4
926.6
1,441.0
564.4
748.9
1,313.3
9.7%
38.0
955.2
993.2
37.1
836.5
873.6
13.7%
–
49.9
49.9
–
52.5
52.5
-5.0%
38.0
1,005.1
1,043.1
37.1
889.1
926.1
12.6%
816.1
1,083.7
1,899.8
1,020.2
1,132.3
2,152.5
-11.7%
339.7
1,112.3
1,452.0
492.8
1,220.0
1,712.8
-15.2%
0.5
0.2
0.6
0.6
0.5
0.4
0.7
0.3
0.6
0.7
0.6
-16.7%
0.5
-20.0%
3,956,953.3 3,033,851.5 6,990,804.8
5,094,929.5
4,011,492.1 9,106,421.6
-23.2%
*Includes electricity consumption from both stationary and mobile assets.
†A location-based method reflects the average emissions intensity of grids on which energy consumption occurs.
‡A market-based method reflects emissions from the electricity supply that the company has purchased.
§ Total energy consumption refers to all energy consumption under Hiscox’s operation control. This includes Scope 1 and Scope 2: natural gas, fuel oil, refrigerants,
stationary electricity, mobile electricity and district heating/cooling.
For the purposes of baselining and ongoing comparison, we are required to express emissions using a carbon intensity metric. The intensity metric chosen is FTE.
In line with the requirements set out in the UK Government’s guidance on streamlined energy and carbon reporting, the table
above shows Hiscox’s total annual energy use and GHG emissions associated with the consumption of electricity, natural gas
and other fuels combusted, and fuel consumed for relevant business transport purposes, for the period 1 November 2022 to
31 October 2023.
The methodology applied to the calculation of GHG emissions is the ‘GHG Protocol: Corporate Accounting and Reporting
Standard (revised edition)’. An ‘operational control’ boundary has been applied. Carbon factors from UK Government GHG
Conversion Factors for Company Reporting, and the International Energy Agency (IEA) database and, the United States
Environmental Protection Agency (US EPA) GHG Emission Factors Hub database have been used to calculate the GHG
emissions, where they are not separately provided by a supplier. Emissions are reported as tCO2e. Electricity emissions have
been reported as both ‘location-based’ and ‘market-based’.
This table will differ from our full GHG inventory on page 58. In our full GHG inventory you will find information on our Scope 3
emissions not required under SECR.
In 2023, the UK accounted for 23% of our global total Scope 1 and 2 of our market-based emissions, as well as 57% of our global
energy use, outlined in the table above.
In 2023 we implemented a number of energy efficiency initiatives, including an investment in smart controls for the firing of boilers
in both our York and Colchester offices. These controls lead to reduced energy and gas consumption and support our continued
progress towards decarbonisation.
Hiscox Ltd Report and Accounts 2023
59
Chapter 1
Performance
and purpose
6
22
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.
collection process as we implemented
a central travel booking system across
all regions, and a continued rebound in
travel-related emissions compared to
previous years.
Conversely, we saw a significant decrease
in our capital goods expenditure this year
compared to 2022, when one-off costs
related to the London office move in 2022
had a material effect.
We also report on waste and waste
water usage (see page 58), where the
year-on-year improvements we have
seen are predominantly driven by further
enhancements to our data collection
processes, including greater use of
actual, rather than estimated, data. In
relation to waste data, this has resulted in
more detail on waste types for some sites,
which in turn allows for more accurate
categorisation of emission factors.
Tracking progress against our
GHG targets
Progress against these targets is
driven by our sustainability working
group and overseen by the SSC. For
example, emissions data is discussed
at least annually at the sustainability
working group and SSC, with other
related activities discussed periodically.
This includes our progress against
targets, and any issues with progress
are escalated through the established
sustainability governance structure
(see page 51).
Progress against these targets is also
recorded through our annual carbon
reporting cycle, and we seek to remain
operationally carbon neutral through
offsetting, as we have been since
2014, while also actively reducing
our emissions over time. Our primary
and continuous goal is to improve our
60
Hiscox Ltd Report and Accounts 2023
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
2023: B grade
2022: B grade
2023: AA grade
2022: AA grade
2023: 28.0
2022: 28.7
2023: 78%
2022: 83%
2023: 43/100
2022: 45/100
emissions reporting to become more
granular in order to help us reduce
emissions efficiently and confidently.
TCFD disclosure mapping
compliance statement
Disclosures have been made in alignment with the TCFD recommendations and in compliance with the FCA Listing Rule
LR 9.8.6R(8) on climate-related disclosure. The disclosure takes into account the TCFD supporting guidance, including the
TCFD Implementing Guidance Annex (updated October 2021) and the Supplemental Guidance for the Financial Sector.
Climate targets
Beyond our GHG targets, other
climate-related measures include:
s 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 amount invested in ESG/green
bonds, which at year end stood
at $367 million, or 5.7% of the
corporate bond portfolio;
s the growth and exposure of
sustainable underwriting products
such as flood and renewable energy
products, including, but not limited
to, the business written through the
ESG sub-syndicate we launched
during 2023, ESG 3033.
Progress against climate targets
These activities are owned by the relevant
business areas, including underwriting
and investments. Given the commercial
sensitivities of these targets, progress is
monitored through internal dashboards
and reported through the embedded
sustainability governance structures as
well as other relevant committees, such
as the Investment Committee.
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.
The table below summarises where we are reporting consistently against the recommendations. Where additional information
outside of this report aids our TCFD disclosure, links to this information have been provided, and where we have not yet disclosed
fully against the recommended TCFD disclosure, we have outlined why this is and the actions already being taken towards
meeting the disclosure requirements within the timeframe given.
Describe the Board’s oversight of climate-related
Disclosed.
risks and opportunities.
Describe Management’s role in assessing and
Disclosed.
managing climate-related risks and opportunities.
the organisation has identified over the short,
medium, and long term.
2023 climate report* pages 11 to 14.
CDP climate questionnaire 2023.
2023 climate report* pages 17 to 18.
CDP climate questionnaire 2023.
and 33.
CDP climate questionnaire 2023.
Describe the climate-related risks and opportunities
Disclosed.
2023 climate report* pages 27 to 28
Describe the impact of climate-related risks and
Focus on developing a
CDP climate questionnaire 2023.
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,
Focus on reviewing our most
2023 climate report* pages 12, 15 and
taking into consideration different climate-related
material scenario impacts
54 to 55.
scenarios, including a 2°C or lower scenario.
ahead of any further disclosure.
Describe the organisation’s processes for identifying
Disclosed.
2023 climate report* pages 17 to 18
and assessing climate-related risks.
and 31 to 36.
CDP climate questionnaire 2023.
and 17 to 18.
CDP climate questionnaire 2023.
and 17 to 18.
CDP climate questionnaire 2023.
Describe the organisation’s processes for managing
Disclosed.
2023 climate report* pages 11 to 14
climate-related risks.
Describe how processes for identifying, assessing,
Disclosed.
2023 climate report* pages 11 to 14
and managing climate-related risks are integrated
into the organisation’s overall risk management.
Disclose the metrics used by the organisation
Additional indicators to monitor
2023 climate report* pages 23 and 43.
to assess climate-related risks and opportunities in
and manage risk exposure,
CDP climate questionnaire 2023.
line with its strategy and risk management process.
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.
CDP climate questionnaire 2023.
See Hiscox Group website.
2023 climate report* pages 23 and 43.
CDP climate questionnaire 2023.
Chapter 1
Performance
and purpose
6
22
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
165
Read more in our 2023 CDP disclosure
hiscoxgroup.com/cdpdisclosure2023.
Read more about our approach to
climate change in our 2023 climate
report*, available online at
hiscoxgroup.com/2023climatereport.
* Our 2023 climate report was published in
August 2023 and covers our climate-related
activities between July 2022 and July 2023.
Where we reference information from that report,
that information remains correct at 5 March 2024.
TCFD disclosure mapping
compliance statement
Disclosures have been made in alignment with the TCFD recommendations and in compliance with the FCA Listing Rule
LR 9.8.6R(8) on climate-related disclosure. The disclosure takes into account the TCFD supporting guidance, including the
TCFD Implementing Guidance Annex (updated October 2021) and the Supplemental Guidance for the Financial Sector.
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.
The table below summarises where we are reporting consistently against the recommendations. Where additional information
outside of this report aids our TCFD disclosure, links to this information have been provided, and where we have not yet disclosed
fully against the recommended TCFD disclosure, we have outlined why this is and the actions already being taken towards
meeting the disclosure requirements within the timeframe given.
Recommended disclosure
Describe the Board’s oversight of climate-related
risks and opportunities.
Describe Management’s role in assessing and
managing climate-related risks and opportunities.
Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium, and long term.
Status
Disclosed.
Disclosed.
Disclosed.
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy, and financial planning.
Focus on developing a
low-carbon transition plan
to enhance disclosure.
Reference
2023 climate report* pages 11 to 14.
CDP climate questionnaire 2023.
2023 climate report* pages 17 to 18.
CDP climate questionnaire 2023.
2023 climate report* pages 27 to 28
and 33.
CDP climate questionnaire 2023.
CDP climate questionnaire 2023.
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario.
Focus on reviewing our most
material scenario impacts
ahead of any further disclosure.
2023 climate report* pages 12, 15 and
54 to 55.
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.
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Disclosed.
Disclosed.
2023 climate report* pages 17 to 18
and 31 to 36.
CDP climate questionnaire 2023.
2023 climate report* pages 11 to 14
and 17 to 18.
CDP climate questionnaire 2023.
2023 climate report* pages 11 to 14
and 17 to 18.
CDP climate questionnaire 2023.
2023 climate report* pages 23 and 43.
CDP climate questionnaire 2023.
See Hiscox Group website.
CDP climate questionnaire 2023.
See Hiscox Group website.
2023 climate report* pages 23 and 43.
CDP climate questionnaire 2023.
Hiscox Ltd Report and Accounts 2023
61
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Diversity, equity and inclusion (DEI)
At Hiscox, people matter. Having a
human approach to our work is really
important to us. This means we try to
be clear, fair, and inclusive, and to treat
everyone around us with the respect
they deserve. Hiscox operates in a
global market and much of the success
of our business is dependent on our
people, which is why we want to build
a workforce that reflects our customer
base, as well as the diverse communities
in which we live and work, with
employees from different backgrounds
bringing unique perspectives and
experiences. Our belief is that diverse
teams and an equitable and inclusive
workplace are important contributors
to building sustainable growth, which
is why we remain focused on nurturing
a working environment where all our
people can thrive.
DEI strategy
Our DEI strategy is built on four cornerstones. Together, these four cornerstones
provide the solid and sustainable foundation that we need to achieve our vision
and drive progress.
Represent, lead and guide the
DEI culture.
How we lead the way forward is critical.
Our DEI strategy is integral to our overall
business strategy and we all have a
responsibility to contribute to a diverse
and inclusive Hiscox.
Strengthen and leverage data
and insights.
We are investing in our data inputs and
outputs so we can drive deeper insights
and understanding of our workforce,
pain points and opportunities. This will
help us make better decisions and place
wiser bets to get us the results we want.
Inspire with our story.
Our stories are important. We listen
to and communicate our successes,
invest time and effort into building on
the vision, and work hard to understand
how our employees and customers
experience Hiscox so we can know
who we are, ‘see’ progress and help
our people see themselves as part of
the Hiscox success story.
Make DEI ‘business as usual’.
We continue to invest in equitable
structures, programmes, and tools
that enable our journey, so that being
diverse, equitable and inclusive is just
our everyday way of doing business.
It’s really important for
us to be able to attract,
develop and retain the
very best talent, and
that means creating a
culture where talented
people with different
perspectives and
experiences can thrive.”
Kate Markham
Chief Executive Officer,
Hiscox London Market and
DEI Executive Sponsor
62
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Diversity, equity and
inclusion (DEI)
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Our DEI journey: steady progress over time
2018
Established our Board
diversity and inclusion policy.
Unconscious bias
training introduced.
Published our first UK
gender pay report in 2018,
reflecting 2017 data, when
our UK gender pay gap was
31.1% on a mean basis.
In addition to our Women at Hiscox network, we launched a number of new employee networks:
Generations; WeMind (our mental health and well-being network); Parents and Caregivers;
Pan-African; Latino; and Pride (LGBT+).
2019
2021
2022
2023
First sponsored the Queer
Frontiers art exhibition.
Published our transitioning
in the workplace guide.
Appointed a Global Head of DEI and established our Global DEI
strategy and vision.
Launched our global hybrid
working programme.
Launched our Global Abilities
employee network that
focuses on disabilities
and neurodiversity.
Became Founding Sponsors
of the Black Insurance
Industry Collective in the USA.
First published employee
ethnicity metrics in our
Annual Report.
Published our latest UK
gender pay report, which
for 2023 showed our UK
gender pay gap has reduced
over time and is now at 16.0%
on a mean basis.
Set our first target for ethnic
minority representation at
Senior Management level
(see page 66).
Hiscox Ltd Report and Accounts 2023
63
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Diversity, equity and
inclusion (DEI)
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Social commitments and partnerships
Black Insurance Industry Collective (BIIC) SEO London
Insuring Women’s Futures
UK Living Wage employer
Structure and oversight
Our senior leadership drives sustainable
progress in diversity, equity and inclusion
across the Company. 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.
We are building DEI capability across the
Company and embedding DEI principles
and best practices into our processes
and structures, while translating our
global plan into local action. Plans are
monitored centrally and also via specific
local reports to subsidiary boards. This
approach is supported by an annual
report on DEI which our Nominations
and Governance Committee receives.
We also have active and passionate
employee networks, which focus on
building communities and support
around a variety of employee populations.
Our 18 employee network chapters
include Global Abilities (disabilities
and neurodiversity), Pan-African,
Generations, Latino, Parents and
Carers, Pride (LGBT+), WeMind (mental
health), and Women at Hiscox, and these
groups support our DEI strategy by
building communities, helping to drive
positive employee engagement and
promoting a culture of inclusion. During
2023, our networks delivered a series of
webinars and panel discussions ranging
from breaking bias, good coaching,
tackling progression barriers, Pride
commemorations and education around
neurodiversity to health, hormones and
happiness, as well as networking events.
DEI policies
Our efforts are guided by the Hiscox
Ltd Board DEI policy and our Group DEI
64
Hiscox Ltd Report and Accounts 2023
policy, which applies to all employees.
Our Board policy lays out the purpose,
scope and governance of our DEI
efforts, and the Board’s commitment
to DEI, including the Board’s and
Hiscox’s overall diversity and how DEI
is considered in appointments and
succession planning at Board level.
The Group DEI policy also lays out the
purpose, scope, governance, principles
and commitment to DEI, how we apply
the policy in all areas of our business,
and how we monitor progress.
These policies 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 67.
DEI training and awareness
Each year we review our programmes
to identify opportunities to further
embed DEI principles and practices
into our learning and development
materials and approaches.
In addition, foundational DEI training
is available to all employees and all
new joiners are invited to complete
the training within their first month.
In the last year, we’ve also made
training available on topics such
as allyship, creating psychological
safety, building inclusive teams, and
neurodiversity in the workplace, and
have introduced guidelines to help
people managers support those
experiencing perimenopause and
the menopause.
We have also made mentoring accessible
to any employee who wants it, as we
look to improve readiness for leadership
roles at mid-manager level and ensure
equity when it comes to opportunities
to progress.
DEI projects and progress
We want to play our part in advancing
DEI across the insurance industry.
Recognising that we cannot achieve
lasting change on our own, we
participate in the Insurance Inclusion
Diversity Forum, enei Member Forum
and We Are The City, as well as
DEI-focused workstreams within the
ABI and others. We are particularly
proud to have contributed to the creation
of the ABI’s DEI Blueprint to clarify and
promote DEI best practices across the
insurance industry.
During 2023, we continued to focus
on improving our DEI data by giving
colleagues the opportunity to ‘self-ID’
(in countries where the law allows us to
do so) by providing their demographic
information across a variety of
diversity-related categories beyond
sex and ethnicity. This helps us build a
more complete picture of our workforce
(including intersectionality), understand
our progress and further evolve our DEI
strategy and approach.
We’re also empowering employees to
tell their own diversity story through
our ‘Voices’ campaign, to highlight
the unique perspectives within our
organisation and help foster an open
and inclusive working environment.
We remain committed to facilitating
healthy feedback across the Company,
and our employee engagement
network ensures employees’ views are
considered in Board decision-making.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Diversity, equity and
inclusion (DEI)
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Our DEI policies can be found at
hiscoxgroup.com/about-hiscox/
group-policies-and-disclosures.
Gender/sex diversity at 31 December 2023
Men
Women
Not specified/prefer not to say
Ethnic diversity at 31 December 2023
Number
of Board
members
Percentage
of the Board
7
5
–
58%
42%
–
Number
of senior
positions on
the Board
(CEO, CFO,
SID and Chair)
Number in
Executive
Management*
Percentage
of Executive
Management*
4
–
–
8
5
–
62%
38%
–
Percentage
of Executive
Management
and direct
reports†
58%
42%
–
Percentage
of all
employees
50%
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
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
11
–
1
–
–
–
92%
–
8%
–
–
–
3
–
1
–
–
–
10
–
2
–
–
–
83%
–
17%
–
–
–
82%
2%
7%
5%
–
4%
75%
3%
9%
7%
2%
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.
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 (male/female) or specify that they ‘prefer not to say’.
In the countries where we collect ethnicity data (currently the 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 by our People team. 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 were unable to collect data.
Note: some totals may not tally due to rounding.
Hiscox Ltd Report and Accounts 2023
65
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Diversity, equity and
inclusion (DEI)
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
This programme involves Board
Director-facilitated discussions with
representative groups of employees
from across the business, with diversity
of gender, ethnicity, geography, tenure
and business area, as well as other
aspects of diversity. In 2023, these
Board-facilitated meetings took place
several times with different employee
populations and explored key topics
including DEI, workplace culture,
workplace planning, employee
sentiment and rewards and benefits.
DEI reporting and disclosures
We recognise that reporting and
disclosure is important for continued
DEI progress. We have fulfilled our
UK obligations to report our gender
pay gap ratios with respect to our UK
subsidiaries, and published our latest
annual gender pay report during the
year. This report sets out in detail
the gender-related programmes and
initiatives we pursued during 2023
and can be viewed at hiscoxgroup.com/
gender-pay-report-2023.
We also report our Board and Executive
Management diversity data as at
31 December 2023 in accordance
with the UK Listing Rules targets and
associated disclosure requirements –
see page 65 for further details.
As at 31 December 2023, the Board
comprised 42% women and there
was one Director from an ethnic
minority background. None of the four
FCA-specified positions on the Board
(Chair, 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
66
Hiscox Ltd Report and Accounts 2023
three Executive Directors on the
Board, our Chief Underwriting Officer,
is a woman.
The Board continues to work towards
building a pipeline of diverse candidates
and this, combined with the 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 targets over
the course of 2024 and will provide a
further update in the 2024 Annual
Report and Accounts.
We report our ethnicity representation
in Senior Management* and have set a
target for ethnic minority representation
in these ranks to be met by 2027, in
support of the updated Parker Review.
As at 31 December 2023, our Senior
Management (which consists of 88
individuals) comprises 11% ethnic
minorities†. Our intent is to improve
this representation to 13% by the end
of 2027.
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.
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 second consecutive year in
this report.
We will look to build on this good work
in 2024 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.
* For the purposes of the Parker Review, Senior
Management includes the Group Executive
Committee (the most senior executive body
below the Board) and the Company Secretary,
and their direct reports, excluding administrative
and support staff.
† An additional 16% of our Senior Management
live in countries where we do not currently collect
ethnicity data and therefore are not reflected in our
ethnic minority metrics.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
Diversity, equity and
inclusion (DEI)
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Board DEI objectives and 2023 progress
Board objective
Implementation
Progress
1.
Ensure a
diverse1 and
effective Board
• 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 this Annual Report demonstrates the
diversity of our Board as at 5 March 2024.
Via the delivery of our Board DEI 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 targets
and UK Listing Rules targets 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 ethnic 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 DEI policy2.
• Ongoing Board and Committee review of
matters relating to employee retention,
engagement and culture.
The Committee receives an annual report from the
Global Head of DEI. Our Head of DEI and DEI
Executive Sponsor for the Group drive our progress
which includes a commitment from every business
unit leader to deliver on our DEI goals. These plans
are monitored centrally and also via specific local
reports to subsidiary boards.
The tables on page 65 provide a breakdown of
diversity at Hiscox at 31 December 2023.
The Board and Committees receive reports relating to
key workforce matters on an ongoing basis, including
employee retention, engagement and culture.
1 Diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.
2 hiscoxgroup.com/diversity-and-inclusion-policy.
Hiscox Ltd Report and Accounts 2023
67
Lisa Waters is one of Hiscox’s
longest-serving employees, having
joined Hiscox in 1987 when the
Company consisted of three Lloyd’s
syndicates and had yet to take its
first step into the retail market.
Building on her significant experience
as an underwriter, Lisa has spent
the past nine years heading up the
retrocessional account as part of
Hiscox Re & ILS.
Q&
A:
with Lisa Waters
Head of Retro, Hiscox Re & ILS
Retro perspective
The Hiscox retrocessional business has
responded well to unprecedented market
conditions, thanks in part to the vast
experience of the woman leading it. >
68
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
69
Q&
A:with Lisa Waters
Head of Retro, Hiscox Re & ILS
Q: For anyone unfamiliar with the term,
what does ‘retro’ mean in the context
of insurance?
A: It’s short for retrocessional. What it
means is that I’m three steps removed
from the original risk. The insurance
companies buy reinsurance to cover
them against fire, explosion and various
types of catastrophes, and then the
reinsurance companies offset that
against what we call ‘retro cover’ for the
big bang stuff such as hurricanes and
earthquakes around the world. It’s the
end of the line as ultimately the buck
stops here. I cover big, multinational
reinsurance companies around the world,
and my book is very much natural-perils
based. So unsurprisingly, it mostly covers
the things you might end up seeing on
CNN or the BBC: hurricanes, severe
flooding, or earthquake events.
Q: What was Hiscox like back in 1987
when you first joined the business?
A: When I first started, Hiscox was a very
different world. At Lloyd’s of London
back then, people wore three-piece
suits and bowler hats, and there were no
computers. Some underwriters still wrote
with a quill pen and the waiters would
come round with blotting paper and fill up
the ink wells. It’s come a long way! Hiscox
was like a small family – I believe I was
employee number 45. I sat on the box next
to the underwriter. I did the photocopying,
I kept the aggregates by hand (which I
added up every night), to keep a running
total of our exposure in various classes
of business, and I learned on the job. We
wrote all classes of reinsurance, including
retro business, even back in the day, and
I worked with an underwriter who was
known as one of the top underwriters
writing retrocessional business. He retired
in 2015, at which point I took over that
book of business, and I’ve been running
it ever since.
70
Hiscox Ltd Report and Accounts 2023
Q: Presumably the gender balance
at Lloyd’s has changed a lot over the
past 27 years?
A: When I started, you could count on
one hand the number of women you’d
see, as women were only allowed into
the Lloyd’s Underwriting Room in 1973.
That’s why my father, who was a Lloyd’s
Name and knew the place well, was dead
set against me joining. But I went behind
his back, got a job, and the rest is history.
It’s changed so much since then. It used
to be a very white male-dominated area,
and as a woman you had to really shout
to be heard. The industry is now so much
more diverse. I love that when you look
around Hiscox, you see people being
recognised for the job they do, not for
the colour of their skin or whether they’re
male or female.
Q: A lot has changed, but do some
of the characteristics of today’s
business have a direct line back to
those early years?
A: Our values and our reputation
haven’t changed. Hiscox was always
reputed to be a high-performing
business and it still is today. We’ve
always been known for being one of the
more technical underwriters, and that’s
still very true too. Hiscox has grown,
obviously – we’re now a multinational
company – but I’ve been with some
of my clients for as long I can remember.
The people may have changed over
time, but the companies that are buying
remain the same, so there’s been a
consistency there.
Q: What have the market conditions
been like during the past year and how
have you responded to them?
A: We’ve been hearing the expression
‘generational shift’ a lot this year. The
insurance market has definitely seen a
change, and therefore the reinsurance
market has seen an even further change.
Everything is shifting up. Secondary
perils have been a huge problem in the
market, and not everyone has been
pricing for those perils, from wildfires and
floods to strikes and riots, to the terrible
wars we’re now seeing. Across the
industry, there is a lot of third-party
capital in the retro space and some of
that capital was trapped because of
losses in 2022 such as Hurricane Ian.
As a result, the only people in 2023 who
seemed happy to go out and quote
early were those like me who’ve been
around for a long time, seen the market,
and know where we want to position
ourselves. We took a position early, that
in 2023, we were going to cover named
natural perils only, and that we wouldn’t
be giving worldwide policies. That meant
we were able to go out there and sell our
policies within a really clear remit. That
kind of transparency has enabled us to
achieve better terms and conditions,
but you can only do that if you’re willing
to quote and stand by your quote and
if you’ve got a decent line size where
you can dictate those kinds of terms.
It’s a position that our Group Executive
Committee has supported and enabled
us to deploy more capital in what are
strong market conditions.
Q: How do you keep across all the
vast and incredibly complex global
issues that affect the pricing of your
retro book?
A: I’m a stickler for information. I’m an
avid reader of the information packs that
are sent in by each and every client. You
need to have that deep understanding
of what they’re writing, because retro
is something that you don’t want to get
wrong. It’s something I instil in the people
who work for me: read the information,
know your client, know what they’re
writing and in turn what we are giving
We took a position early, that in 2023,
we were going to cover named natural
perils only, and that we wouldn’t be
giving worldwide policies. That meant
we were able to go out there and
sell our policies within a really clear
remit. That kind of transparency has
enabled us to achieve better terms
and conditions, but you can only do
that if you’re willing to quote and
stand by your quote and if you’ve
got a decent line size where you
can dictate those kind of terms.”
cover for. But it goes further than that.
When we initially get those packs, it’s
just a snapshot in time, you need to work
out what that book is going to look like
in the hurricane season, or 12 months
down the line. You need to understand
everything from the vulnerabilities of a
business, to the wind speeds expected
in a specific place and the aggregation
of risk. You have to read a lot, keep up to
date on anything newsworthy and risk
model-related, employ bright people that
will do the same and bring in new ideas.
We’ve got a very good analytics team,
and our modelling team is constantly
reviewing the models we use and
developing our own ‘view of risk’, which
helps us to avoid any nasty surprises.
Q: The scale of your book means
there’s a lot of responsibility loaded
on your shoulders. How do you cope
with that pressure?
A: I love some of the new things that
Aki has brought in – like for instance,
for every five consecutive years you’ve
worked at Hiscox, you get a 20-day
sabbatical, fully paid. I think it’s great –
a change is as good as a rest, and a
rest is as good as a change. Last year, I
backpacked around Costa Rica with my
15-year-old son and this year we went
off to Vietnam. Taking that time off and
spending quality time with my family
means I come back refreshed and ready
for anything, and Hiscox has enabled me
to do that with the sabbatical scheme.
Q: Have you never been tempted to
move to a less intense role?
A: Never. I love the work I do, and I
love the interaction with people on a
day-to-day basis. I love the relationships
I’ve built up with brokers over many
years. I always remember a very good
lesson: that even if you’re declining the
risk the brokers are bringing in, you want
to do it in such a way that they still want
to bring you in their next risk – and the
risk after that. I also love working with
my team and the wider Hiscox Re & ILS
group, teaching them, taking them to
meetings and seeing their interactions
and watching those relationships flourish.
It’s a great thing. I wouldn’t want to do
anything else.
Q: How do you experience a sense of
community at Hiscox?
A: I see it everywhere. I love the Art
Café in our London office, because
even though you’re split up around the
office you still come together as you’re
queueing for a coffee. And going over to
Lloyd’s, you still see the community over
there too. The other half of our Re & ILS
team is based in Bermuda, so we interact
with them all the time and that sense of
community between the two offices is
great. We have weekly meetings where
people will talk through the topics of the
day so you constantly see both teams,
London and Bermuda, working together.
Two different views come together as
one, and we are better for it.
Hiscox Ltd Report and Accounts 2023
71
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Board of Directors
Non Executive Chair
Jonathan Bloomer (Aged 69)
Appointed to the Board: June 2023
Relevant skills, experience and contribution
s Extensive experience in financial services.
s Significant experience of driving
international growth.
Jonathan was appointed Chair of Hiscox in
July 2023. Prior to Hiscox he was a partner at
Arthur Andersen before going on to become
Chief Financial Officer and then Chief Executive
Officer of FTSE 100 Prudential plc. His final
executive role, from 2006 to 2012, was as
operating partner at Cerberus, the US-based
private equity investor. Since 2012, Jonathan has
had a successful portfolio career with a range of
largely financial services companies. Previous
board roles include Chair of DWF PLC and Arrow
Global Group Plc, and senior independent
director at Hargreaves Lansdown Plc.
External board appointments
Morgan Stanley International Group;
SDL Group Limited.
Executive Director
Joanne Musselle (Aged 53)
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 over 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 2023
Executive Director
Aki Hussain (Aged 51)
Group Chief Executive Officer
Appointed to the Board: September 2016
Executive Director
Paul Cooper (Aged 51)
Group Chief Financial Officer
Appointed to the Board: May 2022
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. Aki also sits on the board of a
number of Hiscox subsidiary companies. Prior to
Hiscox, Aki held a number of senior roles across
a range of sectors, including Chief Financial
Officer of Prudential’s UK and Europe business,
and Finance Director for Lloyds Banking Group’s
consumer bank division. Aki is a Chartered
Accountant, having trained with KPMG.
External board appointments
Visa Europe Limited.
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.
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 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.
Senior Independent Director
Colin Keogh (Aged 70)
Appointed to the Board: November 2015
Independent Non Executive Director
Beth Boucher (Aged 58)
Appointed to the Board: May 2023
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 Chief
Executive Officer 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 Considerable experience leading global
teams and initiatives.
s Significant experience of cyber security,
people management and audit and
regulatory operations.
Beth is currently a partner at Fortium Partners
and a Research Fellow at Nemertes Research.
Beth has more than 25 years of professional
experience across multiple industries, as well
as strategic consulting and managed services.
Most recently, Beth was the Senior Vice President
and Chief Information Officer of Sirius Point from
2019 until 2021 and prior to that held various
executive roles at The Travelers Company. Beth
is a certified organisational change management
and international board director with experience
leading technology strategy, application
development, infrastructure and operations.
External board appointments
Coforge Ltd.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Board of Directors
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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
Donna DeMaio (Aged 65)
Appointed to the Board: November 2021
Independent Non Executive Director
Michael Goodwin (Aged 65)
Appointed to the Board: November 2017
Independent Non Executive Director
Thomas Huerlimann (Aged 60)
Appointed to the Board: November 2017
Relevant skills, experience and contribution
s Extensive financial services experience,
Relevant skills, experience and contribution
s Significant knowledge of the global
Relevant skills, experience and contribution
s Considerable experience of leading a
particularly in the USA.
s Proven expertise in overseeing global
auditing and operational activities.
insurance market.
as a trained actuary.
global business.
insurance market.
s Deep understanding of risk management
s Extensive knowledge of the European
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, Chief Executive Officer 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.
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. During the year, Michael served 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 over 30 years’ experience in
banking, reinsurance and insurance. He was
Chief Executive Officer 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 Syndicate Ltd board
as Chair and on the Hiscox SA board as a
Non Executive Director.
External board appointments
Leadway Assurance Ltd, Nigeria.
Independent Non Executive Director
Anne MacDonald (Aged 68)
Appointed to the Board: May 2015
Independent Non Executive Director
Constantinos Miranthis (Aged 60)
Appointed to the Board: November 2017
Independent Non Executive Director
Lynn Pike (Aged 67)
Appointed to the Board: May 2015
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.; Visiting Nurse &
Hospice of Litchfield County.
Relevant skills, experience and contribution
s Deep understanding of Bermuda’s
(re)insurance industry, as well as the
broader global (re)insurance landscape
and market cycle.
s Senior leadership experience in the
reinsurance sector including within
large publicly-listed companies.
Costas served as President and Chief Executive
Officer 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;
Riverstone International Limited.
Relevant skills, experience and contribution
s Strong background in the US financial
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
business banking division. Lynn is Chair of
the Risk Committee and also serves on the
Hiscox Insurance Company Inc. board as a
Non Executive Director.
External board appointments
American Express Company (NYSE: AXP);
American Express National Bank;
CareerWork$ Advisory; California State
University Channel Islands Foundation.
Hiscox Ltd Report and Accounts 2023
73
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Board of Directors
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Departures and appointments
Retired Non Executive Chair
Executive appointments
None.
Non Executive appointments
Jonathan Bloomer
(effective 1 June 2023)
Beth Boucher
(effective 12 May 2023)
Executive retirements
None.
Non Executive retirements
Robert Childs
(effective 1 July 2023)
Group General Counsel and
Company Secretary
Marc Wetherhill (Aged 51)
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.
74
Hiscox Ltd Report and Accounts 2023
Non Executive Chair
Robert Childs (Aged 71)
Appointed Chair: February 2013
Appointed to the Board: September 2006
Robert joined Hiscox in 1986 and held a number
of senior roles across the Group, including
Active Underwriter for Syndicate 33 and Group
Chief Underwriting Officer, before becoming
Non Executive Chair in February 2013. He joined
the Council of Lloyd’s in 2012 and served as
Deputy Chairman of Lloyd’s from 2017 to 2020.
Robert stepped down from the Board and
retired from Hiscox during 2023 after 37 years
of service.
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.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Board statistics
62
Read more about gender and ethnic
diversity at Hiscox.
Board statistics
Board diversity at 5 March 2024
Gender
Female
Male
Ethnicity
5
7
White British or other white
(including minority-white groups)
Asian/Asian British
11
1
Tenure
0-3 years
3-6 years
6-8 years
8+ years
Location
USA
Bermuda
Europe
Asia
Age
46-55
56-65
66-75
4
1
6
1
3
4
5
Nationality
British
Bermudian*
American
Swiss
Australian
* Includes those Directors who hold
a Permanent Residency Certificate.
4
1
4
3
6
1
3
1
1
Hiscox Ltd Report and Accounts 2023
75
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Group Executive Committee (GEC)
Aki Hussain
Group Chief Executive Officer
Joined Hiscox: September 2016
Fabrice Brossart
Group Chief Risk Officer
Joined Hiscox: November 2023
Paul Cooper
Group Chief Financial Officer
Joined Hiscox: May 2022
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 Extensive expertise in enterprise risk
management within the international
general insurance industry.
s Considerable experience in leading
regulator relationships around the world.
Fabrice joined Hiscox in 2023 from AIG, where
he was Chief Risk Officer for the International
General Insurance business. He continues
to evolve our risk function, leading our global
team of approximately 40 risk and compliance
experts, and is responsible for ensuring our
risk structures enable growth, as well as our
continued regulatory compliance.
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 leads our team of 400 finance experts
around the world and is responsible for ensuring
robust financial systems and continued capital
efficiency. With over 25 years of financial services
experience, Paul has held a number of senior
roles, including 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.
Nicola Grant
Chief People Officer
Joined Hiscox: September 2022
Kevin Kerridge
Chief Executive Officer, Hiscox USA
Joined Hiscox: December 1996
Relevant skills, experience and contribution
s Deep expertise in leading HR as a global
Relevant skills, experience and contribution
s Significant expertise in, and at the
function, scaling it through technology
and effective, integrated, global products
and services.
s Significant experience of performance
and reward management, robust
talent and succession planning and
HR transformation.
Nicola leads our global People team, driving
Group-wide people strategies to accelerate and
de-risk Hiscox’s business performance. This
includes policies, products, and services covering
workforce planning and talent acquisition to
ensure the right talent is in the right place at the
right time; learning and development experiences
that strengthen our culture and accelerate talent
development; employee listening mechanisms to
understand and communicate with colleagues;
and compensation and benefits programmes
that retain and inspire performance at all levels.
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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.
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 400 London Market
underwriters, analysts and support functions
in the UK, Guernsey, France and the USA.
In addition, Kate is the Group’s Executive
Sponsor for DEI.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Group Executive
Committee (GEC)
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Stéphane Flaquet
Group Chief Operations and Technology Officer
Joined Hiscox: March 2010
Relevant skills, experience and contribution
s Strong financial services background.
s Sizable insurance industry
experience gained within a range
of European territories.
Stéphane originally joined Hiscox as Chief
Operating Officer for Europe, and has since
held a number of other senior roles including
Group Chief Information Officer, Chief Executive
Officer of Hiscox Europe and Interim Chief
Executive Officer for Hiscox UK. In 2022, he took
on the newly created role of Chief Operations
and Technology Officer, in which he oversees
a number of critical Group functions including
technology, change, operations, data, claims,
marketing, procurement and property services,
to ensure the continued effective and efficient
delivery of core services while also driving
operational efficiency and scalability.
Robert Dietrich
Chief Executive Officer, Hiscox Europe
Joined Hiscox: June 1997
Jon Dye
Chief Executive Officer, Hiscox UK
Joined Hiscox: September 2022
Relevant skills, experience and contribution
s In-depth knowledge of the European
Relevant skills, experience and contribution
s In-depth knowledge of the UK
insurance market.
insurance market.
s Significant experience of bringing niche
insurance products to market.
s Track record of building sustainable,
profitable retail insurance businesses.
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,
redefining its long-term vision and leading its
ambitious growth plans.
Jon leads our UK retail insurance business,
which spans eight offices and over 800
employees, overseeing 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.
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 over 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. As Group Chief
Underwriting Officer, Joanne leads our team
of around 500 underwriters around the
world, driving the continued evolution of our
underwriting practices and the development of
our underwriting talent. 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
120-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 2023
77
Fiona Mayo joined Hiscox in the
summer of 2022, bringing with
her over 20 years of brand and
marketing experience from a range
of sectors. In 2023, she led Hiscox’s
highly acclaimed nationwide brand
campaign that brought to life with
verve and humour the real risks
faced by small business owners.
Q&
A:
with Fiona Mayo
Chief Marketing Officer, Hiscox UK
On brand
2023 saw the launch of our new
Hiscox brand campaign in the UK,
which marks a new focus for the Group
on telling the stories of our customers –
the people behind the policy. >
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Hiscox Ltd Report and Accounts 2023
79
Q&
A:
with Fiona Mayo
Chief Marketing Officer, Hiscox UK
Q: What’s your background and how
did you come to join Hiscox?
A: I’d describe myself as first and
foremost a brand-based marketeer, but
with a broad, generalist marketing skill
set. I started out in advertising agencies
before moving to Vodafone, where I led
their marketing communications, then
moved to the energy sector, as Brand
and Marketing Communications Director
for SSE and then OVO. Hiscox is my first
foray into insurance and my focus here
is continuing to build such a strong and
distinctive brand, so that’s a challenge
that was really attractive to me.
Q: When you arrived here, what were
your first impressions of the culture?
A: I don’t think people appreciate what a
fantastic company this is. When I joined,
I’d been looking at various opportunities
in some very different sectors. What
swung it for me were the people I met
through the interview process. Since
I’ve arrived, I’ve been so struck by how
collaborative it is here. There’s a saying
at Hiscox that we’re kind on the people,
tough on the problem, and that is
absolutely what I’ve found. I remember
one of the first big meetings I was in, I
was fascinated by how there was a lot
of really constructive challenge in the
room but no emotion or politics or
agenda. That, from my experience, is
extremely rare and something that so
many other companies would love to
bottle if they could!
Q: Have your first experiences of
marketing in the insurance sector
presented any new challenges?
A: Not really. It’s much more similar to
other industries than you might think.
The sectors I’ve worked in – mobile
phones, energy and insurance – are
all typically low-interest categories
with an annual renewal cycle. Despite
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Hiscox Ltd Report and Accounts 2023
the challenges that brings, Hiscox has
historically achieved fame beyond its
scale. The approach Hiscox has taken
to marketing has enabled it to stand out
from a sea of sameness of other insurers.
In insurance you often see a reticence for
communications to show the real risks
that customers face, but we know from
customer insight, that is what consumers
want us to recognise. Hopefully we have
managed to show those real risks, telling
those stories with empathy and some
intelligent wit.
Q: What was the thinking behind the
latest brand campaign?
A: Our starting point was to capture
the real essence of Hiscox – our
‘secret sauce’. In a world of increasing
automation, Hiscox is a deeply human
insurer. We are specialist in what we
do, we deeply understand the sectors
and the people that we insure, and our
claims teams fight like lions to protect
our customers should the worst happen.
That is why our brand promise across the
globe is ‘we see the people behind the
policy’. That means we see their hopes,
their dreams, their lives, their stories. The
core idea of our campaign is: ‘Stories.
Underwritten by Hiscox’. Stories are an
incredibly potent mechanic for us, with
all sorts of fascinating scientific research
that shows the power of storytelling. To
quote Steve Jobs, “The most powerful
person in business is the storyteller”.
Q: What was your approach to telling
those stories?
A: Our aim was to tell the stories of the
very real risks faced by the different
small businesses that we insure, but
tell them with wry humour, in a brave
and inventive way. We had a lot of fun
with the campaign, creating what has
been coined by the media as ‘the most
disastrous campaign ever’.
We have played with the media formats
themselves to create real impact. For
example, we have had posters falling
down as if they’ve been incorrectly
installed, water literally pouring from
a ‘leaking’ poster, another with mud
splattered all over it, and a teeny tiny
poster, as if it was printed at the wrong
size. We’ve had radio ads ‘mis-recorded’
in Spanish and other radio ads read by
kids. We had a Metro wrap advert that
was just a blank page, as if the agency
hadn’t supplied the image. We had a
WeTransfer takeover, saying: “Oops, I just
shared confidential information”. We’ve
really looked to push the boundaries
through the creative and I’m really proud
of the final executions.
Q: The consumer element of the
campaign was the most visible, but
were you serving other audiences
as well?
A: Our broker audience is among the most
important for us so of course we targeted
them too – in the trade press, at industry
events and through broker-specific
activations. Rather than it being the story
of your business underwritten by Hiscox,
it’s the story of your business supported
by Hiscox.
Q: How do you measure the success
of a broad-ranging campaign
like that?
A: The very first read you get is the
anecdotal feedback from brokers or
customers. You then start to look at the
short-term metrics: are more people
clicking on the website, are more
people calling the phone lines? But
the real measure of success doesn’t
come for 12 to 18 months, when we do
a form of regression modelling called
econometric modelling. That’s when you
can accurately measure the return on
investment, or ROI, of the campaign.
Renewals only come about once
every 12 months so, simplistically,
what we’re trying to do with brand
advertising is create memory
structures so that, when you come
to renew your insurance, you think of
Hiscox. It doesn’t stop there either:
you might remember a poster from
ages ago that made you smile, and
those memory structures might
trigger you to buy insurance from
Hiscox years down the line.”
If you think about it, insurance is a cycle.
Renewals only come about once every
12 months so, simplistically, what we’re
trying to do with brand advertising is
create memory structures so that,
when you come to renew your insurance,
you think of Hiscox. It doesn’t stop
there either: you might remember a
poster from ages ago that made you
smile, and those memory structures
might trigger you to buy insurance from
Hiscox years down the line. That’s why
it’s always a longer-term build, why we
still benefit from the strong brand work
of old, and why we need to get back
out there to re-fuel our brand, to give it
longevity and a strong position in our
customers’ minds and in the market
for years to come.
Q: What are your main priorities for
the coming year?
A: Our brand is incredibly important
to us, so we’ll continue to invest in it.
Beyond marketing, I’m also accountable
for the direct business. We really want
to accelerate faster growth in that area,
be that direct commercial or the direct
home insurance business. We’ll be
developing new products and moving
into adjacent sectors to support our
customers with new and emerging
risks. We want to be more sophisticated
in how we talk to our existing direct
customers or our brokers. We use a
customer relationship management tool,
or CRM system, to do that, so there’s
some capability building we need to
do there. I’m also accountable for the
‘consumer understanding’ pillar of the
UK’s Consumer Duty regulation. I was
very quick to put my hand up for that – as
a brand marketeer, I always want to put
the consumer at the heart of everything
and I love the idea of a regulatory
programme that does just that. For me,
it’s like the Trojan horse to make sure
that, as an organisation, we really are
customer focused.
Q: As UK Chief Marketing Officer,
what’s your relationship like with the
other regions?
A: It’s really good, and part of that
is because we see ourselves as an
international community of marketeers.
We have a Group-wide promise that we
developed together and we’re continually
sharing knowledge and ideas and
looking for ways we can collaborate.
There are lots of pockets of opportunity
where we can work together.
Q: And finally, how have you felt a
sense of community since you arrived
at Hiscox?
A: Honestly, from the moment I arrived
here it felt different. We’re not so soft
that’s it’s just a warm bath with everyone
floating around, but nor are we so
hardcore that you’re always fighting
to be heard. We’ve somehow bottled
that perfect balance of focusing on the
problem, having robust debate about
the problem, but not being driven by
anything other than solving the problem.
It’s so refreshing.
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Chair’s letter to shareholders
Dear Shareholder
The close of 2023 marked the end of my
first six months as Chair of the Board,
and it has been a pleasure to take on the
role from Robert Childs who enjoyed
such a long and successful tenure.
In getting to know the business, I have
found a robust and resilient organisation
in the midst of an exciting evolution. The
strategic tilt introduced by Aki and the
GEC over the last two years is delivering
material results, and our future growth
opportunities remain significant. Our
big-ticket teams have performed very
well in a hard market, taking advantage
of some of the best property pricing
conditions we’ve seen in decades,
and in retail the teams are focusing on
quality growth – stepping away from
business where pricing falls below our
profitability thresholds, and leveraging
legacy portfolio transactions (or LPTs) in
the same way as our big-ticket lines to
reduce earnings volatility from business
we have now exited.
This year’s results reflect the team’s
tremendous work growing the
business over time, leading to a
record pre-tax profit of $625.9 million
for 2023. This reinforces our balance
sheet strength, with the capital generated
used to drive growth and strengthen the
risk adjustment. In addition, the Board
has also recommended a final dividend
of 25.0 cents per share and a further
return of $150 million of capital to
shareholders through the form of a
buyback. This approach to capital
management means we can invest in
the many attractive growth opportunities
ahead while maintaining balance sheet
strength and financial flexibility.
The foundations of the business are
strong, as you can see from this year’s
record results, and our unique culture –
a key asset of the organisation –
continues to evolve with the business,
while still holding true to its core tenets
of exceptional customer service,
deep specialist sector expertise,
and long-held shared values. This
is demonstrated in our employee
engagement scores, which Aki and I
were delighted to see retain its ten-year
high of 82%. In addition, 83% of our
people told us they would recommend
Hiscox as a great place to work and
similarly 83% said they felt proud to work
for Hiscox, so that gives you a sense of
the strong positive sentiment we have
from our people around the world.
I have also found an effective and
energetic Board at Hiscox. The
onboarding process has supported
me well in getting under the skin of
the business, and I have seen healthy
debate and discussion in our boards
and committees. As well as my own
appointment during the year, the Board
also welcomed Beth Boucher as an
Independent Non Executive Director,
and we are benefitting immensely from
her career as a global Chief Information
Officer and her extensive experience
across the technology sphere.
2023 also saw the completion of an
external Board review, providing a critical
fresh perspective on Board effectiveness.
In the following pages you will find further
information on this and our broader
corporate governance information,
including our established and embedded
governance arrangements.
Beyond Hiscox, 2023 saw many
events signalling the changes to the
world around us. This included the
continued and devastating escalation of
geopolitical conflict in Russia/Ukraine
The foundations of the
business are strong, as
you can see from this
year’s record results,
and our future growth
prospects remain
substantial across
all business units.”
Jonathan Bloomer
Chair
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Chair’s letter
to shareholders
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
I would like to end by thanking all of our
colleagues for their work and efforts
which have led to this strong set of
results. I also thank my Board colleagues
for the warm welcome and support.
Finally, I thank you all for your ongoing
interest in Hiscox, and I look forward to
spending time with some of my fellow
shareholders over the course of 2024.
Jonathan Bloomer
Chair
and Israel/Gaza, and the plethora of
natural catastrophe events that have
affected so many – from wildfires in
Hawaii and Canada to earthquakes
in Morocco, Syria and Turkey, winter
storms and hurricanes in the USA,
cyclones in New Zealand and flooding
across Europe. Where we have had
exposures to these events, we have
been there for our customers.
Against this backdrop, the role of
our industry is more important than
ever. From the way we look after our
customers, to how we help them manage
the rapidly evolving risk landscape and
build their own resilience, insurance
has a crucial role to play in our society.
During 2023, we reviewed and refreshed
our sustainability strategy, which
you’ll find on page 46. This focused on
embedding sustainability in our business
strategy, and sharpening our focus on
the areas that matter the most to our
key stakeholders, and where we believe
we can make the most impact. Through
this review we have developed a new
five-pillar approach, which you can learn
more about on pages 46 to 49.
I am pleased to have also taken on the
role of Chair of the Hiscox Foundation.
Dating back to 1987, the Foundation
focuses its work around three core
pillars: protecting and preserving
the environment, social mobility and
entrepreneurship, and causes our
people are passionate about. In
2023, our charitable giving and
volunteering around the world
resulted in us supporting over 260
good causes with just over $2 million
in donations and fundraising and
1,400 hours of volunteering, which
gives you a sense of how much this
matters to our people.
Hiscox Ltd Report and Accounts 2023
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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
90 to 94.
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 to view 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. The
Group Executive Committee members
are detailed on pages 76 to 77.
Supporting policies and processes
During the year, no corrective action
was required by Management to ensure
that policies, practices and behaviours
Good governance
requires a holistic
approach, and we
work hard to make
sure our corporate
responsibilities are
lived through training
and awareness and
by fostering a culture
that surfaces the
right issues.”
Marc Wetherhill
Group General Counsel and
Company Secretary
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
in the business were aligned with the
Company’s purposes, values and
strategy, as outlined on pages 8 to 11.
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 36 to 39.
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 Independent
Non Executive Chair, three Executive
Directors, and eight Independent Non
Executive Directors including a Senior
Independent Director.
Additional details on Board composition
and succession planning, including
the process for the appointment of
Jonathan Bloomer as Chair, can be found
in the Nominations and Governance
Committee report on pages 95 to 98.
Notable changes in the reporting period
include the appointment of Jonathan
Bloomer as Independent Non Executive
Chair, effective 1 July 2023, following
the retirement of Robert Childs, and
the appointment of Beth Boucher as
Independent Non Executive Director,
effective 12 May 2023. 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 2024 Annual General
Meeting. This will be the last time that
Anne MacDonald and Lynn Pike will
seek re-appointment, as both will have
served on the Board for nine years in
2024. However, their experience and
diversity remain invaluable and they
continue to exercise the independent
thinking and judgement consistent
with remaining an Independent Non
Executive Director. Therefore, with the
Chair having joined midway through
2023, and with the benefit of the
outcome of an independent evaluation
that was conducted in November 2023,
the Board considers that additional time
is needed to appropriately assess the
future requirements of the Board and
identify Anne and Lynn’s successors.
This will also be the last time that Colin
Keogh will seek re-appointment as he
will have served on the Board for nine
years from November 2024. No issues
have arisen that would prevent the Chair
from recommending the re-appointment
of any individual Director.
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.
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.
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and purpose
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Chapter 2
A closer look
22
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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 95 to 98.
The Board also has an ongoing training
programme with regular items on
topical issues. In 2023, this included,
among other things: investor relations;
IFRS 17; cyber security, artificial
intelligence; global brand; and an
external market update. 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,
86
Hiscox Ltd Report and Accounts 2023
transparent, well-informed and balanced
decision-making, and appropriate onward
delegations to effectively deliver the
Company’s purpose, values and strategy.
The Board has delegated a number of its
responsibilities to its Audit, Nominations
and Governance, Remuneration and Risk
Committees. Each Board Committee
operates within established written terms
of reference and each Committee Chair
reports directly to the Board. The formal
schedule of matters reserved for Board
decision and the Committee terms of
reference were reviewed in late 2023
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 Chair, 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 Chair
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
a review of the competitive landscape.
Agendas are built to ensure that
the most appropriate method of
progressing an item is utilised. The
Chair 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
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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 and Committee attendance
in 2023
In line with the agreed meeting
schedule, the Board and each of the
Committees of the Board held four
comprehensive meetings in 2023.
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 2023
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 2023, the Directors’ attendance
(and the number of meetings that they
were eligible to attend) was as follows:
Donna DeMaio, Michael Goodwin,
Thomas Huerlimann, Colin Keogh,
Anne MacDonald, Costas Miranthis,
Lynn Pike, Joanne Musselle, Aki Hussain,
Paul Cooper (4/4); Jonathan Bloomer,
Beth Boucher, Robert Childs (2/2).
There were also four meetings of each
of the Committees of the Board during
2023. All of the Company’s Independent
Non Executive Directors are members 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: Donna DeMaio, Michael
Goodwin, Thomas Huerlimann, Colin
Keogh, Anne MacDonald, Costas
Miranthis, Lynn Pike (4/4); Jonathan
Bloomer, Beth Boucher (2/2). Robert
Childs was a member of the Nominations
and Governance Committee, Risk
Committee and Investment Committee
and he attended both of the meetings that
he was eligible to attend. Aki Hussain,
Paul Cooper and Joanne Musselle are
members of the Investment Committee
and attended all four meetings.
Outside of the formal Board and
Committee meetings and informational
calls, Non Executive Directors have
unfettered access to employees at all
levels of the business, regularly liaise
with Management on activities aligned
to their key skills, and attend appropriate
management strategy and training
events. They also have the opportunity
to attend briefings with Group Executive
Committee members and Senior
Management, to understand key
issues and conduct deep dives on
specialist subjects.
Hiscox Ltd Report and Accounts 2023
87
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
to ensure it reflects the time commitment
and responsibilities of each role; there
are no performance-related elements.
The Chair’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.
Board activity in 2023
Board activity in 2023 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 2024 business
plan, the agreement of business
priorities for the year ahead,
oversight of capital management
measures taken (including
legacy portfolio transactions),
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 12 to 15,
36 to 39 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.
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.
88
Hiscox Ltd Report and Accounts 2023
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 Chair, 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 2023, in relation
to the appointment of our Chair, can be
found on page 97.
More information on how the Board
engages with key stakeholders can
be found on pages 40 to 41.
Board evaluation 2023
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 2023
was externally facilitated, the details of
which can be found in the Nominations
and Governance Committee report on
pages 95 to 98.
Board remuneration
The remuneration of Independent
Non Executive Directors is determined
by the Chair in conjunction with
the Nominations and Governance
Committee and is regularly benchmarked
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Corporate governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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 any Director 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 95 to 98.
Remuneration Committee
Risk Committee
• Establishes
remuneration policy.
• Oversees alignment
of rewards, incentives
and culture.
• Sets Chair, 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 133.
• 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 12 to 15 and 36 to 39.
To ensure that the Board operates efficiently, each Director has distinct role responsibilities.
Chair
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 Chair.
• Leading the Chair’s
performance evaluation.
• 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.
• Proposing and delivering
the strategy as set by
the Board.
• 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 2023
89
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Compliance with the UK Corporate Governance Code 2018
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 22 to 31
demonstrate the Company’s strong performance and position. In the
corporate governance overview on pages 84 to 89, 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 8 to 9).
Procedures for regulation of Board conduct are detailed in the Group
governance manual and individual appointment letters, and are 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 36 to 39). The Board and
its Committees have unfettered access to the resources they deem
necessary to fulfil their obligations.
D: Stakeholder engagement
Code: In order for the company to meet its responsibilities to shareholders
and stakeholders, the board should ensure effective engagement with,
and encourage participation from, these parties.
Hiscox: The Board regularly considers the Group’s relationship with
various stakeholder groups including shareholder matters, employee
engagement, customers, and the Group’s impact on, and relationship
with, wider society, examples of which can be found on pages 40 to 41.
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 2023 results
can be found on pages 7 and 47. The Board also engages with the
workforce through its established employee engagement network,
which supports the pre-existing engagement infrastructure.
Provision 1:
pages 36 to 39
(risk management),
pages 8 to 11
(business model).
Provision 2:
pages 87 to 88
(Board activity),
pages 106 to 143
(chapter 4,
remuneration).
Provision 3:
pages 40 to 41
(shareholder
engagement).
Provision 4:
No AGM votes
below 80%.
Provision 5:
pages 40 to 41
(stakeholder
engagement),
pages 87 to 88
(Board activity).
Provision 6:
page 84
(corporate
governance
framework).
Provision 7:
pages 84 to 88
(Non Executive
Director time,
corporate
governance
framework).
Provision 8:
Group governance
manual and Director
appointment letters.
90
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
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
165
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
from July 2023, complied with all its
provisions. Prior to July 2023, and as
noted in previous reports, the Company
was non-compliant with Provision 9 on
Chair independence, Provision 19 on
Chair tenure and part of Provision 25
regarding the Chair’s membership of
the Risk Committee. However, following
the appointment of Jonathan Bloomer
as Chair in July 2023, the Company
is compliant with these provisions.
More information on Chair succession
can be found on page 97.
The corporate governance statement
(pages 84 to 89), the remuneration
report (pages 112 to 133) and the
Directors’ report (pages 148 to 150),
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.
In January 2024, the FRC published
amendments to the UK Corporate
Governance Code, which will apply to
accounting periods beginning on or
after 1 January 2025, with the exception
of Provision 29, which is effective
from 1 January 2026. We are currently
assessing the impact of both the
new and revised Provisions.
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 (other
than Provision 9
up until July 2023,
see above).
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 86. 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 84 to 89 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 89).
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 96). 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 91 (Chair
independence
and tenure),
page 89
(CEO and Chair
separate roles).
Provision 10:
pages 72 to 73
(Board of Directors).
Provision 11:
pages 72 to 73
(Board of Directors).
Provision 12:
pages 72 to 73
(Board of Directors),
pages 97 to 98
(Board evaluation).
Provision 13:
page 86
(Board cycle).
Provision 14:
page 89
(structure of Board
decision-making),
pages 86 to 87
(Board attendance
in 2023).
Provisions 15 and 16:
Group governance
manual and Director
appointment letters.
Hiscox Ltd Report and Accounts 2023
91
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
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
165
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 (other
than Provision 19
up until July 2023,
see page 91).
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 page 64. 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
95 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 95 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, and most
recently during 2023 (see pages 97 to 98).
Provision 17:
pages 95 to 98
(key responsibilities
and membership,
Nominations
and Governance
Committee report).
Provision 18:
pages 72 to 73
(Board composition).
Provision 19:
page 91
(Chair independence
and tenure).
Provision 20:
pages 95 to 98
(talent review and
Board composition
and succession,
Nominations
and Governance
Committee report).
Provisions 21 and 22:
pages 95 to 98
(Board evaluation,
Nominations
and Governance
Committee report).
Provision 23:
pages 95 to 98
(Nominations
and Governance
Committee report).
92
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
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
165
Requirements
Operation and practices
Additional detail on provisions:
Compliance
4
Section 4
of the Code:
Audit, risk and
internal control
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
2023 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 36 to 39. 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.
The Company
applied all of the
principles and
complied with
the provisions of
Section 4 (other
than part of
Provision 25
as the Risk
Committee
membership
included the Chair
of the Board up
until July 2023,
see page 91).
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.
Provisions 27, 30
and 31:
pages 148 to 150
(going concern and
viability statements,
Directors’ report).
Provisions 28, 29
and 31:
pages 36 to 39
(risk management).
Hiscox Ltd Report and Accounts 2023
93
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
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
165
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 120 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 134 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 and vision
(see pages 8 to 9).
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 2022/23 and the changes
proposed were supported by shareholders through a shareholder vote
at the May 2023 AGM. Changes included 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 were also further aligned with market practice
and the circumstances that may trigger use of malus and clawback
were extended.
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.
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Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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 People
policies for Executive Directors and
Senior Management. The Committee
also reviews the Board evaluation
process, Company strategy relating to
DEI, and the diversity 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 certain Group policies.
The Committee is comprised of eight
members, being the Chair of the Board
and seven 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 2023
were as follows.
• Search for and appointment of
new Chair of the Board
and new Director.
• Smooth transition of Chair of the
Board and new Director.
• Review of the Board
evaluation outcomes.
• Ongoing diversity monitoring of
the Board and Senior Management.
• Review of Committee terms
of reference.
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
GEC 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
The Committee reviewed the
independence of each of the Non
Executive Directors. There was a
particularly robust assessment of
the independence of Lynn Pike and
Anne MacDonald given their tenure
on the Board. The Board continues
to consider that they demonstrate
independent judgement and provide
robust challenge. As part of the annual
Board succession planning process, the
Committee reviewed the composition of
the Board in 2023. 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.
Hiscox Ltd Report and Accounts 2023
95
2023 was another
important year for the
Committee when it
comes to succession,
and I can personally
speak highly of the
Board induction
process in this,
my first year.”
Jonathan Bloomer
Chair of the Nominations and
Governance Committee
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Nominations and
Governance
Committee report
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Chair succession process
A formal and transparent process was deployed for the appointment of the Chair.
Requirements
Process
Interview and appointment
Induction
Jonathan’s induction
consisted of a tailored
induction programme which
allowed him to become more
familiar with the working of
the Board and the Group,
and to fully understand
the Company’s operating
environment (internal and
external). This included
meetings with individuals
from the Board, Senior
Management and external
auditors, and was
supported by an induction
pack. The programme
was tailored to Jonathan’s
appointment and it was
continually reviewed to
identify additional areas
where induction is required.
The process was initiated with
the appointment of an agency.
Spencer Stuart was
engaged based on its market
reputation, and alignment
to our DEI objectives. The
search firm used was deemed
to be independent as it does
not have any connection with
the Company or its individual
Directors other than in its
engagement in this capacity.
The search firm identified
potential candidates
assessed against the role
specification, based on
merit, and with due regard
for the benefits of all forms
of diversity on the Board,
including gender and
ethnicity. This produced
a long list of high-quality
candidates from a broad
range of potential sources
of talent. Candidates
were then shortlisted for
interviews, which focused on
each candidate’s skills and
experience for the role.
A formal, multi-stage
interview process was used
to assess candidates, and
included interviews with
Board members including
the Group Chief Executive
Officer. All interview
candidates were deemed
appropriate for appointment
based on their skills and
experience, and subject
to a referencing process
and review of any potential
conflicts and time availability
(assessed against significant
time commitments).
The outstanding candidate
for the role was Jonathan
Bloomer, and the Nominations
and Governance Committee,
led by the SID, agreed that
he demonstrated significant
global insurance and broader
financial services expertise,
as well as substantial previous
Chair experience. The
appointment was announced
in May 2023.
In 2022, as part of the orderly
succession plan for the
retirement of the Chair, it
was agreed to target an
appointment to be in place
by mid 2023.
The key requirements of the
role were agreed as being
financial services experience,
as well as recent Chair
experience, with insurance
sector expertise also being
highly regarded. It was agreed
that a diverse candidate with
these skills would also be
highly regarded.
A review was completed
by the Committee on the
geographical location of the
new Chair, assisted by an
externally delivered market
map of available Directors.
A brief was prepared for the
role specifying the above.
The Senior Independent
Director (SID), Colin Keogh,
led the search and the
process on behalf of the
Committee and established
a sub-committee comprising
two other Independent
Directors who were members
of the Committee. The former
Chair recused himself from
the process.
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Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Nominations and
Governance
Committee report
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
The review focused on Non Executive
succession and was aligned to the talent
reviews for the Executive Directors.
As part of this process, the Committee
established the need to appoint a new
Independent Non Executive Director
with a technology background. The
Committee appointed independent
executive search firm, Russell Reynolds,
to assist with the appointment. Russell
Reynolds does not have any connection
with the Company or its Directors other
than in its engagement in this capacity.
Russell Reynolds commenced a search
for candidates meeting the role criteria
outlined by the Committee. Having
undertaken an extensive mapping of
the market for candidates meeting
the key criteria outlined by the
Committee, together with personal
fit for the Board, they identified a
significant number of diverse
candidates who met the criteria
from which a long list of the most
qualified candidates was created.
These candidates were subsequently
interviewed by the Chair and the
Group’s Chief People Officer.
Following these interviews, a shortlist
of candidates went on to meet with
selected Independent Non Executive
Directors, as well as members of
Management. In considering the future
needs of the Board, as well as diversity
of gender and race, Beth Boucher was
identified as the most qualified candidate.
Beth joined the Board on 12 May 2023
and brings extensive experience
thanks to her career as a global Chief
Information Officer and her significant
expertise across the technology sphere.
Beth’s induction was consistent with the
process outlined for Jonathan above.
Following these formal reviews, the
Board remains confident that the
current skills and expertise are in place
to deliver value to the Company and its
shareholders. This formal annual
process is augmented by ongoing open
dialogue between the Non Executive
Directors on succession and the skills
required to deliver the strategy.
Pages 72 to 73 set out 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. This was also validated
through the Board evaluation process.
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
by the Board and its Committees
– specifically the Nominations and
Governance Committee, with a focus
on Board composition.
2023 Board and Committee
effectiveness review
Every third year, the Board evaluation
is undertaken by an external evaluator.
This was undertaken in 2023 by SCT
Consultants (who have no other
connection with the Company or its
Directors) and, in the interim years, an
internal evaluation is carried out which
also reviews each Committee, the
Board and individual Directors.
2023 evaluation
Building on the work of prior years, the
evaluation involved an assessment of
Board, Committee Chair and individual
Director performance. The Board and
Committee reviews and the external
evaluation focused on the composition
of the Board; the Board’s development
and oversight of business strategy; the
Board’s work on talent, succession and
culture; stakeholder engagement and
wider social impact. This review was
completed by all Directors.
The external evaluation process involved
a review of key Board documents and
a series of confidential interviews with
Board members, including the Company
Secretary, by the external evaluator.
All members of the Board completed a
confidential questionnaire. The external
evaluator also observed the November
Board meetings, and the results were the
subject of a Chair-facilitated discussion
at the Committee.
2023 Board review outcomes
The 2023 Board results demonstrated
continued strong Board, Director,
Chair, and Committee performance
and re-affirmed the independence of
the Board. The report further identified
that the Board is a capable and effective
Board made up of Directors with strong
and diverse capabilities and experience.
Directors have deep expertise in a
variety of areas relevant to the work
of the Company. The Board works
well together as a team and is open,
transparent, straightforward, and
Hiscox Ltd Report and Accounts 2023
97
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Nominations and
Governance
Committee report
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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;
• maintained a focus on people and
succession planning, specifically
relating to workforce DEI, employee
engagement, and long-term
succession planning for Senior
Management, Independent Non
Executive Directors and the Chair;
• continued discussions on the
Group’s strategy to further address
risk, operations and the competitor
environment in a fast-changing world;
• further focus on the development
and communication of sustainability
initiatives in line with changing
expectations and regulation; and
• continued focus on the diversity of
the Board, specifically as a number
of Directors reach the end of their
nine-year term in the coming year.
Jonathan Bloomer
Chair of the Nominations and
Governance Committee
evidence based in its decision-making.
It is well chaired and Directors show
considerable commitment to the
success of the business and to their
responsibilities, including work
outside formal Board meetings. The
selection of and transition to the new
Chair was considered to have been
well managed.
Directors were fully engaged with
the Board, Committee, Chair and
Director evaluation process. The
recommendations presented build on
the very good work which has been done
in recent years to build the capability
and effectiveness of the leadership of
Hiscox. 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. Notable points include:
• the Directors have a clear
understanding of and support for
the business strategy. Building
on this, the Board will continue to
enhance its annual strategy review;
• continuing review of strategy
implementation and milestones,
particularly for large and
material projects;
• strengthening the Board’s existing
work on talent strategy, seeking
out the perspectives of key external
stakeholders, as well as ensuring
there is consistency in the reporting
frameworks from each of the
Group’s business areas; and
• recognising the significant benefits
to the fact that Independent Non
Executive Directors also sit on
subsidiary boards across the
Group, which provides them with
stronger insights into the wider
business, and identifying new ways
for these experiences be shared
between all Directors.
98
Hiscox Ltd Report and Accounts 2023
Additional topics for review were
identified as part of the Board evaluation
which will influence the agendas and
training plans for the year.
While it was noted that the Board
continues to perform well and function
effectively, it was also noted that there
will be changes to the Board as a result
of the tenure of some Non Executive
Directors, and as such the Board will
need to consider the future-facing skills
that would be required by prospective
Board candidates. As set out in more
detail on page 67, the Board is cognisant
of its commitment to diversity in all its
forms and intends to continue to comply
with the current FTSE Women Leaders
Review target for gender diversity and
UK Listing Rules targets for gender and
ethnic diversity at Board level.
In summary, 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 2024 Annual
Report and Accounts.
2022 Board effectiveness review –
progress against identified actions
The Board and its Committees have
made tangible progress during 2023
against the action points identified in the
2022 Board effectiveness review:
• focused on the succession of the
Chair of the Board and a new Director;
• continued to drive accountability
and excellence in execution,
including the continued monitoring
of progress against the Company’s
business priorities and key projects,
and the linkage between objective
setting and monitoring;
• devoted time to considering
changes in the external environment
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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.
The Committee meets four times
a year to coincide with key points
in the Group’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:
• the quality and acceptability of
accounting policies and practices;
• the clarity of the disclosures and
compliance with financial reporting
standards and requirements;
• material areas in which significant
judgements and estimates have
been applied, or where there
has been discussion with the
external auditor; and
• any correspondence from
third parties in relation to our
financial reporting.
The Committee is comprised of eight
independent Non Executive members
with relevant finance expertise
and competence relevant to the
insurance sector.
The significant judgements considered
by the Committee in relation to the
2023 financial statements were
as follows.
i) Reserving for insurance losses
As set out in our material accounting
policies on pages 189 to 191, the
reserving for insurance losses is the
most critical estimate in the Group’s
financial statements. The Group
adopted IFRS 17 Insurance Contracts
from 1 January 2023. This changed
the methodology for measuring and
presenting insurance and reinsurance
contracts in the financial statements;
however, it does not change the Group’s
conservative reserving philosophy.
The Committee received regular updates
on the Group’s IFRS 17 programme
ahead of the publication of restatements
and the interim financial statements,
and the critical estimates applied in
measuring the insurance contract
liabilities and reinsurance assets.
The Committee concluded that the
disclosures in the annual financial
statements with respect to IFRS 17
are appropriate.
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 assets and
liabilities, including in relation to reserving
methods, longer-tailed casualty lines
and IFRS 17 assumptions involving
premium allocation approach eligibility
and risk adjustment.
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 conservative approach where
uncertainty exists as to the final cost
of settlement. As with prior years, the
Committee also considers the report
of the external auditor, following its
re-projection of reserves using its own
methodologies, and the independent
Hiscox Ltd Report and Accounts 2023
99
The Audit Committee
continues to foster
healthy debate and
discussion, with an
uncompromising
focus on the integrity
and robustness of our
financial disclosures.”
Donna DeMaio
Chair of the Audit Committee
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Audit Committee report
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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. The Committee is satisfied that
the valuation of insurance liabilities and
reinsurance assets at 31 December 2023
is appropriate.
ii) The recoverability of
reinsurance assets
Management are not aware of any
material issues regarding concentration
risk, credit risk or default risk on the
Group’s holding of reinsurance assets.
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 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
100
Hiscox Ltd Report and Accounts 2023
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 2.13 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 and the
results of the independent pension
valuation report. The Committee is
satisfied that the assumptions used
to measure the pension scheme are
reasonable and that appropriate
disclosures are provided in the
financial statements.
vi) Valuation of the investment portfolio
The Group adopted IFRS 9 Financial
Instruments from 1 January 2023.
The new standard did not have a
significant impact on the Group and
the Committee is satisfied that the
transitional disclosures presented in the
financial statements are appropriate.
The Group continues to measure and
report its investment assets at fair value.
Due to the nature of the investments,
as disclosed in notes 14 and 17, the fair
values are based on quoted prices or
are measured using directly or indirectly
observable inputs. A small proportion of
investments rely on a higher degree of
judgement, due to the limited availability
of observable market prices, to estimate
their fair value.
The Committee, through the Investment
Committee, receives reports on the
portfolio valuation and is content
with the process and the estimates
reported. Sensitivity analysis on
valuation of assets is captured within
the financial risk section (note 3.3) of
the financial statements.
vii) The recoverability of deferred
tax assets
Following substantive enactment of
the Corporate Income Tax Act 2023
in Bermuda, the Group expects to be
subject to corporate income tax on the
profits of its Bermudian subsidiaries
with effect from 1 January 2025.
The legislation requires taxpayers
to recognise an economic transition
adjustment, which creates a temporary
difference and should be recognised
as a deferred tax asset or liability,
subject to the recognition criteria.
The estimation of the value of this
deferred tax asset requires significant
judgement. The Committee is satisfied
with Management’s approach to
valuation and recognition of the
deferred tax asset.
Controls and corporate governance
The Committee receives quarterly
updates on the effectiveness of the
financial control environment. This
includes metrics to evaluate control
effectiveness, attestations from business
unit chief financial officers and the
tracking of any control remediation
activity. The Committee receives updates
on internal controls and reporting matters
from the significant regulated entity audit
committees operating within the Group.
In addition, the Committee was updated
on potential changes to the governance
and reporting of internal controls for
UK-listed companies, and the Group’s
plans to address these new reporting
disclosures. The Committee was also
given updates on various thematic
reviews published by the FRC
in 2023 on corporate reporting.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
Audit Committee report
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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,
the Committee recognises it is
important that Hiscox demonstrates
its commitment to environmental,
social and governance factors.
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. Detailed results of an annual
self-assessment against Internal
Audit standards and codes, and on
independence are reported annually
to the Committee. Every three years,
this assessment is carried out externally.
The internal audit plan is derived using
a risk-based approach. In 2023, key
themes included core underwriting
and claims controls, cyber security,
business and IT operations, change,
financial control, data governance and
controls, consumer duty and various
regulatory themes.
External auditor
PwC has been the Company’s external
auditor since 2016 following a tender
process. As an audit tender is required
before 2026, a tender process for
an external audit engagement was
approved in the year. The engagement
with vendors and a selection process will
commence in 2024.
PwC is invited to attend all meetings
of the Committee and it is the
responsibility of the Committee to
monitor their performance, objectivity
and independence. The Committee
discusses and agrees with PwC the
scope of its audit plan for the full-year
and the review plan for the interim
financial statements.
The Audit Committee receives reports
from PwC at each meeting which include
the progress of the audit, key matters
identified and the views of PwC on
the judgements outlined above. PwC
also reports on matters such as their
observations on the Company’s financial
control environment, developments in
the audit profession, 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.
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 the Committee concluded
that PwC continued to perform
effectively and remains independent
and that the audit was of a sufficiently
high quality.
In planning for an audit tender process
and assessing the effectiveness of the
external auditor, the Committee has been
apprised and has taken into account the
FRC’s publication: Audit Committees and
the External Audit: Minimum Standard.
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 2023
101
Sarah Bourdeau joined Hiscox USA in
October 2022 after more than 20 years
in the insurance industry. She is now
using her extensive knowledge of
both digital and traditional channels
to help drive growth in the distribution
of small business insurance across
the USA as part of Hiscox USA’s
mission to be America’s leading
small business insurer.
Q&
A:
with Sarah Bourdeau
Head of Distribution, Hiscox USA
Express delivery
Combining digital capability with
underwriting expertise, Hiscox
USA is seeking rapid growth in
commercial insurance across
multiple distribution channels. >
102
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
103
Q&
A:
with Sarah Bourdeau
Head of Distribution, Hiscox USA
Q: When you joined in 2022, what was
it that drew you to Hiscox?
A: I’ve spent my whole career in
insurance – claims, underwriting, sales
and distribution, both on the carrier
side and the agent-broker side – and I’ve
worked for most of the leading firms in
the USA. When this position at Hiscox
became available, I was intrigued by
the opportunity to accelerate the growth
of a carrier that is still relatively new to
the USA. From a culture perspective,
Hiscox is unique. We’re very employee
centric, very customer focused,
and there’s a tremendous amount
of entrepreneurial spirit. We’ve built
tremendous capability in the digital
space and have the backing of the
Group, which is a powerful combination.
Q: Does the current scale of the
Hiscox USA operation play to
your strengths?
A: Yes, it really does. There is the
opportunity to lead, while also getting
to roll up your sleeves and really dig into
the business. I personally thrive in that
environment. I love to be hands-on in the
right way, but also sit in board meetings
having high-level strategic discussions.
Here, I can influence the business in a
way I might not be able to at some of the
larger, less entrepreneurial companies,
and that’s really exciting.
Q: As Head of Distribution, what are
your key responsibilities?
A: We have three distribution channels
in the USA: direct, traded and digital.
I’m responsible for traded and digital.
My job is to drive profitable growth
by bringing our products to the right
partners and brokers while also
ensuring we make underwriting
decisions that support the profitability
of our business. On the digital side,
having the first-mover advantage gave
104
Hiscox Ltd Report and Accounts 2023
us traction, but the space is competitive
and ever-evolving. To counter this, we
have built the best team in the industry
and have a strategic plan that we are
confident in. Going into 2024, we have
significant momentum and I believe
we’re executing at a level we never
have before.
On the traded side, we’re focused
on creating a broker experience that
creates the ease of doing business that
brokers expect while also maintaining
a strong market presence through
the USA. We’ve built the underwriting
expertise to deliver on this experience
and I strongly believe that distinguishes
us in a busy marketplace.
Q: In the USA, you’re covering a
vast country. How do you serve
such a disparate body of customers?
A: Our strategy is to provide solutions
at every level. Through our four
regional offices, we have underwriters
in the field who are proximate to
our broker partners and we have a
best-in-class underwriting centre that
is engineered for speed and scale. It’s
about meeting different needs: if it’s
a complex account and it takes more
underwriting, we have people who can
sit down with our brokers face to face. If
what’s needed is simple, straight-through
processing, we have a talented team
that will handle those accounts quickly
and efficiently. On the digital side, we
have skilled people to engage with our
partners, but being proximate to them
is less important. Even in our digital
space, we need that human touch –
this is still very much a relationship
business, like it always has been,
and I think that’s what we all love
about it. The job is still very much
about engagement but powered
through technology.
Q: Are you able to attract the skilled
people you need to make those
relationships work?
A: We’ve brought in some of the best
talent in the industry. We’re building a
truly dynamic team with people who
have deep expertise in small commercial
insurance, and that’s really important.
The US market is so competitive,
especially in the smaller commercial
space, so being able to draw on the best
talent is a differentiator for us. We need
people who really understand how to
manage a portfolio of small commercial
businesses and build solutions that
meet our customer’s needs. Attracting
those people is a proof point of the
organisation’s health – they’re choosing
Hiscox over other opportunities in the
marketplace because we’re best in class.
Q: The benefits of the business’s
technological investment are clear
on the digital side, but do they
also extend to the traded side of
the business?
A: Very much so. Many of our brokers
are saying: “We want a digital solution”
or “We’re building a digital solution”
so the opportunity is there for us to
plug into that. Because of our
background in digital, there’s an
opportunity for us to bring those
learnings into the broker space and
to develop industry-leading digital
solutions there as well. Through our
digital capabilities, we’re building more
of those cross-cutting relationships,
which is a great position to be in.
Q: How do you measure success?
A: There are multiple elements to
measuring success in our business.
First and foremost, it’s about our ability
to deliver on the promises we make to
our policyholders. Second, profitable
growth. To achieve our goal of being
On the digital side, having the
first-mover advantage gave us
traction, but the space is competitive
and ever-evolving. To counter this, we
have built the best team in the industry
and have a strategic plan that we are
confident in. Going into 2024, we have
significant momentum and I believe
we’re executing at a level we never
have before.”
America’s leading small business insurer,
it’s important we ask ourselves some
pretty important exam questions: are
we growing at the pace we want to and
earning market share? Is our focus on the
segments and products that will deliver a
return? Behind the scenes, we’re getting
more sophisticated in our analytics. Do
we have the necessary foundational
capabilities and can we scale our
business efficiently?
Q: You’re working in a national
market, but you’re also part of a
global business. How does that
affect your work?
A: Day to day, we all operate in our
own markets in the way we need to,
but where we benefit – and what I love
about the Group dynamic – is from the
shared knowledge. I might be the only
Head of Distribution in the USA, but I
have other local market counterparts. So
if I’m trying to solve a problem, I can pick
up the phone, call somebody elsewhere
in the Group and say: “Hey, have you
done this before? How did it go? What
resources did you bring to the table?”
I find it exciting that we get to operate
as a small, nimble, independent US
company, while being part of a bigger,
broader global organisation that has
tremendous talent and resources.
Q: What impact does the strength of
the Hiscox brand have on your work?
A: Brand is important for a number
of reasons. The small commercial
insurance space in the USA is such a
competitive landscape – even the two
largest insurers have no more than a
4-5% market share individually – so
it’s very difficult to get much market
penetration. So having such a strong
brand helps us facilitate that connection
with brokers and partners. We find that
small business customers who have
seen the Hiscox advertising have built
confidence in us as a result.
Q: In your first year there, what has
struck you most about the sense of
community at Hiscox?
A: I love the way we emphasise and live
our values, both internally and externally.
Through the Hiscox Foundation,
employees are encouraged to give back
to the community and we show up strong
in our commitment to the communities
in which we live and work. We get to
support the causes that our people are
most passionate about and we provide
multiple opportunities to teams to give
something back through volunteering,
which I’ve found brings people together
in a really unique way. I’m looking forward
to participating much more next year.
Hiscox Ltd Report and Accounts 2023
105
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Annual statement from the Chair of the
Remuneration Committee
Dear fellow shareholder
On behalf of the Board, I am pleased to
present Hiscox’s remuneration report
for the year ended 31 December 2023.
At Hiscox, our remuneration strategy is
designed to attract and retain talented,
ambitious people, to foster a culture of
high performance and create sustainable
long-term value for shareholders. It
was with this strategy in mind that we
reviewed our remuneration policy in
2022, and the Committee was pleased
to have received a high degree of
support (97.6%) for the policy at the
May 2023 AGM. The Committee
believes that the new remuneration
policy, in its first year of implementation,
is operating effectively in respect of our
remuneration goals, demonstrating a
clear link between business performance
and remuneration outcomes.
2023 was a very strong performance
year that has laid the foundations for
continued growth. The appointment
of a new Group Chief Risk Officer in
November 2023 completes the
Group Executive Committee, and
the focus is squarely on execution
of the strategic plan in 2024 and
beyond. The Committee is excited
by the opportunities ahead for
Hiscox and remains committed to
ensuring remuneration structures
continue to align Executive Directors
with the wider workforce and
shareholder experience.
2023 performance and
remuneration outcomes
In 2023, the Executive Directors led
the business to achieve record results
against a backdrop of geopolitical and
economic uncertainty and in an active
year for claims. The Group has delivered
a record pre-tax profit of $625.9 million,
5.6% premium growth, a net combined
ratio (undiscounted) of 89.8%, and
an ROE of 21.8%* – the highest the
business has delivered in many years.
In light of the favourable market
conditions, particularly in the big-ticket
businesses, the Group has seized
the opportunities at this point in the
cycle and has pursued growth through
the additional allocation of capital to
those parts of the business expected
to generate the highest returns, while
remaining within earnings volatility
parameters consistent with the Hiscox
strategy. More information on the key
achievements of each Executive
Director for 2023 can be found on
page 116.
The ROE performance during 2023
has led to higher bonus awards than
in recent years, and the impact of
the 2023 performance year on the
three-year average growth in NAV
plus dividends long-term incentive
performance metric has also
been positive.
The ongoing impact of the change in
accounting standard from IFRS 4 to
IFRS 17 on incentive performance
metrics is described in the sub-sections
that follow and in more detail throughout
the report. The Committee maintains the
view that, in principle, plan participants
should be no better or worse off due
to this change than they would have
been without it. Where necessary
for 2023 and the following years, the
Committee will exercise discretion and
retrospectively adjust incentive targets
or outcomes to be reflective only of
underlying company performance.
* Excludes Bermuda Deferred Tax Asset (DTA).
Including Bermuda DTA, return on equity
is 27.6%.
The Committee
is excited by the
opportunities ahead
for Hiscox and
remains committed to
ensuring remuneration
structures continue
to align Executive
Directors with the
wider workforce
and shareholder
experience.”
Colin Keogh
Chair of the Remuneration Committee
106
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Chapter 4
Remuneration
Annual statement
from the Chair of
the Remuneration
Committee
2023 annual bonus
For the 2023 annual bonus, performance
metrics consisted of: pre-tax ROE
(75% weighting), employee engagement
(5%), retail claims net promoter score (5%)
and individual strategic objectives (15%).
In 2023, pre-tax ROE of 24.5% was
achieved. In assessing Executive
Director bonuses this ROE was adjusted
downwards to reflect one-third of 2022
adjustment for unrealised investment
loss on the bond portfolio. An upward
adjustment was made last year on the
understanding that as the bonds return
to par, downward adjustments would be
made to the 2023-2025 bonus pools to
remove the impact of any future gains.
The ROE metric was adversely impacted
by the larger equity base under the new
IFRS 17 accounting standard, however,
the Committee determined that the
impact was not sufficiently material to
warrant an adjustment.
The weighted average retail claims
NPS during 2023 was 68, compared
with 66 the prior year. The 2023 bonus
target was set at a stretching level with
25% of maximum payable for each
quarterly score of 69 or more. This
was achieved in two of the four
quarters in 2023, leading to a 50%
of maximum outturn.
The Hiscox employee engagement
score for 2023 was maintained
at a nine-year high of 82, despite a
reduction in engagement seen across
the financial services sector. Hurdle
vesting for 2023 was set at 82 which
generated a 20% of maximum outturn.
The assessment of each Executive
Director’s individual strategic objectives
for 2023 is detailed on pages 116 to 117.
Having combined all these performance
metrics, the Committee determined to
award an annual bonus equivalent to
93% of the maximum bonus opportunity
to Aki Hussain (£2,200,000), 91% to
Paul Cooper (£1,500.000) and 86% to
Joanne Musselle (£1,900,000).
In line with the newly implemented
policy, 40% of each Executive Director’s
bonus for 2023 will be deferred into
Hiscox shares for three years to further
align their interests with those of
our shareholders.
2021-2023 long-term incentive plan
Awards made under the Performance
Share Plan in 2021 included a 40%
weighting to relative TSR and 60% on
stretching net asset value (NAV) plus
dividends per share targets.
The 2021 award covered one year
(2023) of NAV performance that was
based on the IFRS 17 accounting
standard, while 2021 and 2022 were
both based on the IFRS 4 accounting
standard. The Committee agreed it
was appropriate to measure 2023
performance on an IFRS 4 consistent
basis. We are satisfied that this is the
most appropriate approach to remove
any variability in the 2023 result driven
by the transition between the two
standards and to align with the guiding
principle of ensuring no material benefit
or deficit relative to performance absent
the change.
The three-year average growth in NAV
of 13.3% resulted in vesting of 74.4%
of the maximum weighting for this
metric. Relative TSR performance
was below the median of the peer
group over the three-year period. This
resulted in an overall vesting of 44.6%
of awards.
Hiscox Ltd Report and Accounts 2023
107
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Chapter 4
Remuneration
Annual statement
from the Chair of
the Remuneration
Committee
During 2023, we
reviewed the incentive
structures for the wider
workforce, to ensure
we have a consistent
methodology in our
incentive approach
across Hiscox,
which is aligned to the
market and enables us
to remain competitive.”
Exercise of discretion
For both the short- and long-term
incentive plans, and consistent
with previous years, the Committee
assessed performance in the round
when determining variable pay
outcomes, including an assessment
of wider Company performance and
the employee, shareholder and wider
stakeholder experience, alongside a
consideration of risk. As mentioned
earlier, a downward adjustment was
made to the 2023 pre-tax ROE result
following the upward adjustment made
in respect of the unrealised bond
losses in 2022.
The Committee used a scoring
mechanism as a starting point to
calculate performance outcomes
against key strategic objectives for
each Executive Director. Discretion
was then exercised in determining
the final outcomes. The impact of the
Group Chief Underwriting Officer’s
higher bonus max (400% salary versus
300% salary for the other Executive
Directors) was rebalanced in order
to achieve a more equitable outcome
in the context of the overall contribution
made by the three Executive Directors.
Board changes in the year
Jonathan Bloomer was appointed
as Chair to the Hiscox Ltd Board on
1 June 2023, replacing Robert Childs.
Jonathan’s fee is market aligned and
was benchmarked prior to appointment.
2024 remuneration
For 2024, Aki Hussain’s salary will
increase by 4.3%, Paul Cooper by
2.5% and Joanne Musselle by 2.5%.
These increases differ based on
external market data and are in line
with our average workforce increases
in the UK of 4.3%.
108
Hiscox Ltd Report and Accounts 2023
There are no proposed changes to
award levels under the annual bonus
or long-term incentive plan.
The annual bonus metrics for the
2024 plan will remain broadly similar
to those adopted in 2023, albeit with
a small change to the measurement
of the Claims NPS metric to reflect an
internal review that has been carried
out on the NPS process. The 2024
long-term incentive award will be based
on relative TSR and growth in NAV plus
dividends plus shareholder returns
measured on a per-share basis.
Wider workforce
The Committee remains focused on
ensuring Hiscox’s reward philosophy is
applied appropriately across the entire
workforce and that includes looking
after our lowest paid employees.
During 2023, we reviewed the incentive
structures for the wider workforce,
to ensure we have a consistent
methodology in our incentive
approach across Hiscox, which is
aligned to the market and enables
us to remain competitive. The new
incentive structures will be implemented
during 2024 and will provide our
wider workforce with greater visibility
of potential incentive outcomes, in
particular bonus outcomes.
The Committee also continued with
the following activities to ensure we are
appropriately rewarding and engaging
the entire workforce and reflecting this
in Board decision-making:
p Board oversight: we are regularly
kept up to date by the Chief
People Officer on wider workforce
remuneration trends and policies
to aid our understanding of how
Executive Directors’ remuneration
aligns to that of wider employees;
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Chapter 4
Remuneration
Annual statement
from the Chair of
the Remuneration
Committee
(2022: 16.0%). We recognise that
there is more to do and are focused
on getting more women into senior
roles, while maintaining our principles
of recruiting based on talent alone. We
have DEI action plans in place across
our business units that are measured
and monitored, with goals related to
recruitment and career development
right through to succession planning.
Employee share ownership
We continue to grant shares to all new
permanent employees aligned with our
ownership value under the HSX:26 share
ownership scheme, to further foster
a culture of sustainable performance
and shared ownership. In addition, all
employees are able to join one of our
sharesave schemes, which run twice a
year and provide the wider workforce
with an opportunity to buy Hiscox shares
at a discounted rate after three years
of saving.
In summary
The Remuneration Committee is
satisfied that 2023 remuneration
outcomes are aligned with the
experience of shareholders and
reflective of business performance.
Colin Keogh
Chair of the Remuneration Committee
p employee engagement:
Anne McDonald, Non Executive
Director, also serves as the
Group’s Employee Liaison and,
as such, continues to facilitate
engagement sessions through
the established representative
employee engagement network to
better understand employee views
on issues, including but not limited
to remuneration, and provides
periodic feedback on these
discussions to the Board. We are
pleased to report that, during 2023,
the feedback received showed that
Executive Director remuneration
is viewed as commensurate with
relative skills, experience and risk
and was not felt to be excessive
or disproportionate.
More broadly, we recognise the
criticality of employee engagement
for our business, which is exemplified
by the inclusion of an employee
engagement metric within the annual
bonus plan for Executive Directors.
Living Wage employer
Hiscox has been an accredited Living
Wage employer in the UK since 2019.
This is an important part of our
employee value proposition and
helps ensure that Hiscox employees
receive pay that recognises the rising
cost of living in the UK.
Additional bonuses have been paid to
the most junior employees in recognition
of the strong financial performance of
the Company during 2023.
Pay reporting
We published our seventh annual UK
gender pay report in 2023 and the
gap remains broadly unchanged from
last year at 16.0% on a mean basis
Hiscox Ltd Report and Accounts 2023
109
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Summary of remuneration arrangements
Total remuneration 2023
Aki Hussain
Paul Cooper
Joanne Musselle
Fixed pay Bonus LTIP/buy-out
859,564
606,429
604,582
2,200,000
1,500,000
1,900,000
963,600
687,550
687,550
£3,747,114
£3,070,029
£3,192,132
Annual bonus
Aki Hussain
Paul Cooper
Joanne Musselle
93%
300%
91%
300%
86%
400%
2023 award (as % of max) Maximum opportunity (as % salary)
Long-term incentive plan (LTIP) Award vesting where the performance period ends 31 December 2023
Aki Hussain
Joanne Musselle
45%
45%
55%
55%
2023 vested
vs lapsed
Shareholding requirement
Aki Hussain
Paul Cooper
Joanne Musselle
233%
200%
148%
200%
224%
200%
Held Requirement
110
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Summary of
remuneration
arrangements
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Total remuneration 2023
Annual bonus
Long-term incentive plan (LTIP) Award vesting where the performance period ends 31 December 2023
Implementation of policy
for 2023
Salaries for 2023:
AAki Hussain: £787,500
APaul Cooper: £551,250
AJoanne Musselle: £551,250
Maximum opportunity:
Aup to 300% of salary for CEO and CFO;
Aup to 400% of salary for CUO.
Over the past ten years, the average bonus
awarded to the CEO has been equivalent to
30% of the current maximum opportunity.
Performance metrics: 75% weighting on ROE
and 25% on non-financial performance metrics.
Further details are provided on page 114.
Deferral: flat rate of 40% of bonus deferred
into shares and released three years following
the end of the relevant performance year.
Award subject to three-year performance
period and two-year holding period.
Maximum opportunity: 250% of salary for
all Executive Directors.
Vesting subject to: growth in NAV
(50% weighting) and relative TSR
(50% weighting).
2023 award as percentage of salary:
AAki Hussain: 250%
APaul Cooper: 225%
AJoanne Musselle: 225%
Holding period: awards subject to a further
two-year holding period following vesting.
Implementation of policy
for 2024
Salaries for 2024:
AAki Hussain: £821,500
APaul Cooper: £565,000
A Joanne Musselle: £565,000
Salary increases of 4.3% for the
CEO and 2.5% for other Executive
Directors in line with external market
data and other UK-based employees
where the average increase is 4.3%.
No changes.
Vesting subject to: growth in NAV
(50% weighting) and relative TSR
(50% weighting).
Maximum opportunity, time horizon
and holding period all unchanged.
2024 award as percentage
of salary:
AAki Hussain: 250%
APaul Cooper: 200%
AJoanne Musselle: 200%
Shareholding requirement
Share ownership guidelines of 200% of salary
for all Executive Directors, after five years in role.
Share ownership
guideline unchanged.
2023 actual:
AAki Hussain: 233%
APaul Cooper: 148%
Paul Cooper was appointed in May 2022.
AJoanne Musselle: 224%
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.
134
Read our remuneration policy.
Key principles underpinning
remuneration at Hiscox
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.
CEO single figure (ten-year history)
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
£
3,747,114
1,390,959
1,332,964
717,243
698,196
1,818,086
2,394,428
3,970,466
3,358,894
3,130,535
Hiscox Ltd Report and Accounts 2023
111
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Annual report on remuneration 2023
This report explains how the remuneration policy was implemented
for the financial year ended 31 December 2023.
PwC has been engaged to audit the sections in the annual report on remuneration 2023 below entitled ‘Executive Director
remuneration’ and ‘additional notes to the Executive remuneration table’, ‘annual bonus’, ‘performance outcomes for 2023’,
‘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)
2023
Name
Salary
£
Benefits
£
Retirement
£
Bonus4
£
Aki Hussain
Paul Cooper
Joanne Musselle
778,125
544,688
544,688
10,703
8,945
9,349
70,736 2,200,000
52,796 1,500,000
50,546 1,900,000
2022
Name
Aki Hussain
Paul Cooper1
Joanne Musselle
Salary
£
750,000
340,057
522,125
Benefits
£
10,593
6,009
8,890
Retirement
£
67,866
30,732
43,527
Bonus
£
562,500
237,182
525,000
Long-term
incentive
plan2
£
687,550
0
687,550
Long-term
incentive
plan2
£
Other3
£
Total
£
Fixed
remuneration
£
Variable
remuneration
£
Total split
0
3,747,114
963,600 3,070,029
3,192,132
0
859,564 2,887,550
606,429 2,463,600
604,582 2,587,550
Other
£
Total
£
Fixed
remuneration
£
Variable
remuneration
£
Total split
0
0
0
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
¹Paul 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.
2 2023 long-term incentives for Aki Hussain and Joanne Musselle relate to performance share award granted in 2021 where the performance period ends on
31 December 2023. The award is due to vest on 8 April 2024. The amount includes dividend equivalents of £42,799 accrued on the award. For the purpose of
this table, the award has been valued using the average share price during the three-month period 1 October 2023 to 31 December 2023 of £10.00. Of the vested
amount, £90,911 relates to share price appreciation over the performance period.
3 On 3 April 2023, the second tranche of the share buy-out award for Paul Cooper vested. The total vested award was 87,600 shares including dividend
equivalents accrued on the award. The award was valued at £963,600 using the middle market quotation of £11.00 on 3 April 2023, which included £112,814
share price appreciation.
440% of the bonus is deferred into shares for three years. No further performance conditions apply.
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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, salaries for all
Executive Directors were increased by 5% which was below the average UK-based employee salary increase of 6.1%.
Base salaries for Executive Directors from 1 April 2023 were as follows:
Aki Hussain
Paul Cooper
Joanne Musselle
April 2023
£
787,500
551,250
551,250
Benefits
For 2023, 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 (£8,500 for 2023) 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. Although the remuneration structure has naturally evolved over
time to reflect market and best practice, the framework has been in place for more than 15 years.
Hiscox Ltd Report and Accounts 2023
113
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
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.
In determining the bonuses to be paid to Executive Directors for 2023, the Committee based its judgement on the scorecard
shown below. Assessment of claims transactional NPS and employee engagement was undertaken by external third parties.
Metric
Weighting
of maximum
opportunity
Performance criteria
Financial
Pre-tax ROE
75%
The pre-tax ROE threshold is set annually using an investment
benchmark rate and for 2023 was set at a pre-tax ROE of 5%.
To aid the Committee’s assessment of bonus outcomes, the
following framework was in place for 2023.
Pre-tax ROE
Bonus % max
< 5%
5%-12%
11%-16%
15%-20%
18%-23%
>21%
0%
0-30%
25-55%
45-75%
65-90%
80-100%
Non-financial
Strategic personal
objectives
15%
Retail claims
transactional NPS
5%
The Committee undertakes a robust assessment of individual
achievements by the Executive Directors. See page 116 for
further details.
Weighted average quarterly score is derived by an external
third party. Bonus vesting is reduced if the quarterly score falls
below 69.
Global employee
engagement score
5%
Engagement is measured through the annual employee
engagement survey run by an external third-party provider.
Performance threshold of 82% engagement below which
bonus payment for this metric is zero with a stretch score
of 90% or above for 5% vesting. Straight-line vesting profile
between hurdle and max.
Maximum bonus opportunities for 2023 remained unchanged from 2022, being 300% of salary for both the Group Chief Executive
Officer and Group Chief Financial Officer and 400% of salary for the Group Chief Underwriting Officer. 40% of annual bonuses are
deferred into Hiscox shares for a period of three years. The release of these shares and the associated accrued dividend shares are
generally subject to continued employment but are not subject to any further performance conditions. The remaining 60% of annual
bonus is paid in cash in March 2024. Malus and clawback provisions apply (see page 141 for more details).
114
Hiscox Ltd Report and Accounts 2023
400
350
300
250
200
150
100
50
0
400
350
300
250
200
150
100
50
0
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Executive Directors’ cash incentives and return on equity
Bonus as a percentage of salary
2007
2023
2003
2009
2006
2015
2013
2012
2014
2010
2016
2004
2002
2008
2005
2021
2018
2022
2001
2020
Below zero
2011 2017
2019
0%
5%
10%
15%
20%
25%
30%
35%
40%
Return on equity
Pay for performance – track record
The chart above shows the relationship between the Group ROE performance and bonus awards for Executive Directors over an
extended period. It demonstrates the strong link between Company performance and bonus outcomes.
Performance outcomes for 2023 (audited)
Pre-tax ROE
5
The Executive Directors led the business to achieve record results against a backdrop of geopolitical and economic instability
and in an active year for claims. The Group has delivered a pre-tax ROE result of 24.5%.
25
10
35
20
30
15
0
40
As explained in last year’s remuneration report, ROE in 2022 was materially impacted by unrealised investment losses on the
bond portfolio. The Committee agreed last year that the fairest treatment was to pay bonuses to Executive Directors and the wider
workforce on an adjusted profit basis, recognising the impact of unrealised investment losses on bonds. It was further agreed that
as the bonds return to par, adjustments would be made to the 2023-2025 bonus pools to remove the impact of any future gains.
This year, the Committee has therefore deducted one-third of the profit adjustment made last year, from this years ROE results.
For the Executive Directors, the profit adjustment of $35.8 million results in an adjusted pre-tax ROE of 23.1% for bonus purposes.
The Committee is of the view that paying 100% of the maximum bonus opportunity weighted to ROE performance is a fair
outcome for the Executive Directors and that payment of this level is aligned with the shareholder experience.
Hiscox Ltd Report and Accounts 2023
115
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
2023 key objectives and individual achievements by the Executive Directors (audited)
Key objectives
Achievements
Aki Hussain
Deliver the 2023
business plan
Lead an effective
Group Executive
Committee (GEC)
Oversee a risk
aware culture
During 2023, Aki has led the business to achieve record results against a backdrop of geopolitical and
economic instability and in an active year for claims. The Group has delivered a record pre-tax profit of
$625.9 million, 5.6% growth in ICWP, a net combined ratio (undiscounted) of 89.8%, and an ROE of
21.8%*. This record result was underpinned by an additional allocation of capital to those parts of the
business expected to generate the highest returns in the favourable hard market conditions, while
remaining within the Group’s earnings volatility parameters.
Aki has established a high performing GEC and has been focused on clarifying its role and behaviours,
in the context of delivering the Hiscox Group 2025 ambition. Aki has driven further alignment between
the individual objectives of GEC members and the overall strategy. Excellent progress has been made,
and the record employee engagement score of 82% which was achieved in 2022 was maintained in 2023.
Aki has strengthened and embedded the Group’s risk aware culture, while also more generally enhancing
its risk management framework. This has been achieved through delivering regular mandatory training
to our people and implementing a new risk and compliance operating model. Aki also appointed Fabrice
Brossart this year as our new Chief Risk Officer, thus completing the membership of the GEC.
Paul Cooper
Deliver the
expense ratio plan
Expense efficiency has been a key priority for Paul this year, and he has led the business to achieve an
expense ratio of 48.1% which represents a 1.5 point improvement year on year. Furthermore, Paul has
formalised a detailed roadmap to continue to maximise operating leverage as we grow the business and
embedded this into the business planning process to the end of 2026.
Implement and
embed IFRS 17
Build a first class
finance function
Paul has delivered a smooth implementation of IFRS 17 globally across the business with minimal
disruption. This was achieved through a multi-year programme addressing systems and process changes
and realising efficiencies in the IFRS 17 reporting timetable. This has enabled continued successful and
timely reporting of our results, with clear commentary outlining the impact on our numbers. An extensive
communication schedule was also conducted, including two specific market briefing sessions to sell-side
analysts and an extensive internal training and education programme covering the Board, Management
and staff. This has been recognised and positively received both internally and externally – particularly by
industry analysts and investors.
Paul has continued to focus on building a first class finance function, which in 2023 included enhancing
the financial risk and control framework to reflect the evolving regulatory landscape, and addressing
changes to the UK Corporate Governance Code with the formation of a dedicated programme to drive
progress. Paul has also embedded a new vision for finance as a trusted business partner and a destination
for talent, completing his Finance Leadership Team during the year with a number of key appointments
including Todd Isaac as our new Chief Investment and Treasury Officer.
Joanne Musselle
Deliver the 2023
business plan
Joanne has successfully overseen our underwriting teams around the world as they maximised
the opportunities in each of our chosen markets, resulting in an insurance service result for 2023 of
$492.3 million, up 36.4% year-on-year, despite an active year for claims. Our big-ticket businesses
successfully leaned into the hard market, growing net ICWP in Hiscox London Market by 15.1% and
in Hiscox Re & ILS by 23.2%.
Technical
excellence
Active portfolio
management
Joanne has continued to boost our technical capabilities, with a particular focus on further enhancing
the alignment between underwriting, claims, reserving and pricing. Strong progress has been made,
with minimum standards established and the appointment of a dedicated lead to drive this critical
workstream. In addition, the Faculty of Underwriting, established under Joanne’s leadership to enhance
technical and behavioural skills and capabilities across the underwriting community at Hiscox, continues
to develop the underwriters of the future and ultimately enhance the robustness of the underwriting risk
and control framework across the Group.
Active portfolio management continues to be a key priority for Joanne, and under her leadership our
big-ticket teams have made the most of the cyclical market opportunities, maximising growth in areas
such as property (re)insurance and renewables, while our retail teams have continued to focus on the
structural growth opportunity, investing in tools and capabilities to pro-actively manage emerging trends
and opportunities. Joanne has also overseen the ongoing execution of legacy portfolio transactions
(LPTs) for exited lines of business to effectively minimise earnings volatility. In addition, Joanne has led
the development of a sustainable underwriting strategy for the Group, designed to enable the business
to balance the requirements of the transitioning economy and realise new and growing underwriting
opportunities, including through the ESG 3033 sub-syndicate launched during 2023.
*Excludes Bermuda Deferred Tax Asset (DTA). Including Bermuda DTA, return on equity is 27.6%.
116
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
The Committee used a scoring mechanism as a starting point to calculate performance outcomes against key strategic objectives
for each Executive Director. Discretion was then exercised in determining the final outcomes. The impact of the Group Chief
Underwriting Officer’s higher bonus max (400% salary versus 300% salary for the other Executive Directors) was rebalanced
in order to achieve a more equitable outcome in the context of the overall contribution made by the three Executive Directors.
The Committee judged that Aki Hussain should receive 44% salary for achievement of his objectives, 37% for Paul Cooper and
31% for Joanne Musselle.
Retail claims transactional NPS (audited)
Our customers are at the heart of what we do and their experience of dealing with us is intrinsically linked to our brand value.
Claims transactional net promoter score was measured by an external third party across our retail operations in Europe, the UK
and the USA. The weighted average quarterly scores are shown below.
Q1
Q2
Q3
Q4
66
69
69
68
There were two quarters when the score fell below the performance threshold score of 69 and therefore 50% of the weighting
attributed to this metric will vest.
Global employee engagement score (audited)
Employee engagement has proven to be strongly correlated with overall Company performance and we regard it as an important
forward-looking leading measure of our success. We also believe it is largely a function of good leadership. Engagement was
measured during 2023 through an annual global employee engagement survey run by an external third-party provider. The score
was 82% and therefore 20% of the weighting attributed to this metric will vest.
Summary of annual bonus performance outcomes (audited)
The maximum bonus opportunity for both the Group Chief Executive Officer and Group Chief Financial Officer is 300% salary and
400% of salary for the Group Chief Underwriting Officer. Having assessed the scorecard outturns and aggregate performance,
the Committee is of the view that paying 93% of the maximum bonus opportunity to Aki Hussain (£2,200,000), 91% to Paul Cooper
(£1,500.000) and 86% to Joanne Musselle (£1,900,000) are fair outcomes for the Executive Directors, reflective of the excellent
business results and aligned with the shareholder experience.
Long-term incentive plan (audited)
Share buy-out arrangements for Paul Cooper
As disclosed in the 2022 remuneration report, in lieu of forfeited long-term incentive plan awards with his previous employer,
Paul Cooper was compensated with awards of an equivalent face value and all vesting terms were mirrored. The Hiscox malus
and clawback provisions apply. Vesting is subject to continued employment.
On 3 April 2023, the second tranche of the buy-out award vested. Paul Cooper received an additional 820 shares equivalent to
the dividends payable with a record date between 16 May 2022 and 2 April 2023. The total vested award was 87,600 shares.
Hiscox Ltd Report and Accounts 2023
117
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Performance Share Plan (PSP) awards where the performance period ends with the 2023 financial year (audited)
Aki Hussain and Joanne Musselle were each granted 144,436 nil-cost options under the PSP on 8 April 2021 for the three-year
performance period 1 January 2021 to 31 December 2023.
The performance conditions for this award were set at the start of the performance period and are as follows.
60% of awards are based on three-year average growth in NAV per share, plus dividends:
Less than RFR + 6% p.a.
RFR + 6% p.a.
RFR + 14% p.a.
Equal to or greater than RFR +17% p.a.
Straight-line vesting in between each point.
The risk-free rate (RFR) for the awards granted in 2021 was set at 0%.
Award vesting (% of maximum)
0
16
80
100
40% of awards are based on relative total shareholder return measured against a group of global insurance peers:
Relative TSR
Below median
Median
Upper quartile
Straight-line vesting in between each point.
Award vesting (% of maximum)
0
20
100
The peer group consists of the following 24 companies: Admiral Group, Alleghany, American Financial Group, Arch Capital, Argo, Axis Capital, Beazley,
Cincinnati Financial, Conduit, CNA Financial, Direct Line Insurance Group, Everest Re, Fairfax Financial Holdings, Hanover Insurance, James River Group,
Kinsale Capital Group, Lancashire Holdings, Markel, QBE, Renaissance Re, RLI, SCOR, White Mountains Insurance Group, and WR Berkley.
Performance outcome
Following Berkshire Hathaway’s acquisition of Alleghany in 2022, Alleghany has been removed from the peer group, reducing
the number of companies to 23. Hiscox’s relative TSR performance over the three-year period was below the median of the
comparator group and therefore this component of the award will not vest.
The three year average growth in net asset value plus dividends, measured on a consistent IFRS 4 basis over the period, was
13.3%. The vesting outcome was 74.4% of the maximum award which when applied to the 60% weighting for this metric, equates
to an overall vesting of 44.6%. Executive Directors will accrue additional shares based on dividend equivalents over the three
performance years and are required to hold the vested shares (net of tax) for a further two years from the end of the three-year
vesting period.
118
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
PSP awards granted during the 2023 financial year (audited)
PSP awards granted to the Executive Directors in 2023 were set at 250% of salary for Aki Hussain and 225% of salary for
both Paul Cooper and Joanne Musselle. Awards are based on a three-year performance period and will vest on 15 May 2026
followed by a two-year holding period. 50% of awards are based on stretching growth in net asset value (NAV) plus dividends
targets, measured on a per share basis, with 50% based on relative total shareholder return (TSR) against a group of global
insurance peers.
Executive Directors were granted nil-cost options under the PSP as shown below. Grants were made on 23 May 2023.
Aki Hussain
Paul Cooper
Joanne Musselle
Number of
awards granted
168,269
106,009
106,009
Market price
at date of grant
£
Market value
at date of grant
£
11.74 1,975,478
11.74 1,244,546
11.74 1,244,546
The performance condition for these awards, measured over the period 1 January 2023 to 31 December 2025, is as follows:
Growth in NAV per share plus dividends
Award vesting (% of maximum)*
< $0.43 p.a.
$0.43 p.a.
$1.28 p.a.
0
20
100
*Applies to 50% of awards. Straight-line vesting in between each point.
These numbers were set on an IFRS 4 basis. The performance years 2023, 2024 and 2025 will be measured on an IFRS 17 basis and so these IFRS 4 targets will be
converted to equivalent IFRS17 numbers and restated prior to vesting.
Relative TSR
Below median
Median
Upper quartile
Award vesting (% of maximum)*
0
20
100
*Applies to 50% of awards. Straight-line vesting in between each point.
The peer group consists of the following 23 companies: Admiral Group, American Financial Group, Arch Capital, Argo, Axis Capital, Beazley, Cincinnati Financial,
CNA Financial, Conduit, Direct Line Insurance Group, Everest Re, Fairfax Financial Holdings, Hanover Insurance, James River Group, Kinsale Capital Group,
Lancashire Holdings, Markel, QBE, Renaissance Re, RLI, SCOR, White Mountains Insurance Group, and WR Berkley.
Executive Directors will be required to retain any shares post vest (net of tax charges) for a further two years.
Hiscox Ltd Report and Accounts 2023
119
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Non Executive Director remuneration (audited)
The table below sets out the remuneration received by the Non Executive Directors for the financial years ending 31 December 2023
and 31 December 2022.
2023
Jonathan Bloomer (Chair)1
Robert Childs2
Beth Boucher3
Donna DeMaio
Michael Goodwin
Thomas Huerlimann4
Colin Keogh
Anne MacDonald
Constantinos Miranthis
Lynn Pike
2022
Robert Childs (Chair)
Donna DeMaio
Caroline Foulger5
Michael Goodwin
Thomas Huerlimann
Colin Keogh
Anne MacDonald
Constantinos Miranthis
Lynn Pike
Ltd Board
fee
£
Subsidiary board
fee
£
195,417
147,500
64,213
108,871
100,806
100,806
121,774
108,871
108,871
106,452
–
–
–
62,903
36,290
119,804
106,000
–
39,516
62,903
Ltd Board
fee
£
Subsidiary board
fee
£
295,000
116,379
45,634
107,759
107,759
130,172
116,379
116,379
113,793
–
39,224
43,971
38,793
51,304
106,000
–
42,241
67,241
Benefits6
£
–
7,041
–
–
–
–
–
–
–
–
Benefits1
£
13,987
–
–
–
–
–
–
–
–
Total Hiscox
fees
£
195,417
154,541
64,213
171,774
137,096
220,610
227,774
108,871
148,387
169,355
Total Hiscox
fees
£
308,987
155,603
89,605
146,552
159,063
236,172
116,379
158,620
181,034
1Jonathan Bloomer was appointed as Chair to the Hiscox Ltd Board on 1 June 2023. Board fees are pro-rated from this date.
2Robert Childs retired from the Hiscox Ltd Board on 30 June 2023. Ltd Board fees and benefits are pro-rated to this date.
3Beth Boucher was appointed to the Hiscox Ltd Board on 12 May 2023.
4Thomas Huerlimann took over as Chair of a subsidiary board in Q4 2023.
5Caroline Foulger retired from the Hiscox Ltd Board on 12 May 2022.
6Benefits include life assurance and healthcare.
Fees are paid in multiple currencies – 2023 fees were converted using £1: €1.15 and £1: $1.24. 2022 fees were converted using £1: €1.15 and £1: $1.16.
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Membership of the Remuneration Committee
The Remuneration Committee members during the year were Beth Boucher, Donna DeMaio, Michael Goodwin,
Thomas Huerlimann, Colin Keogh (Chair), Anne MacDonald, Constantinos Miranthis and Lynn Pike.
Directors’ shareholding and share interests (audited)
To align their interests with those of Hiscox shareholders, senior managers are expected to own a minimum number of Hiscox
shares. Executive Directors are required to hold Hiscox shares valued at 200% of salary within five years of becoming an Executive
Director. Joanne Musselle and Aki Hussain have met the requirement with holdings of 224% and 233% respectively using
the closing share price on 31 December 2023. Paul Cooper was appointed to the Board in 2022 and is beginning to build his
shareholding. He currently holds shares equivalent to 148% of salary.
Details of the post-employment shareholding guideline for Executive Directors which applies for a period of two years from
stepping down from the Board can be found on page 139.
The interests of Executive and Non Executive Directors are set out below, including shares held by connected persons. There
have been no changes in the Director share interests between 31 December 2023 and 5 March 2024.
Directors
Executive Directors:
Aki Hussain
Paul Cooper
Joanne Musselle
Non Executive Directors:
Jonathan Bloomer1
Robert Childs2
Beth Boucher
Donna DeMaio
Michael Goodwin
Thomas Huerlimann
Colin Keogh
Anne MacDonald
Constantinos Miranthis
Lynn Pike
1Jonathan Bloomer was appointed as Chair to the Hiscox Ltd Board on 1 June 2023.
2Robert Childs retired from the Hiscox Ltd Board on 30 June 2023.
31 December
2023
6.5p ordinary
shares
number of shares
beneficial
31 December
2022
6.5p ordinary
shares
number of shares
beneficial
174,188
77,174
117,309
145,767
30,045
117,309
20,000
1,113,162
–
–
12,678
16,548
59,667
42,629
6,832
1,538
–
1,213,162
–
–
12,678
16,112
53,980
41,504
6,832
1,538
Hiscox Ltd Report and Accounts 2023
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Annual report on
remuneration 2023
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Performance Share Plan (PSP) (audited)
Awards in the form of nil-cost options are granted under the PSP as a percentage of salary. All awards are subject to performance
conditions, with the exception of Paul Cooper’s buy-out. The interests of Executive Directors are set out below:
Name
Aki Hussain
Paul Cooper
Joanne Musselle
Total
*Denotes buy-out award.
Number of
awards at
1 January
2023
120,500
144,436
190,355
–
86,780*
42,945*
11,037*
141,646
–
120,500
144,436
133,248
–
1,135,883
Number of
awards granted
Number of
awards lapsed
Number of
awards exercised
Number of
awards at
31 December
2023
Mid-market price
at date of grant
£
Average market
price at date of
exercise
£
Date from
which released
–
–
–
168,269
820
–
–
–
106,009
–
–
–
106,009
381,107
(120,500)
–
–
–
–
–
–
–
–
(120,500)
–
–
–
(241,000)
–
–
–
–
(87,600)
–
–
–
–
–
–
–
–
–
144,436
190,355
168,269
–
42,945
11,037
141,646
106,009
–
144,436
133,248
106,009
(86,780) 1,188,390
7.00
8.59
9.85
11.74
9.70
9.70
9.70
9.85
11.74
7.00
8.59
9.85
11.74
15-May-23
08-Apr-24
08-Apr-25
23-May-26
11.00 03-Apr-23
01-Apr-24
01-Apr-25
08-Apr-25
23-May-26
15-May-23
08-Apr-24
08-Apr-25
23-May-26
Sharesave Schemes (audited)
The interests of Executive Directors under the Sharesave Schemes are set out below.
The scheme offers a three-year savings contract where the exercise price of the options is calculated on an average share price
over five days prior to the invitation date, with a 20% discount. Sharesave options are not subject to performance.
Aki Hussain
Paul Cooper
Joanne Musselle
Total
Number of
options at
1 January
2023
2,500
2,452
2,380
7,332
Number of
options granted
Number of
options lapsed
Number of
options exercised
Number of
options at
31 December
2023
Exercise price
£
Market price
at date
of exercise
£
–
–
–
–
–
–
–
–
–
–
–
–
2,500
2,452
2,380
7,332
7.20
7.34
7.56
Date from which
exercisable
Expiry date
01-Jun-24 30-Nov-24
01-Dec-25 31-May-26
01-Dec-24 31-May-25
Payments for loss of office (audited)
No payments were made during the year for loss of office.
Payments to past Directors (audited)
Following stepping down as Group Chief Executive Officer and as an Executive Director of Hiscox Ltd with effect from
31 December 2021, Bronek Masojada has continued providing strategic advice as an Executive Advisor for key subsidiaries.
During 2023, Bronek received a salary of £150,000 and was covered under the health insurance and life assurance schemes.
Bronek was granted a performance share award in 2021 of 187,612 shares. As detailed on page 118, 44.6% of these awards
will vest plus Bronek will receive additional shares based on dividend equivalents over the three performance years. He will be
required to retain the shares post vest (net of tax charges) for a further two years.
122
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Implementation of remuneration policy for 2024
Salary
Annual salary reviews take effect from April each year. The Committee takes account of a number of factors, primarily the increase
applied to other UK-based employees. The Committee applies judgement when using external market data.
For 2024, salaries will be increased by 4.3% for the Group Chief Executive Officer and 2.5% for the other Executive Directors. This
is in line with external market data and other UK-based employees where the average increase is 4.3%. Salaries from April 2024
will be as follows:
Aki Hussain
Paul Cooper
Joanne Musselle
2024
£
821,500
565,000
565,000
Bonus
The annual bonus performance targets for 2024 are considered commercially sensitive. They will be disclosed in full in the 2024
annual report on remuneration including specific details of individual and strategic performance targets. The weighting of the
performance measures will remain unchanged from 2023, as detailed below.
Metric
Pre-tax ROE
Strategic personal objectives
Retail claims transaction NPS
Global employee engagement score
Weighting
75%
15%
5%
5%
The maximum opportunity remains unchanged at 300% salary for the Group Chief Executive Officer and Group Chief Financial
Officer, and 400% salary for the Group Chief Underwriting Officer.
Hiscox Ltd Report and Accounts 2023
123
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Implementation of
remuneration policy
for 2024
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Long-term incentive plan: Performance Share Plan (PSP)
The maximum opportunity for the awards to be granted to the Executive Directors in 2024 will remain unchanged at 250% of
salary. Awards in the form of nil-cost options will continue to be based on a three-year performance period (1 January 2024 to
31 December 2026) followed by a two-year holding period post vest. The Group Chief Executive Officer will receive an award of
250% salary and the Group Chief Financial Officer and Group Chief Underwriting Officer will each receive 200% of salary.
For 2024, 50% of awards will be based on stretching growth in NAV plus dividends plus shareholder returns, measured on a
per-share basis. The Committee considers that growth in NAV continues to be a key metric for the PSP given that our strategy
is built around the objective of generating long-term shareholder value and NAV is aligned with shareholder value creation.
The targets below represent an expected aggregate increase in shareholder value of between $433 million and $1,255 million over
three years.
Minimum threshold vesting
Maximum vesting
Applicable to 50% of awards. Straight-line vesting between threshold and maximum.
Growth in NAV
plus dividends
plus shareholder
returns per share
$0.42 p.a.
$1.21 p.a.
Proportion of PSP vesting
%
20
100
50% of awards will be based on relative TSR, aligned to our strategy of generating long-term value for shareholders.
Relative TSR
Below median
Median
Upper quartile
Proportion of PSP vesting
%
0
20
100
Applicable to 50% of awards. Straight-line vesting in between each point.
The peer group consists of the following 23 companies: Admiral Group, American Financial Group, Arch Capital, Argo, Axis Capital, Beazley, Conduit,
Cincinnati Financial, CNA Financial, Direct Line Insurance Group, Everest Re, Fairfax Financial Holdings, Hanover Insurance, James River Group, Kinsale Capital
Group, Lancashire Holdings, Markel, QBE, Renaissance Re, RLI, SCOR, White Mountains Insurance Group, and WR Berkley.
124
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Implementation of
remuneration policy
for 2024
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Non Executive Director fees
The Non Executive Director fees which apply for 2024 are set out below. The Board Chair’s fee increased from £295,000 to
£335,000 during 2023, which was as the result of the appointment of Jonathan Bloomer. The Chair fees were benchmarked
and approved by the Nominations and Governance Committee.
All Board members sit on each of the Committees (Audit, Remuneration, Risk, Nominations and Governance) so the Committee
fees have been aggregated into the basic fee.
Board Chair and subsidiary services
Non Executive Director basic fee
Additional fees for:
Audit Committee Chair
Remuneration Committee Chair
Risk Committee Chair
Senior Independent Director
Employee Liaison
Bermuda Committee
2024
fees
£335,000
$125,000
$10,000
$9,000
$7,000
$17,000
$10,000
$10,000
Hiscox Ltd Report and Accounts 2023
125
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Other remuneration matters
External Non Executive Directorships
Executive Directors may not accept any external appointment that may give rise to a conflict of interest, and all external
appointments require the consent of the Chair. Aki Hussain held a directorship at VISA Europe Limited during 2023 and received
a fee of £132,500. Joanne Musselle was remunerated £40,000 for her directorship at Realty. Paul Cooper was an unremunerated
member of the board at the ABI.
External advisors
The Committee received independent advice from WTW during 2023. WTW was appointed by the Committee in June 2022,
following a competitive tender process. WTW is a signatory to the Remuneration Consultants Group Code of Conduct and, as
such, voluntarily operates under its code of conduct. During the year, the Committee received advice on developments in market
practice, corporate governance, institutional investor views, and on the design of the Company’s remuneration arrangements.
Total fees for advice provided to the Committee during the year were £173,620 based on a time and materials basis.
The Committee regularly reviews the advice it receives and is satisfied that this has been objective and independent. During the
year, WTW also provided other consulting services to the Company.
In addition to the external advisors, the Group Chief Executive Officer and Chief People Officer attend the Committee meetings by
invitation and provided material assistance to the Remuneration Committee during the year. No Director or Committee member
was involved in determining their own remuneration during the year.
Statement of shareholder voting
At the AGM on 11 May 2023, the directors remuneration report and remuneration policy received the shareholder votes shown in
the table below. The Committee was pleased with the level of support received from shareholders.
For
%
Against
%
Withheld
Directors remuneration report
(11 May 2023)
261,629,087
93.39%
18,522,418
6.61%
1,280,608
Remuneration policy
(11 May 2023)
274,610,137
97.58%
6,811,674
2.42%
10,302
126
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Other remuneration
matters
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Total shareholder return performance
The graph below shows the total shareholder return of the Group against the FTSE All-Share and FTSE Non-Life Insurance
indices. These reference points have been shown to assess performance against the general market and industry peers.
Between December 2013 and 2023, Hiscox delivered total shareholder return of 67.5%.
Total shareholder return
(%)
Hiscox
FTSE All-Share
FTSE Non-Life Insurance
160
140
120
100
80
60
40
20
0
-20
D ec 13
D ec 14
D ec 15
D ec 16
D ec 17
D ec 18
D ec 19
D ec 20
D ec 21
D ec 22
D ec 23
Hiscox Ltd Report and Accounts 2023
127
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Other remuneration
matters
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Chief Executive historic remuneration
The table below shows the single total remuneration figure for the Group Chief Executive Officer for the past ten years. The Group
Chief Executive Officer was Bronek Masojada up to and including 2021. From 1 January 2022 the Group Chief Executive Officer
is Aki Hussain.
20141
2015
2016
2017
2018
2019
2020
2021
2022
2023
CEO single
figure of
remuneration (£)
Annual bonus
as percentage
of current max
PSP vesting
as percentage
of maximum
opportunity
3,130,535 3,358,894 3,970,466 2,394,428 1,818,086 698,196
717,243 1,332,964 1,390,959 3,747,114
44
39
64
0
9
100
100
100
85
47
0
0
0
0
30
25
93
0
0
45
1Prior to 2015, the annual bonus was operated on an uncapped basis. In order to facilitate comparison, a cap has been applied retrospectively.
Comparator data
Remuneration for the wider workforce
When considering the remuneration arrangements for Senior Management, the Committee takes into account remuneration
throughout the wider workforce, which is based on broadly consistent principles. The Remuneration Committee receives
information on Group-wide remuneration policies and uses internal and external measures to assess the appropriateness of the
remuneration policy and outcomes for Executive Directors. During the year, the Committee reviewed information on market levels
of pay in our peer group, bonus pools split by business area, levels of share plan participation and pay ratios between Executives
and average employees.
The Committee received employee feedback on executive remuneration during 2023 via our employee engagement network led
by Employee Liaison and Non Executive Director Anne MacDonald.
Anne directed a group of employees to the relevant sections of the Annual Report where executive remuneration was described in
detail. The group noted that there is a wider, macro question relating to companies in general around the increasing financial gap
between executives and workforce and the long-term societal, ethical and community impact this may have, but noted that market
forces are what they are. Specifically, with respect to Hiscox, it was noted that the remuneration for Senior Executives was higher,
but this was commensurate with their relative skills, experience and risk. The group did not believe that the remuneration was
excessive or that Executive Directors benefited from any arrangements that targeted Executive Management in a disproportionate
manner or were materially different than the wider workforce. It was noted that in certain situations the arrangements for Executive
Directors were more restrictive.
128
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Other remuneration
matters
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Group Chief Executive Officer pay ratio
The Group Chief Executive Officer’s total remuneration compared with the median (50th percentile) remuneration of the
Company’s UK employees as at 31 December 2023 is shown below, along with the 25th and 75th percentiles.
We selected calculation method ‘Option A’ as it is the more robust approach and favoured by investors. This method captures all
pay (excluding overtime due to its volatility) and benefits for the financial year to 31 December 2023 and aligns with how the ‘single
figure’ table is calculated (from which there has been no deviation). Part-time employee single figures were annualised to provide
more meaningful comparison.
Full year
2023
2022
2021
2020
2019
Calculation
methodology
P25
(lower quartile)
P50
(median)
P75
(upper quartile)
A
A
A
A
A
79:1
31:1
34:1
20:1
19:1
49:1
20:1
20:1
12:1
11:1
32:1
13:1
12:1
8:1
7:1
The table below shows the salary and total remuneration of each employee at the 2023 quartile positions.
2023
Salary
Total remuneration
P25
£
37,809
47,696
P50
£
59,305
76,285
P75
£
79,298
116,905
The Committee has considered the pay data for the three employees identified and believes that it fairly reflects pay at the relevant
quartiles among the UK employee population. The increase in CEO pay ratio for 2023 is a result of improved vesting of the
long-term incentive plan and higher bonus outturns. Given the greater weighting of variable remuneration versus fixed pay for
senior roles, including the Group Chief Executive Officer, these positive business outcomes translate into a significant increase
in the CEO pay ratio.
The Committee is comfortable that the pay ratio for 2023 aligns to the pay and progression policies for employees, in particular,
that pay is truly linked to performance and that individuals are appropriately motivated and rewarded according to their knowledge
and seniority within the business.
Hiscox Ltd Report and Accounts 2023
129
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Other remuneration
matters
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Percentage change in remuneration of the Board Directors
The table below shows the percentage change in remuneration for each Executive and Non Executive Director, between the years
2020 and 2023. Salary and bonus are compared against all employees globally, benefits are compared against all UK-based
employees, reflecting the location of the Executive Directors.
All employees1
Executive Directors:
Aki Hussain
Paul Cooper
Joanne Musselle
Non Executive Directors:2
Jonathan Bloomer3
Robert Childs4
Beth Boucher
Donna DeMaio
Michael Goodwin
Thomas Huerlimann5
Colin Keogh
Anne MacDonald
Constantinos Miranthis
Lynn Pike
Salary/fees
4.3
Benefits
5.9
2.8
N/A
N/A
N/A
1.7
N/A
N/A
4.2
(2.0)
(2.5)
2.2
(5.2)
(6.3)
(6.9)
N/A
N/A
N/A
(1.7)
N/A
N/A
–
–
–
–
–
–
2020
% change
Bonus
(36.1)
N/A
N/A
N/A
N/A
–
N/A
N/A
–
–
–
–
–
–
2021
% change
2022
% change
Salary/fees
1.8
Benefits
(3.7)
2.2
N/A
22.1
N/A
–
N/A
N/A
(0.7)
(1.4)
32.4
(0.7)
5.0
(0.7)
3.3
N/A
21.6
N/A
10.4
N/A
–
–
–
–
–
–
–
Bonus
147
N/A
N/A
N/A
N/A
N/A
–
–
–
–
–
–
–
–
Salary/fees
5.8
46.8
N/A
2.2
536.2
N/A
–
N/A
19.0
12.5
9.6
19.0
19.0
19.0
Benefits
2.6
43.3
N/A
(6.4)
N/A
8.7
N/A
–
–
–
–
–
–
–
Bonus
11.6
21.7
N/A
(4.5)
N/A
N/A
–
–
–
–
–
–
–
–
Salary/fees
3.6
3.8
60.2
4.3
N/A
(50.0)
N/A
10.4
(6.5)
38.7
(3.6)
(6.5)
(6.5)
(6.5)
2023
% change
Bonus
29.7
291.1
532.4
261.9
N/A
N/A
–
–
–
–
–
–
–
–
Benefits
8.6
3.8
68.0
14.3
N/A
(50.0)
N/A
–
–
–
–
–
–
–
1 Median employee salary, benefits and bonus have been calculated on a full-time equivalent basis. Salary and benefits are calculated as at 31 December 2023,
bonus is that earned during the year ending 31 December 2023.
2Non Executive Director fees are subject to exchange rate fluctuations.
3Jonathan Bloomer was appointed as Chair to the Hiscox Ltd Board on 1 June 2023. Board fees are pro-rated from this date.
4Robert Childs retired from the Hiscox Ltd Board on 30 June 2023. Board fees and benefits are pro-rated to this date.
5Thomas Huerlimann took over as Chair of a subsidiary board in Q4 2023.
130
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Other remuneration
matters
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Percentage change in remuneration of the Board Directors
The table below shows the percentage change in remuneration for each Executive and Non Executive Director, between the years
2020 and 2023. Salary and bonus are compared against all employees globally, benefits are compared against all UK-based
employees, reflecting the location of the Executive Directors.
Salary/fees
4.3
Benefits
5.9
Salary/fees
1.8
Benefits
(3.7)
2.2
N/A
22.1
N/A
–
N/A
N/A
(0.7)
(1.4)
32.4
(0.7)
5.0
(0.7)
3.3
N/A
21.6
N/A
10.4
N/A
–
–
–
–
–
–
–
All employees1
Executive Directors:
Aki Hussain
Paul Cooper
Joanne Musselle
Non Executive Directors:2
Jonathan Bloomer3
Robert Childs4
Beth Boucher
Donna DeMaio
Michael Goodwin
Thomas Huerlimann5
Colin Keogh
Anne MacDonald
Constantinos Miranthis
Lynn Pike
2020
% change
Bonus
(36.1)
N/A
N/A
N/A
N/A
N/A
N/A
–
–
–
–
–
–
–
2.8
N/A
N/A
N/A
1.7
N/A
N/A
4.2
(2.0)
(2.5)
2.2
(5.2)
(6.3)
(6.9)
N/A
N/A
N/A
(1.7)
N/A
N/A
–
–
–
–
–
–
1 Median employee salary, benefits and bonus have been calculated on a full-time equivalent basis. Salary and benefits are calculated as at 31 December 2023,
bonus is that earned during the year ending 31 December 2023.
2Non Executive Director fees are subject to exchange rate fluctuations.
3Jonathan Bloomer was appointed as Chair to the Hiscox Ltd Board on 1 June 2023. Board fees are pro-rated from this date.
4Robert Childs retired from the Hiscox Ltd Board on 30 June 2023. Board fees and benefits are pro-rated to this date.
5Thomas Huerlimann took over as Chair of a subsidiary board in Q4 2023.
2021
% change
Bonus
147
N/A
N/A
N/A
N/A
–
N/A
–
–
–
–
–
–
–
Salary/fees
5.8
46.8
N/A
2.2
N/A
–
N/A
536.2
19.0
12.5
9.6
19.0
19.0
19.0
2022
% change
Bonus
11.6
21.7
N/A
(4.5)
N/A
–
N/A
–
–
–
–
–
–
–
Benefits
2.6
43.3
N/A
(6.4)
N/A
8.7
N/A
–
–
–
–
–
–
–
Salary/fees
3.6
3.8
60.2
4.3
N/A
(50.0)
N/A
10.4
(6.5)
38.7
(3.6)
(6.5)
(6.5)
(6.5)
2023
% change
Bonus
29.7
291.1
532.4
261.9
N/A
–
N/A
–
–
–
–
–
–
–
Benefits
8.6
3.8
68.0
14.3
N/A
(50.0)
N/A
–
–
–
–
–
–
–
Hiscox Ltd Report and Accounts 2023
131
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Other remuneration
matters
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Relative importance of the spend on pay
The charts below show the relative movement in profit, shareholder returns and employee remuneration for the 2022 and 2023
financial years. Shareholder return for the year incorporates the distribution made in respect of that year. Employee remuneration
includes salary, benefits, bonus, long-term incentives and retirement benefits. Profit is the ultimate driver behind the performance
metrics of the bonus and long-term incentive schemes. See profit before tax on the consolidated income statement on page 174.
Profit before tax ($m)
+127.1 (% change)
626
Dividend and return of
capital to shareholders† ($m)
+4.8 (% change)
Total employee remuneration ($m)
+19.8 (% change)
276
124
130
447
373
2022*
2023
2022*
2023
2022
2023
* Restated for the adoption of IFRS 17 and IFRS 9.
† Shareholder return for the year incorporates
the distribution made on behalf of that year
(for example, final dividend paid in April/May the
following year) and excludes the impact of the
share buyback announced in March 2024.
132
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
106
Chapter 4
Remuneration
Other remuneration
matters
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
How we have addressed the following factors in the UK Corporate Governance Code 2018
Factor
Consideration of how this is addressed for Hiscox
Clarity – remuneration arrangements
should be transparent and promote
effective engagement with shareholders
and the workforce.
A Shareholders’ views on the proposed changes to the remuneration policy were
sought during Q1 2023 and constructive feedback was received.
A In 2023, a range of people-related topics, including remuneration, were discussed
by our Employee Engagement Network, facilitated by Committee member Anne
MacDonald, who also serves as our Employee Liaison. The Committee receives
information on broader workforce remuneration policies and practices during the
year which informs its decision-making for Executive Director remuneration.
Simplicity – remuneration structures
should avoid complexity and their
rationale and operation should be easy
to understand.
A The remuneration philosophy is a simple one: to reward performance. Hiscox’s
remuneration framework is simple, comprising three main elements:
Afixed pay (base salary, benefits and pension);
Aannual bonus; and
Aperformance share awards.
Risk – remuneration arrangements
should ensure reputational and other
risks from excessive rewards, and
behavioural risks that can arise from
target-based incentive plans, are
identified and mitigated.
Predictability – the range of possible
values of rewards to individual Directors
and any other limits or discretions should
be identified and explained at the time of
approving the policy.
Proportionality – the link between
individual awards, the delivery of strategy
and the long-term performance of the
Company should be clear. Outcomes
should not reward poor performance.
The remuneration policy incorporates a number of design features to take account
of and minimise risk:
A the Committee has the ability to apply independent judgement and override
formulaic outcomes to ensure that incentive awards are a fair reflection of both
the Company’s performance and that of the individual over that period;
A part of the annual bonus is subject to deferral, and share awards are subject to a
post-vesting holding period and a post-employment shareholding requirement;
A all variable remuneration is subject to malus and clawback provisions.
s The range of possible values are set out in the performance scenario charts in
the remuneration policy on page 143.
s Limits and ability to exercise discretion are also set out in the notes to the policy
on page 141.
s Variable incentive pay-outs have a strong link to Company performance. The
Committee is satisfied that the remuneration outcomes for 2023, detailed on
pages 117 and 118, are reflective of Company performance over the respective
performance periods.
Alignment to culture – incentive
schemes should drive behaviours
consistent with Company purpose,
values and strategy.
s The variable incentive schemes, including quantum, time horizons, form of
award, performance measures and targets are all designed with the Company’s
purpose, values and strategy in mind.
s Strategic non-financial measures, including retail claims NPS, are included in the
annual incentive.
s The pay arrangements for the Executive Directors are aligned with those of the
broader workforce and senior team.
Hiscox Ltd Report and Accounts 2023
133
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Remuneration policy
Hiscox has a forward-looking remuneration policy for its Board members
Hiscox has a forward-looking remuneration policy for its Executive Directors. The policy was approved at the 11 May 2023 AGM
and is replicated below. The policy can be viewed in the 2022 Annual Report and Accounts at hiscoxgroup.com.
Future policy table
Executive Director remuneration
Base salary
Purpose and link to strategy
Fixed-pay elements enable the Company to be competitive in the recruitment market when
looking to employ individuals of the calibre required by the business.
Operation
Base salary is normally reviewed annually, taking into account a range of factors including
inflation rate movements by country, relevant market data and the competitive position of
Hiscox salaries by role.
Individual salaries are set by taking into account the above information, as well as the
individual’s experience, performance and skills, increases to salary levels across the wider
Group, and overall business performance.
By exception, an individual’s salary may be amended outside of the annual review process.
Maximum potential value
The salaries for current Executive Directors which apply for 2024 are set out on page 123.
Executive Directors’ salary increases will normally be in line with overall employee salary
increases in the relevant location.
Increases above this level may be considered in other circumstances as appropriate (for
example, to address market competitiveness, development in the role, or a change in role
size, scope or responsibility).
Performance metrics
Individual and business performance are taken into account when setting salary levels.
Application to broader
employee population
Process for review of salaries is consistent for all employees.
134
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Future policy table
Executive Director remuneration
Benefits (including retirement benefits)
Purpose and link to strategy
Fixed-pay elements enable the Company to be competitive in the recruitment market when
looking to employ individuals of the calibre required by the business.
Operation
Retirement benefits
These vary by local country practice, but all open Hiscox retirement schemes are based
on defined contributions or an equivalent cash allowance. This approach will be generally
maintained for any new appointments other than in specific scenarios (for example, where local
market practice dictates other terms). For current Executive Directors, a cash allowance of up
to 10% of salary is paid in lieu of the standard employer pension contribution, or a combination
of pension contributions and cash allowance, totalling 10% of salary.
Other benefits
Benefits are set within agreed principles but reflect normal practice for each country. Hiscox
benefits include, but are not limited to: health insurance, life assurance, long-term disability
schemes and participation in all-employee share plans such as the sharesave scheme.
Executive Directors are included on the directors and officers’ indemnity insurance.
The Committee may provide reasonable additional benefits based on circumstances (for
example, travel allowance and relocation expenses) for new hires and changes in role.
Maximum potential value
Set at an appropriate level by reference to the local market practice and reflecting individual
and family circumstances.
Pension benefits will be in line with the standard employer contribution taking into account any
local requirements.
Performance metrics
None.
Application to broader
employee population
Executive Directors’ benefits are determined on a basis consistent with all employees.
Hiscox Ltd Report and Accounts 2023
135
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Future policy table
Executive Director remuneration
Annual bonus
Purpose and link to strategy
To reward for performance against the achievement of financial results over the financial year
and key objectives linked to Company strategic priorities.
To provide a direct link between reward and performance.
To provide competitive compensation packages.
Operation
Performance metrics and targets are set annually.
The payment outcome at the end of the performance period is based on an assessment of the
level of performance achieved with reference to the performance targets set at the start of the
year, including an assessment of risk factors.
Amounts are paid in accordance with the bonus deferral mechanism described on page 137.
Bonus awards are non-pensionable.
Bonus awards are subject to malus and clawback provisions as described in the notes to the
policy table on page 141.
Maximum potential value
The maximum bonus opportunity for the Executive Directors will be as follows:
p Group Chief Executive Officer and Group Chief Financial Officer – 300% of salary;
p Group Chief Underwriting Officer – up to 400% of salary.
Where performance is deemed to be below acceptable levels, pay-outs will be nil.
Performance metrics
Performance is assessed against relevant financial and non-financial targets designed to
incentivise the achievement of Company strategy.
The Committee has the discretion to determine the specific performance conditions attached
to each bonus cycle and to set annual targets for these measures with reference to the
strategy approved by the Board. The financial measures used will typically include return
or profit-based targets. Up to 25% of the bonus can be based on non-financial measures
including environmental, social and governance (ESG) related measures. For the measures
and weightings to be used in a particular year, please refer to the annual report on remuneration.
The discretion available to the Committee in assessing the achievement of the performance
targets is as set out in the notes to the policy table on page 141.
Application to broader
employee population
The operation of the annual incentive is consistent for the majority of employees across
the Group.
136
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Future policy table
Executive Director remuneration
Bonus deferral
Purpose and link to strategy
To align with sound risk management, encourage retention of employees, share ownership and
alignment with shareholder interests.
Operation
Executive Directors are required to defer a percentage (currently 40%) of their total annual bonus
into Hiscox shares for a period of three years. The release of these shares and the associated
accrued dividend shares are generally subject to continued employment but are not subject to
any further performance conditions. The remaining 60% will be paid as cash following the end of
the financial year.
The Remuneration Committee may exercise discretion and agree to early payment of deferred
bonuses to Executive Directors on an exceptional basis.
Deferred awards are subject to malus and clawback provisions as described in the notes to the
policy table on page 141.
Maximum potential value
In accordance with the operation of the annual bonus plus accrued dividend shares.
Performance metrics
In accordance with the operation of the annual bonus.
Application to broader
employee population
Bonus deferral is applied in line with regulatory requirements.
Hiscox Ltd Report and Accounts 2023
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Future policy table
Executive Director remuneration
Long-term incentive plan – Performance Share Plan (PSP)
Purpose and link to strategy
To motivate and reward for the delivery of long-term objectives in line with Company strategy.
To encourage share ownership and align interests with shareholders.
To provide competitive compensation packages.
Operation
Awards are granted under, and governed by, the rules of the PSP as approved by shareholders
from time to time.
Share awards are made at the discretion of the Remuneration Committee.
Awards normally vest after a three-year period subject to the achievement of performance
conditions. Dividend equivalents may accrue prior to the vesting date. An additional holding
period, which is currently two years, applies.
Awards are generally subject to continued employment, however, awards may vest to leavers in
certain scenarios.
Dividends (or equivalents) may accrue on vested shares prior to release. Awards are subject to
malus and clawback provisions as described in the notes to the policy table on page 141.
Maximum potential value
PSP awards are subject to a maximum annual grant of up to 250% of salary in respect of any one
financial year plus accrued dividends (or equivalents).
Performance metrics
The performance conditions for awards are set to align with the long-term objectives of
the Company.
The Committee reviews the targets prior to each grant to ensure that they remain appropriate.
The policy provides for a minimum aggregate weighting of 70% for financial metrics and for up
to 30% to be based on strategic non-financial performance metrics. For the weightings used in
a particular year, please refer to the annual remuneration report.
For delivery of threshold performance, up to 20% of the relevant portion of the award can vest.
For full vesting, the stretch hurdles need to be met in full.
The discretion available to the Committee in assessing the achievement of the performance
targets is as set out in the notes to the policy table on page 141.
Where the Committee considers it appropriate to do so, under the plan rules the Committee is
able to modify performance criteria for outstanding awards on the occurrence of certain events
(for example, a major disposal).
Application to broader
employee population
Participation in the PSP is normally restricted to senior individuals.
138
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Future policy table
Executive Director remuneration
Shareholding guidelines
Purpose and link to strategy
To ensure Executive Directors are aligned with shareholder interests.
Operation
Maximum potential value
Performance metrics
Application to broader
employee population
Within five years of becoming an Executive Director, individuals will normally be expected to have
acquired an interest in Hiscox shares valued at 200% of salary. Shares owned by the Executive
Director (and any connected person) count towards the guidelines as do shares subject to any
vested but unexercised PSP awards (net of assumed taxes).
Executive Directors are also expected to remain aligned with the interests of shareholders for
an extended period after leaving the Company. Executive Directors will typically be expected
to retain a shareholding at the level of the in-employment shareholding guideline (or the actual
shareholding on stepping down, if lower) for two years after termination unless the Committee
determines otherwise in exceptional circumstances.
N/A.
N/A.
Post-employment shareholding guidelines only apply to Executive Directors.
Hiscox Ltd Report and Accounts 2023
139
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Future policy table
Non Executive Director remuneration
General approach
Chair
Non Executive Directors
The total aggregate fees payable are set within the limit specified by the Company’s Bye-laws.
The fees paid are determined by reference to the skills and experience required by the Company,
as well as the time commitment associated with the role. The decision-making process is
informed by appropriate market data. Non Executive Directors are not eligible for participation
in the Company’s incentive plans or pension arrangements. Travel and other reasonable
expenses incurred in the course of performing their duties are reimbursed to Non Executive
Directors (including any tax thereon where these are deemed to be taxable benefits).
Non Executive Directors are included on the directors and officers’ indemnity insurance.
The current fees payable to Non Executive Directors are set out on page 125.
The Chair receives an all-inclusive fee in respect of the role. In addition to their fee the Chair
may be provided with incidental benefits, for example, private healthcare and life assurance
(including any tax thereon where these are deemed to be taxable benefits). The remuneration
of the Chair is determined by the Remuneration Committee.
Non Executive Directors receive an annual fee in respect of their Board and Committee
appointments together with additional compensation for further duties (for example,
chairmanship, subsidiary boards, SID fee and employee liaison fee). The fees for the
Non Executive Directors (excluding the Chair) are determined by the Nominations
and Governance Committee.
140
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Notes to the policy table
Performance measures, target setting
and assessment
The performance targets for the annual
bonus and Performance Share Plan
(PSP) awards are closely aligned with
the Company’s short- and long-term
strategic objectives. The intention is to
provide a direct link between reward
levels and performance.
The Company operates a performance
scorecard-based approach for the
annual bonus. This ensures that both
individual bonus levels and overall
spend are commensurate with the
performance of the Company across
a number of key metrics, some
financial and some non-financial.
The Committee considers performance
metrics and targets prior to the start
of each financial year to ensure that
these remain suitable and relevant.
It is the intention of the Committee that
the bonus payments should normally
reflect the outcome of the performance
measures set, although the Committee
has the ability to apply independent
judgement to ensure that the outcome
is a fair reflection of the performance of
the Company and individual over the
performance period. When making
this judgement, the Committee has
scope to consider any such factors
as it deems relevant.
PSP performance measures are
intended to motivate and reward
delivery of long-term Company
success. The Committee considers
performance metrics and targets prior
to the grant of each award to ensure
that these remain suitable and relevant.
It is the intention of the Committee
that the vesting of PSP awards should
normally reflect the outcome of the
performance measures set, although
the Committee has the ability to apply
independent judgement to ensure
that the outcome is a fair reflection
of the performance of the Company
and individual over the performance
period. When making this judgement,
the Committee has scope to consider
any such factors as it deems relevant.
Detailed provisions
The Committee reserves the right to
use discretion within the remuneration
policy to aid in its operation or
implementation (for example, for
regulatory or administrative purposes),
provided that any such change
is not to the material advantage
of Directors.
The Committee may continue to
satisfy remuneration payments and
payments for loss of office (including
the exercise of any discretions available
to the Committee in connection with
such payments) where the terms of
the payment were: i) agreed before
15 May 2014 when the first approved
remuneration policy came into effect;
ii) agreed before the policy set out
above came into effect, provided that
the terms of the payment were consistent
with the shareholder-approved
Directors’ remuneration policy in
force at the time they were agreed;
or iii) agreed at a time when the
relevant individual was not a Director
of the Company and, in the opinion
of the Committee, the payment was
not in consideration for the individual
becoming a Director of the Company.
For these purposes, such payments
include the Committee satisfying
awards of variable remuneration.
Malus and clawback provisions
Bonus deferral applied from 2023
and PSP awards granted from 2023
are subject to malus and clawback
provisions as set out below. The
Committee may, in its absolute
discretion, determine at any time prior to
the vesting of an award to reduce, defer,
cancel or impose further conditions in
the following circumstances:
p a retrospective material restatement
of the audited financial results of
the Group;
p an error in assessing a performance
condition applicable to the award or
in the information or assumptions
on which the award was granted,
or vests;
p actions of gross misconduct or
material error, including fraud, by
the participant or their team;
p significant reputational or financial
damage to the Company as a result
of the participant’s conduct;
p a failure of adequate risk
management and/or controls by
the participant or their team,
resulting in a material impact to
the Group;
p a material corporate failure in
the Group;
p a regulatory or law enforcement
investigation which results in
significant censure.
The malus and clawback provisions that
apply to awards made prior to 2023 are
as set out in the relevant remuneration
policy as at the date of award.
Recruitment policy
A new hire will ordinarily be remunerated
in accordance with the policy described
in the table on the previous pages. In
order to define the remuneration for
an incoming Executive Director, the
Committee will take account of:
p prevailing competitive pay levels
for the role;
p experience and skills of
the candidate;
p awards (shares or earned bonuses)
and other elements which will
be forfeited by the candidate;
p transition implications on
initial appointment;
p the overall Hiscox approach.
A buy-out payment/award may be
necessary in respect of arrangements
forfeited on joining the Company. The
size and structure of any such buy-out
arrangement will take account of relevant
factors in respect of the forfeited terms
including potential value, time horizons
and any performance conditions which
apply. The objective of the Committee
will be to suitably limit any buy-out to
the commercial value forfeited by
the individual.
On initial appointment (including interim
Director appointments) the maximum
level of variable remuneration (excluding
any buy-outs) is capped at the maximum
level set out in the policy table on pages
133 to 139. Within these limits, and
where appropriate, the Committee
may tailor the award (for example, time
frame, form, performance criteria) based
on the commercial circumstances.
Shareholders would be informed of
the terms for any such arrangements.
Ordinarily, it would be expected that
the package on recruitment would be
consistent with the usual ongoing
Hiscox incentive arrangements.
On the appointment of a new
Non Executive Chair or Non Executive
Director, the fees will normally be
consistent with the policy. Fees to Non
Executives will not include share options
or other performance-related elements.
Annual bonus and PSP awards granted
to Executive Directors shall also be
subject to clawback provisions for up to
two years from the date of payment or
vesting in the above circumstances.
Service contracts
It is the Company’s policy that Executive
Directors should have service contracts
with an indefinite term which can be
terminated by the Company by giving
Hiscox Ltd Report and Accounts 2023
141
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Variable remuneration for the most senior
employees is more highly performance
geared towards the longer term in
order to encourage delivery of strong
returns across the insurance cycle
and create sustainable long-term
value for our shareholders.
Hiscox encourages all employees to
become shareholders through our
sharesave schemes, enabling employees
to share in the success of the Company.
While the Committee did not consult
directly with the broader workforce on
the remuneration policy for Executive
Directors, we have introduced a process
by which employee views are gathered
on a range of topics and presented
to the Board (see page 128 for further
details). The Remuneration Committee
also receives an update on the broader
workforce remuneration policies and
practices during the year, which informs
the Committee’s consideration of the
policy for Executive Directors.
Consideration of shareholder views
Hiscox regularly discusses remuneration
policy matters with a selection of
shareholders. The Remuneration
Committee takes into consideration
the range of views expressed in making
its decisions.
The Committee consulted with major
shareholders during Q1 2023 and took
shareholder feedback into account
when finalising the revised policy.
notice not exceeding 12 months or the
Director by giving notice of six months.
The terms set out in the service contracts
for the current Executive Directors do
not allow for any payments that are not
in line with this policy.
Non Executive Directors are appointed
for a three-year term, which is renewable,
with three months’ notice on either side,
no contractual termination payments
being due and subject to re-election
pursuant to the Bye-laws at the Annual
General Meeting. The contract for the
Chair is subject to a six-month
notice provision on either side.
Policy on payment for loss of office
Subject to the execution of an appropriate
general release of claims an Executive
Director may receive on termination of
employment by the Company:
1. Notice period of up to 12 months
In the normal course of events, an
Executive will remain on the payroll but
may be placed on gardening leave for
the duration of the notice period (or until
they leave early by mutual agreement,
whichever is sooner). During this period
they will be paid as normal, including
base pay, pension contributions (or cash
allowance as appropriate) and other
benefits (for example, healthcare).
In the event of a termination where
Hiscox requests that the Executive
Director ceases work immediately, a
payment in lieu of notice may be made
that is equal to fixed pay, pension
entitlements and other benefits (benefits
may continue to be provided). Payments
may be made in instalments and would
ordinarily be subject to mitigation
should the individual find alternative
employment during the unexpired
notice period.
2. Bonus payment for the financial year
of exit
Bonuses will normally only be paid to
Executive Directors who are granted
‘good leaver’ status in accordance with
the bonus plan rules. The bonus amount
would normally be pro-rated depending
on the proportion of the financial year
which has been completed by the time of
the termination date and paid in line with
the normal bonus scheme timings and
performance metrics.
3. Release of any deferred bonuses
All outstanding bonuses deferred from
the annual incentive scheme will normally
142
Hiscox Ltd Report and Accounts 2023
be paid in full at the normal vesting date.
4. Unvested Performance Share
Plan awards
Treatment would be in accordance
with the plan rules and relevant grant
documentation. The intended approach
is summarised below.
p Awards will vest in line with the
normal plan vesting date (unless the
Committee determines otherwise).
Awards vest to the extent that the
relevant performance targets are
considered to have been met.
p The award will normally be
pro-rated to reflect the period
which has elapsed from the
commencement of the award to
the date of termination unless the
Committee determines otherwise.
If the departing Executive Director
does not sign a release of claims, they
would normally be entitled to payments
defined under point 1 only. In the event
that the Executive is dismissed for
gross misconduct, they would forfeit
all payments.
The Committee may also make a
payment in respect of outplacement
costs, legal fees and costs of settling
any potential claims where appropriate.
5. Change of control
In the event of a change of control,
outstanding PSP awards will normally
vest early to the extent that the
performance condition, as determined
by the Committee in its discretion, has
been satisfied and, unless the Committee
determines otherwise, would be
pro-rated to reflect the period which
has elapsed from the commencement
of the award to the date of the relevant
corporate event.
Deferred bonus awards will vest in full.
Outstanding awards under all-employee
share plans will be treated in accordance
with the relevant plan rules.
Consideration of employment
conditions elsewhere
We are proud of our reward offering
across the Company and apply principles
consistent with how we pay our Executive
Directors. We ensure employees are paid
fairly in line with their responsibilities,
experience and the market rate for the
role. Employees participate in an annual
bonus scheme and senior individuals
are eligible for awards under the
Performance Share Plan. We also
offer a generous benefit package.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
Remuneration policy
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Illustration of application of the remuneration policy
(£000s)
Long-term variable remuneration
Annual variable remuneration
Fixed remuneration
6,448
48%
5,421
38%
45%
38%
Chief Executive
3,162
32%
39%
903
Chief Financial Officer
Chief Underwriting Officer
4,440
48%
3,734
38%
45%
38%
2,180
32%
39%
627
2,461
29%
46%
625
5,004
42%
4,297
33%
53%
45%
100%
29%
17%
14%
100%
29%
17%
14%
100%
25%
14%
13%
Below target
On target
Maximum
Max with
share price
appreciation
Below target
On target
Maximum
Max with
share price
appreciation
Below target
On target
Maximum
Max with
share price
appreciation
The charts above have been compiled using the following assumptions.
Fixed remuneration
Variable remuneration
Fixed reward (base salary, benefits and retirement benefit).
p Salary with effect from 1 April 2024.
p Benefits as received during 2023, as disclosed in the Executive Director remuneration
table on page 112.
p Retirement benefit as received during 2023, as disclosed in the Executive Director
remuneration table on page 112.
Assumptions have been made in respect of the annual incentive and the PSP for the purpose of
these illustrations.
p Annual incentive: the amounts shown in the scenarios are for illustration only. In practice,
the award would be determined based on a range of performance factors and therefore
vary depending on the circumstances. The maximum award reflects the incentive caps
described at the beginning of this report.
p PSP: scenario analysis assumes awards are granted at the maximum level set out in the
policy table on page 138. In practice, award levels are determined annually and are not
necessarily granted at the plan maximum every year.
Performance scenarios
Below target performance
Fixed reward only.
On target performance
Maximum performance
Fixed reward plus variable pay for the purpose of illustration as follows.
p Annual incentive: assume a bonus equivalent to 50% of the maximum opportunity.
p PSP: assume vesting of 50% of the maximum award.
Fixed reward plus variable pay for the purpose of illustration as follows.
p Annual incentive: maximum bonus equivalent to 300% of salary for the Group Chief
Executive Officer and Group Chief Financial Officer and 400% of salary for the Group
Chief Underwriting Officer.
p PSP: vesting of 100% of the maximum award.
Maximum performance with
share price appreciation
Fixed reward plus variable pay for the purpose of illustration as follows.
p Annual incentive: maximum bonus equivalent to 300% of salary for the Group Chief
Executive Officer and Group Chief Financial Officer and 400% of salary for the Group
Chief Underwriting Officer.
p PSP: vesting of 100% of the maximum award plus assumed share price growth of 50%.
Hiscox Ltd Report and Accounts 2023
143
David Heras joined Hiscox in 2008.
He leads the Hiscox Spain team,
which covers Spain and Portugal
and is part of the wider Hiscox
Europe operation. In recent years,
its business on the Spain Peninsula,
which is focused on the broker
channel, has been growing at pace.
Q&
A:
with David Heras
Managing Director, Hiscox Spain
Spanish lessons
Hiscox Spain is growing rapidly thanks
to its creative mindset, embracing of
technology and commitment to building
great relationships with brokers. >
144
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
145
Q&
A:
with David Heras
Managing Director, Hiscox Spain
Q: What was Hiscox like when you
first joined?
A: It was very different. Sixteen years
ago, the Hiscox name was nothing in
Spain. No-one knew us in the broker
channel. We had just €5 million in
premiums. But for me, that challenge
is what made the job exciting. It’s why I
came. We are growing all the time and
I’ve seen us roughly double our size
every five years. Today, our premiums are
almost €100 million. For me, this is a big
achievement but of course there is still
more to do, which is great because I am
someone who is driven by a challenge,
so I am as excited and committed now
as I was on that first day.
Q: What kind of operation is Hiscox
Spain now?
A: We are a small company still, but we
make a lot of noise. To compete against
the big guys, we are creative in how we
serve our brokers and partners. We have
a plan that we are executing, and we are
exceeding expectations, but we also
have the passion and energy to try new
things. So last year we did something
very different. At the start of the year,
we came up with this idea of doing a
Hiscox tour, driving across Spain in a
bus with lots of our technological
capabilities on board: APIs, the platform,
the portal, all of these layers. We know
the brokers here: most of them are not
so good with technology, they don’t
have these capabilities. We wanted to
get closer to them, to show them what
we can do. So, to get closer to them,
we went on tour.
Q: How did that work out?
A: It was a big challenge, but our
marketing team accepted that challenge.
We painted our bus in Hiscox colours.
We took it to Madrid, Seville, Barcelona,
Valencia. Thanks to this, we have
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Hiscox Ltd Report and Accounts 2023
doubled our retail sales, attracted new
partners, and seen interest from new
brokers that want to do business with
us. This is something that makes us
different. We have this capacity to take
on challenges, to do new things and to
have the courage to lead. This is the
spirit here because it’s in our company
DNA. It’s not the same as being in the
UK though, where you see the Hiscox
brand on the street. We are small, but
our mission is always to grow.
Q: Your work at Hiscox Spain is
currently devoted to the broker
channel. Do you have any
plans to broaden this by selling
insurance directly?
A: Not at the moment, no. We need to wait
for the maturity of our market, as Spain
is not currently a direct-to-consumer
insurance market, but I’m sure that time
will come. Until then, it is better to focus
on those areas of opportunities that are
in our reach now. For example, we are
still growing strongly through brokers
and partners, where our investments in
technology make us easy to do business
with and we have plenty of opportunities
to grow into.
Q: When you’re speaking to potential
new partners, what is it about Hiscox
that you think differentiates you from
your competitors?
A: It is our value proposition that
differentiates us. We aim to be best in
class – in terms of service, in terms of
product, in terms of claims. We also
have everything we need to connect
them better thanks to our continued
investment in technological capabilities
that can give us an edge. In a world of
increasing digitisation, we know we need
to be leading this movement as an insurer
and I’m proud of the progress we are
making here.
Q: What’s in store for Hiscox Spain
in 2024?
A: This year, we will be launching a new
generation of products. Let’s imagine
you are an IT consultant, or you open
a beauty salon. You’re starting a small
business and you want to buy all the
insurance you need. What we will do
for you is make it so you can buy
everything in a single pack. You will
have a product that contains a
combination of coverage specifically
designed for your profession, at a
reasonable price. For each profession,
there will be two, three versions of the
same product, with different levels of
cover, and you will pay for what you need.
That’s what we call a customer-centric
approach. But it all starts with research.
We need to understand what that
customer segment needs, so it will be
inspired directly by our customers. We
want to speak their language when it
comes to what we offer them.
Q: Hiscox Europe is currently
working through the roll-out of
a new core system, which
represents a major technological
upgrade. Where is Hiscox Spain
on that journey?
A: Having a core system that we can
scale together, and when I say together
I mean across all of our European
countries, is the right thing to do. There
are three phases to it: solution design,
then launch, then migration. Germany
was first, so in Germany we are in the
migration phase. France is currently
building the platform, and Benelux is
currently focused on the solution design.
In Spain, we will start the solution
design during 2024. We are very lucky,
as we will get to use the experiences
accumulated by other countries, so the
aim is that, by 2026, we will be operating
in this new system.
This year, we will be launching a new
generation of products. Let’s imagine
you are an IT consultant, or you open
a beauty salon. You’re starting a
small business and you want to buy
all the insurance you need. What we
will do for you is make it so you can
buy everything in a single pack. You
will have a product that contains a
combination of coverage specifically
designed for your profession, at a
reasonable price.”
This is just one part of the work, though.
All of the peripheral technology is also
crucial. The core system is the centre,
but we need to make sure it works well
with everything around it, and that is
perhaps the most difficult part. It’s like a
car: we are replacing the engine with a
more powerful one, but the car has many
other components, so there’s a lot of
planning we need to do.
Q: Besides the sharing of investment
and knowledge exemplified by the
core system programme, what other
benefits do you see as being part of
the wider European organisation?
A: Europe is beautiful. Different cultures,
different languages, different evolution
phases, different maturity levels. This
diversity gives us strength. This year in
Spain we have had good growth, but
maybe one year in the future we will
grow less and another country will grow
more – together, that gives us more
robustness, more stability. We’re not
dependent on the conditions in just one
place. I sit on our European leadership
team so we share those experiences
and those learnings cross-country,
which collectively make us stronger
and more resilient.
Q: Finally, do you feel a sense of
community within Hiscox?
A: I feel it in many ways, starting within
my own country. You cannot have a
community unless people feel engaged,
unless they want to be here, and in Spain
we have some of the best engagement
scores in the Group. Here in Madrid,
we are 35 people working together.
The other half of my team is in Lisbon,
but distance is something that doesn’t
affect us. We have many, many ways to
be connected. Lisbon and Madrid work
as one. We are also connected to our
colleagues all over Europe – we know we
are stronger together. And then we are
part of the whole global retail operation.
We see how we contribute to Europe,
and we see how Europe contributes
to the Group. Last year, we hosted our
annual Partners’ meeting here in Madrid,
and you could feel the connection
between people who had come here
from all over the world. I love that sense of
us as one community, and I really believe
we have a bright future together.
Hiscox Ltd Report and Accounts 2023
147
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Directors’ report
The Directors have pleasure in
submitting their Annual Report and
consolidated financial statements for
the year ended 31 December 2023.
Management report
The Company is a holding company
for subsidiaries involved in the
business of insurance and reinsurance
in Bermuda, the USA, the UK,
Guernsey, Europe and Asia. The
information found on pages 22 to
31, 36 to 39, 174 to 245 and 247
fulfils the requirements of the
Management report as referred to in
Chapter 4 of the Disclosure Guidance
and Transparency Rules (DTR). This
includes additional explanation of
the figures detailed in the financial
statements and the office locations
of the Group in different countries.
The key performance indicators are
shown on pages 6 to 7. Details of the
use of financial instruments are set out
in notes 3.3 and 17 to the consolidated
financial statements. An analysis of
the development and performance
of the business during the financial
year, its position at the end of the year,
any important events since the end
of the year and the likely future
development can be found within
the Chief Executive’s report on pages
22 to 31. The Chief Executive’s report
also describes the main trends and
factors likely to affect the future
development, performance and
position of the Company’s business.
A description of the Company’s
strategy and business model is set
out on pages 10 to 11. The Company
is not involved in any research and
development activities. A description
of the key risks and uncertainties and
how they are managed or mitigated
can be found in the key risks section
148
Hiscox Ltd Report and Accounts 2023
on pages 12 to 15 and the risk
management section on pages 36 to 39.
In addition, note 3 to the consolidated
financial statements provides a detailed
explanation of the key risks which are
inherent to the Group’s business and
how those risks are managed.
Compliance with the UK Corporate
Governance Code 2018 (the Code)
Details of how the Company has applied
the principles set out in the Code and
complied with the provisions of the
Code are set out on pages 90 to 94.
Emerging and principal risks
The confirmation required by Provision
28 of the Code in relation to the Board’s
robust assessment of the Company’s
emerging and principal risks (referred
to in this document as key risks) can be
found on page 38.
Corporate governance statement
The information that fulfils the
requirements of the corporate
governance statement as referred
to in DTR 7.2 can be found on pages
84 to 89 in this report.
Diversity
The diversity of the business is outlined
in the DEI section of this report on pages
62 to 67.
Financial results
The Group delivered a record pre-tax
profit for the year of $625.9 million
(2022 (restated): $275.6 million).
Detailed results for the year are shown
in the consolidated income statement
on page 174.
Going concern
A review of the financial performance
of the Group is set out in the Chief
Executive’s report on pages 22 to 31.
The financial position of the Group,
its cash flows and borrowing facilities
are outlined on pages 28 to 29. The
Group has considerable financial
resources and a well-balanced book
of business.
The Board has reviewed the Group’s
current and forecast solvency and
liquidity positions for the next twelve
months and beyond. As part of the
consideration of the appropriateness
of adopting the going concern basis,
the Directors use scenario analysis and
stress testing to assess the robustness
of the Group’s solvency and liquidity
positions. Multiple experts within the
business review the provisional results
in order to reduce individual biases and
to try and ensure all possibilities are
considered and captured.
In undertaking this analysis, no material
uncertainty in relation to going concern
has been identified. This is due to the
Group’s strong capital and liquidity
positions, which provide resilience to
shocks, underpinned by the Group’s
approach to risk management which
is described in note 3 on pages 191
to 205.
After making enquiries, the Directors
have a reasonable expectation that
the Group has adequate resources to
continue in operational existence over a
period of at least 12 months from the date
of this report. For this reason, the Group
continues to adopt the going concern
basis in preparing the consolidated
financial statements.
Longer-term viability statement
The preparation of the longer-term
viability statement includes an
assessment of the Group’s long-term
prospects in addition to an assessment
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
Directors’ report
148
Chapter 6
Financial
summary
165
of the ability to meet future commitments
and liabilities as they fall due.
It is fundamental to the Group’s
longer-term strategy that the Directors
manage and monitor risk, taking into
account all key risks the Group faces,
including insurance risks, so that it
can continue to meet its obligations
to policyholders. The Group is also
subject to extensive regulation and
supervision including the Bermuda
Solvency Capital Requirement, which
is outlined on page 29.
Against this background, the Directors
have assessed the prospects of the
Group in accordance with Provision 31
of the UK Corporate Governance Code
2018, with reference to the Group’s
current position and prospects, its
strategy, risk appetite and key risks,
as detailed in the key risks section
on pages 12 to 15 and the risk
management section on pages
36 to 39, as well as note 3 to the
consolidated financial statements.
The assessment of the Group’s
prospects by the Directors covers the
three years to 2026 and is underpinned
by Management’s 2024-2026 business
plan. It includes projections of the
Group’s capital, liquidity and solvency
and reflects the Group’s risk profile of a
portfolio of diversified short-tailed and
medium-tailed insurance liabilities.
In making the viability statement,
the Board carried out, as part of the
Group’s solvency self-assessment
process, a robust assessment using
scenario analysis and stress testing
to consider the Group’s capacity to
respond to a series of relevant financial,
insurance-related or operational shocks
should future circumstances or events
differ from these current assumptions.
The adequacy of the liquid resources
of the Group’s parent company
has been assessed by considering
stress scenarios that would result in
additional calls on central liquidity by
the Group’s business units. A 1-in-200
climate-heavy natural catastrophic year
was assessed to be the most severe
liquidity stress. Under this scenario the
Group was shown to have access to
sufficient liquidity sources to remain
above risk appetite, after taking into
account the Group’s $600.0 million
undrawn revolving credit facility. This
analysis allows the Board to review and
challenge the risk management strategy
and consider potential mitigating actions.
Based on these assessments, the
Board confirms that it has a reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over the
three-year assessment period. Longer
term, the Group’s viability is underpinned
by the Group’s strategy of balancing
big-ticket with retail business, market
growth opportunities and underwriting
expertise. See pages 10 to 11 for further
details of the Group’s strategy and
business model.
Dividends
An interim dividend of 12.5 cents per
share was paid on 26 September 2023
and, as in previous years, a Scrip
Dividend alternative was offered. The
Board is also proposing payment of a
final dividend in respect of the year
ended 31 December 2023 (subject
to shareholder approval) of 25.0 cents
per share, to be paid on 12 June 2024
to shareholders on the register at
3 May 2024.
Bye-laws
The Company’s Bye-laws contain no
specific provisions relating to their
amendment and any such amendments
are governed by Bermuda Company
Law and subject to the approval of
shareholders in a general meeting.
Share capital
Details of the structure of the Company’s
share capital and changes in the share
capital during the year are disclosed
in note 22 to the consolidated financial
statements. The ordinary shares of
6.5p each are the only class of shares
presently in issue and carry voting rights.
There is power under Bye-law 45 of the
Company’s Bye-laws for voting rights
to be suspended if calls on shares are
unpaid. However, there are no nil or partly
paid shares in issue on which calls
could be made. The Bye-laws also allow
the Company to investigate interests
in its shares and apply restrictions
including suspending voting rights
where information is not provided.
No such restrictions are presently in
place. The Company was authorised
by shareholders at the 2023 AGM to
purchase in the market up to 10% of the
Company’s issued ordinary shares. The
Company announced on 5 March 2024
that it would commence a buyback of its
issued ordinary shares for a maximum
aggregate consideration of $150 million.
The Company has commenced the
buyback programme and will provide
updates to the market on the amount
and price of shares repurchased. Hiscox
will cancel all the purchased shares.
Directors
The names and details of all Directors
of the Company who served during
the year and up to the date of this
report are set out on pages 72 to 73.
Details of the Chair’s professional
commitments are included in his
biography on page 72.
Hiscox Ltd Report and Accounts 2023
149
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
Directors’ report
148
Chapter 6
Financial
summary
165
Major interests in shares
The Company has been notified of the following interests in voting rights in its
ordinary shares in accordance with DTR 5:
Disclosure under LR 9.8.4 of the
Listing Rules
Sun Life Financial Group
The Capital Group Companies, Inc.
Fidelity Management & Research Company
Government of Norway
Number
of shares
31,132,559
28,552,549
26,945,972
17,913,616
*There were 347,766,707 shares in issue (excluding Treasury shares) as at 31 January 2024.
As at 4 March 2024, no changes have been notified to the Company.
% of issued
share capital
as at
31 January
2024*
8.95
8.21
7.75
5.15
Details of
long-term
incentive schemes
Allotment of shares
for cash pursuant
to employee
share schemes
Annual report
on remuneration
(pages 117 to 119)
Note 19 to the
consolidated
financial statements
on employee
share schemes
(page 226)
The Bye-laws of the Company govern
the appointment and replacement of
Directors. In accordance with the Code,
the Directors will submit themselves for
re-election at the AGM.
Details of the Directors’ share ownership
are also set out on page 121.
sustainability governance structure
outlined on page 51.
The Company also aligns its
climate-related activities to the TCFD
framework, details of which can be
found on pages 50 to 61.
Biographical details of the Directors are
set out on pages 72 to 73, as are the
reasons why the Board believes their
contribution is (and continues to be)
important to the Company’s long-term
sustainable success. This information
will also be set out in the circular which
will accompany the notice of AGM.
Major interests in shares
The Company has been notified
of the interests in voting rights in its
ordinary shares in accordance with
DTR 5, which are outlined in the table
above. Any acquisitions or disposals
of major shareholdings notified to
the Company in accordance with
DTR 5.1 are announced and those
announcements are available on the
Company’s website, hiscoxgroup.com.
Political donations and
charitable contributions
The Group made no political donations
during the year (2022: $nil). Information
concerning the Group’s charitable
activities is contained in the sustainability
section on pages 46 to 49 and in our
impact report which can be found at
hiscoxgroup.com/impactreport2022.
Climate-related matters
In preparing and authorising this
report, the Board has considered the
relevance of material climate-related
matters. Climate-related matters are
discussed at all levels of the Company,
including Board level, in line with the
150
Hiscox Ltd Report and Accounts 2023
Powers of Directors
The powers given to the Directors are
contained in the Company’s Bye-laws
and are subject to relevant legislation
and, in certain circumstances (including
in relation to the issuing and buying back
by the Company of its shares), approval
by shareholders in a general meeting.
At the 2023 AGM, the Directors were
granted authorities to allot and issue
shares and to make market purchases
of shares and intend to seek renewal of
these authorities in 2024.
Disclosure under LR 9.8.4 of the
Listing Rules
The information that fulfils the reporting
requirements relating to the following
matters can be found at the pages
identified in the table above.
Annual General Meeting
The notice of the AGM, to be held on
9 May 2024, will be sent to shareholders
alongside a copy of this report. The
deadline for submission of proxies is
48 hours before the meeting.
By order of the Board
Marc Wetherhill
Company Secretary
Chesney House
96 Pitts Bay Road
Pembroke HM 08
Bermuda
5 March 2024
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Directors’ responsibilities statement
Advisors
The Directors responsible for
authorising the responsibility statement
on behalf of the Board are the Chair,
Jonathan Bloomer, and the Group
Chief Executive Officer, Aki Hussain.
The statements were approved for
issue on 5 March 2024.
The Directors consider that the Annual
Report and Accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
and the Group’s position, performance,
business model and strategy.
The Board is responsible for ensuring
the maintenance of proper accounting
records which disclose with reasonable
accuracy the financial position of the
Group. It is required to ensure that the
financial statements present a fair view
for each financial period. The Directors
explain in the Annual Report their
responsibility for preparing the Annual
Report and Accounts.
We confirm that to the best of
our knowledge:
s the financial statements, prepared
in accordance with UK-adopted
international accounting standards,
give a true and fair view of the
assets, liabilities, financial position
and profit or loss of the Company
and the undertakings included in
the consolidation taken as a
whole; and
s the Management report includes
a fair review of the development
and performance of the business
and the position of the Company
and the undertakings included in
the consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face.
Hiscox Ltd
Secretary
Marc Wetherhill
Registered office
Chesney House
96 Pitts Bay Road
Pembroke HM 08
Bermuda
Registered number
38877
Auditors
PricewaterhouseCoopers Ltd.
Washington House
4th Floor
16 Church Street
Hamilton HM 11
Bermuda
Stockbrokers
Citigroup
Citigroup Centre
33 Canada Square
London
E14 5LB
Peel Hunt LLP
7th Floor
100 Liverpool Street
London
EC2M 2AT
Registrars
Equiniti (Jersey) Limited
c/o Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
United Kingdom
Hiscox Ltd Report and Accounts 2023
151
Scan the QR code to view
‘the making of the Hiscox
community portrait’ video.
The people behind the policy:
Hiscox community portrait
During 2023, we embarked on an
exciting engagement programme
across the Group.
Everyone at Hiscox has a key role
to play and, working with globally
renowned artist Tim Mann, we’ve
been busy capturing that sense of
community in a piece of art. >
152
Hiscox Ltd Report and Accounts 2023
Portrait23
Hiscox Ltd Report and Accounts 2023
153
Tim Mann
During the sessions, a further series of
artworks were created by each of the
subjects drawing around their own hands
in a similar fashion – the hand being,
as Tim explains: “A common symbol
of strength and protection, but also
of greeting and friendship.”
While the finished artworks have a
distinct aesthetic appeal, Tim believes
that their most consequential impact
has come through the hundreds of
thought-provoking personal interactions
that led to their creation. “The actual
artwork is the process through which
those people participate,” Tim explains.
“The piece itself is just the evidence of
that happening.”
The main portrait can now be
viewed in our York office, while the
hand-based pieces are in each of
the participating locations.
Here’s what some our people had to
say about the experience of taking part.
The Hiscox community portrait is a
celebration of the power of collaboration
and the intrinsic importance of each
individual within a larger collective.
Created by renowned artist Tim Mann,
the artwork merges the overlapping
outlines of over 1,200 employees from
every part of the business, all of whom
volunteered to be part of the project,
creating a powerful visual representation
of the Hiscox community.
Between May and November 2023,
Tim visited six Hiscox offices: Atlanta,
Bermuda, London, Madrid, Munich and
York. After gathering the participants
together in small groups and leading
them into a conversation about the
resonance of the project’s themes
with the Hiscox values, Tim used a
red Conté crayon to draw a simple
silhouette around each person, one
by one – a brief but meaningful act of
intimacy between artist and subject.
Each employee left their own unique
imprint on the work, with absolutely no
sense of hierarchy or differentiation.
“By drawing around each individual in
turn, we created a single image that
celebrates every participant equally,”
says Tim. “Without any one of those
people who took part, it doesn’t
mean as much.”
154
Hiscox Ltd Report and Accounts 2023
“It was an interesting
notion: that it takes many
individuals to make a
community, and we’re all
part of a bigger picture.
We all contribute, but
the community is more
important than the
individual self.”
York
“It was good to connect with some of
the team that I work with and there were
some new people there that I didn’t
know. It built a connection between
the five of us who went in at the same
time. The artist told us that there’s a
bond there that we’ve created together.
I’ll remember that.”
York
“It’s very Hiscox. People
often ask you what it
means to be a Hiscox
person, and it’s quite
hard to put that into
words. I think this project
sums it up quite neatly.”
Bermuda
Hiscox Ltd Report and Accounts 2023
155
“To be part of a piece of
art, it just makes you feel
important – being part
of something that will
be there forever.”
Madrid
“It was a really intense experience. I
didn’t really think that I’d feel anything.
But then as soon as he started drawing,
I was very aware that a person I’d never
met before was suddenly very close to
me, taking evidence of my existence. It
was a powerful moment.”
London
“I love the idea that it’s
like perfume in a room
– every single person
that makes up the
community is leaving
a little trace.”
London
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Hiscox Ltd Report and Accounts 2023
“It was really nice to hear Tim talk
about the meaning of being a human
and feeling empathy. The story he tells
is not only about the Hiscox people,
but how we make other people feel.
There were 20 of us in the room, but it
was really quiet. The experience was
quite emotional. I get goosebumps just
thinking about it.”
Munich
Hiscox Ltd Report and Accounts 2023
157
“He was talking to us about the process
being the art, not just what you see on the
wall afterwards – the process of being
part of this whole community.”
Munich
158
Hiscox Ltd Report and Accounts 2023
Hiscox Ltd Report and Accounts 2023
159
“When you work in corporate America,
people don’t really consider you as an
individual or what your contribution is. By
bringing the whole community together
we’re showing that we actually care
about the people we work with. Having
that put into something that’s artistic,
that’s creative, it’s really interesting.”
Atlanta
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Hiscox Ltd Report and Accounts 2023
“If I could describe it in
one word, I would say
‘empowering’. It was
a really good reminder
of just how much
impact each of us
brings to Hiscox.”
Atlanta
Hiscox Ltd Report and Accounts 2023
161
162
Hiscox Ltd Report and Accounts 2023
“The actual artwork is
the process through
which those people
participate. The piece
itself is just the evidence
of that happening.”
Tim Mann
Hiscox Ltd Report and Accounts 2023
163
164
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Financial summary
Hiscox Ltd Report and Accounts 2023
165
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
Chapter 6
Financial
summary
165
Independent auditor’s report
to the Board of Directors and the Shareholders of Hiscox Ltd
Report on the audit of the consolidated financial statements
Our audit approach
Overview
Our opinion
In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial position
of Hiscox Ltd (the Company) and its subsidiaries (together
the Group) as at 31 December 2023, and their consolidated
financial performance and their consolidated cash flows for the
year then ended in accordance with UK-adopted international
accounting standards.
What we have audited
The Group’s consolidated financial statements comprise:
A the consolidated balance sheet as at 31 December 2023;
A the consolidated statement of changes in equity for the
year then ended;
A the consolidated income statement for the year
then ended;
A the consolidated statement of comprehensive income
for the year then ended;
A the consolidated statement of cash flows for the year
then ended; and
A the notes to the consolidated financial statements,
comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor’s responsibilities
for the audit of the consolidated financial statements section of
our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the
International Code of Ethics for Professional Accountants
(including International Independence Standards) issued by the
International Ethics Standards Board for Accountants (IESBA
Code) and the ethical requirements of the Chartered Professional
Accountants of Bermuda Rules of Professional Conduct (CPA
Bermuda Rules) that are relevant to our audit of the consolidated
financial statements in Bermuda. We have fulfilled our other
ethical responsibilities in accordance with the IESBA Code and
the ethical requirements of the CPA Bermuda Rules.
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Hiscox Ltd Report and Accounts 2023
Materiality
Group
scoping
Key audit
matters
A Overall group materiality: $44 million, which
represents 1% of insurance revenue for the year
ended 31 December 2023.
Our audit comprised:
A full scope audit procedures over four components;
A for certain other components, audit procedures
over financial statement line item balances or
specified procedures;
A for the remaining components that were not
inconsequential, analytical procedures on their
financial information.
A Valuation of insurance contract liabilities and reinsurance
contract assets – assumptions and judgements.
A Implementation of IFRS 17 – transition and restatement
of comparatives.
A Valuation of deferred tax asset – on enactment of
Bermuda Corporate Income Tax.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Independent
auditor’s report
In establishing the overall approach to the Group audit a
determination was made of the type of work that needed
to be performed at the components by the Group
engagement team, or by the component audit teams
within the PwC United Kingdom, PwC United States and
PwC Bermuda firms. A determination was made of the level
of involvement of the Group engagement team that was
necessary in the audit work at those components to be
able to conclude whether sufficient appropriate audit
evidence had been obtained. The Group engagement
team had regular interaction with the component teams
during the audit process. The engagement leader and
senior members of the Group engagement team reviewed
in detail all reports with regards to the audit approach and
findings submitted by the component auditors. This together
with additional procedures performed as described above,
gave us the evidence we needed for our opinion on the
consolidated financial statements as a whole.
The impact of climate risk on our audit
As part of our audit, enquiries were made of Management
(both within and outside of the Group’s finance function)
to understand the process Management adopted to
assess the extent of the potential impact of climate risk
on the Group’s financial statements and support the
disclosures made within the notes to the consolidated
financial statements. The key areas where Management
has evaluated that climate risk has a potential to impact
the business are in relation to underwriting risk, financial
risk, and regulatory, legal, and reputational risk.
Management considers that the impact of climate
change does not give rise to a material financial
statement impact.
Our knowledge of the Group was applied to evaluate
Management’s assessment of the impact on the financial
statements. An evaluation was performed of the
completeness of Management’s assessment of
climate change risk under the categories of Physical
risk, Transition risk, and Litigation risk and how these
may affect the consolidated financial statements and
the audit procedures performed.
As part of this, our audit procedures included:
A reading the minutes of meetings of the Group’s
Sustainability Steering Committee;
A reading submissions to regulators;
A reading the Group’s Climate Report 2023; and
A considering the Group’s memberships, accreditations
and public commitments.
The risks of material misstatement to the consolidated financial
statements as a result of climate change were assessed and
it was concluded that for the year ended 31 December 2023,
there was no impact on the key audit matters or the
assessment of the risks of material misstatement.
Finally, the consistency of the disclosures in relation to
climate change (including the disclosures in the Task Force
on Climate-related Financial Disclosures (TCFD) section)
within the Report and Accounts was considered against
the consolidated financial statements and our knowledge
obtained from our audit including challenging the disclosures
given in the narrative reporting within the consolidated
financial statements.
Hiscox Ltd Report and Accounts 2023
167
Audit scope
As part of designing our audit, the risks of material
misstatement in the consolidated financial statements were
assessed and materiality was determined. In particular,
consideration was given to where Management made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in
all of our audits, the risk of Management override of internal
controls was addressed, including, among other matters,
consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
Tailoring of Group audit scope
The scope of our audit was tailored in order to perform
sufficient work to enable us to provide an opinion on the
consolidated financial statements as a whole, taking into
account the structure of the Group, the accounting processes
and controls, and the industry in which the Group operates.
The Group is structured into four segments (see note 4 to the
consolidated financial statements) and is a consolidation of
over 50 separate legal entities. The Group is a global specialist
insurer and reinsurer, and its operations primarily consist of
the legal entity operations in the United Kingdom, Europe, the
United States and Bermuda.
A full scope audit was performed for four components located
in the United Kingdom and Bermuda. Financial statement
line item audit procedures or specified procedures were also
performed over components in the United Kingdom, the United
States and Bermuda. Taken together this work provided over
80% coverage of the Group’s insurance revenue and over 80%
of the Group’s total assets.
The four full scope audit components are: (i) Hiscox Dedicated
Corporate Member Syndicate No. 33, (ii) Hiscox Dedicated
Corporate Member Syndicate No. 3624, (iii) Hiscox Insurance
Company Limited, and (iv) the parent Company, Hiscox Ltd
(including consolidation). For certain other components, account
balances were identified which were considered to be significant
in size or audit risk at the financial statement line-item level
in relation to the consolidated financial statements, financial
statement line item audit procedures, or specified procedures
were performed over these specified balances. Analytical
procedures over the financial information of the remaining
components that were not inconsequential were performed.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Independent
auditor’s report
Materiality
The scope of our audit was influenced by our application
of materiality. An audit is designed to obtain reasonable
assurance whether the consolidated financial statements are
free from material misstatement. Misstatements may arise due
to fraud or error. They are considered material if, individually or
in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
consolidated financial statements.
Performance materiality is used to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, performance materiality is used in determining
the scope of the audit and the nature and extent of testing of
account balances, classes of transactions and disclosures,
for example in determining sample sizes. The performance
materiality applied was 75% of overall materiality, amounting
to $33 million for the consolidated financial statements.
Based on our professional judgement, certain quantitative
thresholds for materiality were determined, including the overall
Group materiality for the consolidated financial statements
as a whole as set out in the table below. These, together with
qualitative considerations, helped to determine the scope of
our audit and the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both
individually and in aggregate, on the consolidated financial
statements as a whole.
Materiality
Overall Group materiality
$44 million
How we determined it
Rationale for the materiality
benchmark applied
In determining materiality,
we considered a range of
financial metrics believed to
be relevant to the primary
users of the consolidated
financial statements. We
selected a materiality amount
using our professional
judgement which represents
1% of insurance revenue
for the year ended
31 December 2023.
The materiality amount
selected is appropriate
to the size and nature of
the business. Expressing
materiality in terms of
insurance revenue, one of
the key metrics relevant to
key users of the consolidated
financial statements, provides
a good representation relative
to the size and complexity
of the business and it is
not distorted by insured
catastrophe events to which
the Group is exposed, or the
levels of external reinsurance
purchased by the Group.
A number of factors were considered in the determination of
performance materiality including: the history of misstatements,
risk assessment and aggregation risk and the effectiveness
of controls – we concluded that 75% of overall materiality
was appropriate.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
$2 million, as well as misstatements below that amount that,
in our view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the consolidated financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters, and any comments we make on the results
of our procedures thereon, were addressed in the context of
our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
This year there are two new key audit matters:
A Implementation of IFRS 17 – transition and restatement
of comparatives; and
A Valuation of deferred tax asset – on enactment of
Bermuda Corporate Income Tax.
We have combined the prior year key audit matter entitled
‘Valuation of gross claims liabilities’ and ‘Valuation of
reinsurance claims recoverable’ into one single key audit matter
entitled ‘Valuation of insurance contract liabilities reinsurance
contract assets – assumptions and judgements’ to reflect the
matter in terms of IFRS 17.
‘Disclosure of the expected impact of IFRS 17’, which was a key
audit matter last year, is no longer included because this was
a risk relevant to a specific disclosure made in the prior year
consolidated financial statements.
168
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Independent
auditor’s report
Key audit matters
Key audit matter
How our audit addressed the key audit matter
1. Valuation of insurance contract liabilities and reinsurance contract
assets – assumptions and judgements
Refer to notes 2.11, 2.18 and 20 to the consolidated financial statements for
disclosures of related accounting policies and balances.
As at 31 December 2023 insurance contract liabilities comprised
$354.4 million of liabilities for remaining coverage (LRC), and $6.2 billion of
liabilities for incurred claims (LIC). Reinsurance contract assets comprised
$118.8 million of assets for remaining coverage (ARC), and $2.2 billion
of assets for incurred claims (AIC). Insurance contract liabilities and
reinsurance contract assets are inherently uncertain and contain
material estimates.
LIC and AIC – the most subjective element continues to be the incurred
but not yet reported claims cash flows, which form part of the LIC, and
the associated reinsurers’ share of incurred but not yet reported claim
cash flows, which form part of AIC. The LIC and AIC also include the risk
adjustment to reflect the Management’s view of the compensation that
it requires for bearing uncertainty about the amount and timing of cash
flows from non-financial risks.
Management bases these estimates on the estimated ultimate cost of all
claims, together with estimates of the related claims handling costs, these
estimates can be materially impacted by numerous factors including:
A the underlying volatility attached to estimates for certain classes of
business, where small changes in assumptions can lead to large
changes in the levels of the estimate held;
A the risk of inappropriate assumptions used in determining current
year estimates, especially for ‘long-tailed’ classes of business,
there is necessarily greater use of Management judgement;
A the risk that key assumptions in respect of natural catastrophes
and other large claim losses are inappropriate. There is significant
judgement involved in those loss estimates, particularly as they
are often based on limited data;
A the valuation of AIC is uncertain due to the significant degree of
judgement applied in valuing the underlying insurance contracts that
have been reinsured, the complexity of the application and coverage
of the reinsurance programme; and
A the determination of discount rates (including choice of illiquidity
premium) and payment patterns used to derive the cash flow for
incurred claims.
Liabilities and assets for remaining coverage – we consider the most
significant judgements to be:
A the determination of the Premium Allocation Approach (PAA)
measurement model for groups of contracts that are not
automatically eligible, including the selection of ‘reasonably
expects’ assumptions;
A the appropriateness of methodologies and assumptions
adopted to value reinsurance assets associated with
retrospective reinsurance arrangements measured under
the General Measurement Model (GMM); and
A the judgement on the degree of risk that will transfer with
respect to retrospective reinsurance arrangements.
In performing our work over the valuation of
insurance contract liabilities and reinsurance
contract assets PwC actuarial specialists were
used, where appropriate. Procedures included
the following:
A understood and evaluated the process and
the design and implementation of controls
in place to determine the insurance
contract liabilities and reinsurance
contract assets. This included evaluating
the design and implementation of the
relevant controls in place;
A tested the underlying data to
source documentation;
A assessed the appropriateness of the
policy applied to determine the risk
adjustment and testing of the derivation
of the adjustment;
A evaluated and challenged the robustness
of the key judgements adopted in relation to
LIC and AIC, including the risk adjustment;
A applied our industry knowledge and
experience and compared the methodology,
models and assumptions used against
recognised actuarial practices;
A for the undiscounted best estimate liabilities,
developed independent point estimates for
classes of business considered to be higher
risk, particularly focusing on the largest and
most uncertain classes, as well as for certain
other classes for unpredictability, as at
31 August 2023 and performed a roll-forward
test to 31 December 2023;
A evaluated the methodology and assumptions
or performed a diagnostic check to identify
and investigate any anomalies over the
remaining classes of business;
A tested the accuracy of application of
reinsurance contract terms;
A understood updates made to the actuarial
assumptions impacting the forecast future
claims cash flows, and evaluated any changes
for reasonableness. This includes assumptions
on discount rates and payment patterns; and
A assessed the appropriateness of the
judgements and supporting estimates used
to determine use of the PAA and GMM
measurement models, including testing the
completeness and accuracy of the supporting
data, evaluating the assumptions used and
scenarios applied and testing the accuracy
of the models used.
The results of our procedures indicated that the
valuation of insurance contract liabilities and
reinsurance contract assets were supported by
the evidence obtained.
Hiscox Ltd Report and Accounts 2023
169
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Independent
auditor’s report
Key audit matters
Key audit matter
How our audit addressed the key audit matter
2. Implementation of IFRS 17 – transition and restatement
of comparatives
Refer to notes 2.1.1, 2.11 and 20 to the consolidated financial statements
for disclosures of related accounting policies and balances.
On 1 January 2023, the Group transitioned to IFRS 17 Insurance Contracts
which replaced IFRS 4. Due to the significance of the changes introduced
by the standard, which requires new and complex accounting models
and the application of the new accounting policies, there is increased
inherent risk in respect of the functionality and application of these models
in this first year of adoption. This is of particular focus for the Group as
the calculation engine used (Tyche) to determine the liabilities, assets
and related items of income and expense under IFRS 17 has been
internally developed.
The 2022 opening balance sheet and the 2022 comparatives have
been restated in order to comply with the requirements of IFRS 17.
The comparatives have been calculated by Management by adjusting
the reported position on an IFRS 4 basis using internal models developed
for transition. These adjustments require a number of significant
judgements and estimates including:
A the determination of the measurement model to apply under the
standard, in particular Management’s use of the PAA measurement
model for groups of contracts that are not automatically eligible;
A the appropriateness of methodologies and assumptions
adopted to value reinsurance assets associated with retrospective
reinsurance arrangements measured under the GMM;
A the methodology and assumptions in respect of determining
the risk adjustment;
A the methodology used by Management to determine discount
rate, which was deemed to be significant to the overall impact
of transition; and
A the implementation of new models to produce the IFRS 17
results, which include the Tyche and internally developed
models for transition.
In performing our audit work over the transition
to IFRS 17, and restatement of the comparative
consolidated financial statements (including
the 2022 opening balance sheet), the following
procedures were performed:
A evaluated the design and implementation of
the relevant controls in place;
A assessed the significant judgements
used by Management to determine the
accounting policies along with the
compliance of those policies with IFRS 17;
A tested the application of Management’s
documented accounting policies;
A assessed the appropriateness of the
judgements and supporting estimates used
to determine use of the PAA and GMM
measurement models, including testing the
completeness and accuracy of supporting
data, evaluating the assumptions used and
scenarios applied, and testing the accuracy
of models used;
A tested Management’s calculation engine and
the transition models using our independent
model;
A evaluated the appropriateness of the
methodology used to determine discount
rates and independently recalculated the
impact of discounting;
A assessed the appropriateness of the policy
applied to determine the risk adjustment and
testing of the derivation of the adjustment;
A tested the mapping of outputs from the
calculation engine to the general ledger
and financial statement disclosures; and
A tested the mathematical accuracy and
completeness of the supporting calculations
and adjustments used to determine the
2022 comparatives and opening position
at 1 January 2022;
As a result of the procedures performed,
we have no matters to report related to the
Implementation of IFRS 17 – transition and
restatement of comparatives.
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Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Independent
auditor’s report
Key audit matters
Key audit matter
How our audit addressed the key audit matter
3. Valuation of deferred tax asset – on enactment of Bermuda
Corporate Income Tax
Refer to notes 2.12, 2.18 and 23 to the consolidated financial statements
for disclosures of related accounting policies and balances.
The Bermuda government has introduced a corporate income tax (CIT),
which was substantively enacted on 27 December 2023, and applies to
Bermuda constituent entities with effect from 1 January 2025. The CIT will
apply at a rate of 15% on the profits of Hiscox’s Bermuda entities which are
consolidated in the financial statements of Hiscox Ltd. A deferred tax asset
(DTA) of $150 million in relation to Bermuda CIT has been recognised at the
balance sheet date related to the Economic Transition Adjustment (ETA)
calculated as at 30 September 2023.
The ETA for Hiscox Bermuda is primarily driven from the customer
relationship intangible asset.
Management has used an external expert to value the customer
relationships which is dependent on a number of key assumptions
including: forecast cashflows, discount rate, and contributory
asset charges. These assumptions are inherently judgemental and
the customer relationship intangible asset is sensitive to changes in
these key assumptions.
In performing our work over the valuation of the
deferred tax asset arising on enactment of Bermuda
Corporate Income Tax, PwC valuation experts were
used and the following procedures were performed:
A obtained an understanding of the key
components of the customer relationship
intangible asset. We focused our testing on
the material components of the customer
relationship intangible asset and evaluated
the following key assumptions:
A forecast cash flows: compared the
assumptions in respect of forecast
operating profit and cash flows to
historical results and assessed the
underlying projections;
w discount rate: developed an independent
estimate of the discount rate applied to
the cash flows and compared this to the
discount rate used by Management;
A contributory asset charges:
benchmarked the contributory asset
charges applied by Management to
industry benchmark data to assess the
reasonableness of the assumption;
A tested the mathematical accuracy
of Management’s model and the
appropriateness of the methodologies
used to determine the fair value of the
customer relationship intangible asset.
The results of our procedures and the evidence
obtained supported Management’s valuation of
the Bermuda CIT deferred tax asset.
Hiscox Ltd Report and Accounts 2023
171
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Independent
auditor’s report
Other information
Management is responsible for the other information. The
other information comprises the Report and Accounts (but
does not include the consolidated financial statements and our
auditor’s report thereon). The other information also includes
reporting based on the TCFD recommendations. Our opinion
on the consolidated financial statements does not cover the
other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in
this regard.
Responsibilities of Management and those charged with
governance for the consolidated financial statements
Management is responsible for the preparation and fair
presentation of the consolidated financial statements in
accordance with UK-adopted international accounting
standards and for such internal control as Management
determines is necessary to enable the preparation of
consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements,
Management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using
the going concern basis of accounting unless Management
either intends to liquidate the Group or to cease operations,
or has no realistic alternative but to do so.
Those charged with governance are responsible for
overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the
consolidated financial statements
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance
with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
A identify and assess the risks of material misstatement
of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
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Hiscox Ltd Report and Accounts 2023
that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations,
or the override of internal control;
A obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the
Group’s internal control;
A evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made by Management;
A conclude on the appropriateness of Management’s use
of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue
as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date
of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue
as a going concern;
A evaluate the overall presentation, structure and content
of the consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements represent the underlying transactions and
events in a manner that achieves fair presentation; and
A obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business
activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for
the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a
statement that we have complied with relevant ethical
requirements regarding independence, and to communicate
with them all relationships and other matters that may
reasonably be thought to bear on our independence, and
where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of
most significance in the audit of the consolidated financial
statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in
our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest
benefits of such communication.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Independent
auditor’s report
Report on other legal and regulatory requirements
Other voluntary reporting – Directors’ remuneration
The Company voluntarily prepares a report on Directors’
remuneration in accordance with the provisions of the UK
Companies Act 2006. The Directors have requested an
audit of the part of the report on Directors’ remuneration
specified by the UK Companies Act 2006 to be audited as
if the Company were a UK-registered company.
In our opinion, the part of the report on Directors’ remuneration
to be audited has been properly prepared in accordance with
the UK Companies Act 2006.
Corporate governance statement
The Directors’ statements in relation to going concern,
longer-term viability and that part of the corporate governance
statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code, which the
Listing Rules of the Financial Conduct Authority specify for
review by auditors of premium listed companies has been
reviewed. Our additional responsibilities with respect to the
corporate governance statement as other information are
described in the other information section of this report.
Based on the work undertaken as part of our audit, it was
concluded that each of the following elements of the corporate
governance statement is materially consistent with the
consolidated financial statements and our knowledge obtained
during the audit, and there is nothing material to add or draw
attention to in relation to:
A the Directors’ confirmation that they have carried
out a robust assessment of the emerging and
principal risks;
A the disclosures in the Report and Accounts that
describe those principal risks, what procedures are
in place to identify emerging risks and an explanation
of how these are being managed or mitigated;
A the Directors’ statement in the consolidated financial
statements about whether they considered it
appropriate to adopt the going concern basis of
accounting in preparing them, and their identification
of any material uncertainties to the Group’s ability to
continue to do so over a period of at least twelve
months from the date of approval of the consolidated
financial statements;
A the Directors’ explanation as to their assessment of the
Group’s prospects, the period this assessment covers
and why the period is appropriate; and
A the Directors’ statement as to whether they have a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
The review of the Directors’ statement regarding the
longer-term viability of the Group was substantially less in
scope than an audit and only consisted of making inquiries
and considering the Directors’ process supporting their
statements; checking that the statements are in alignment with
the relevant provisions of the UK Corporate Governance Code;
and considering whether the statement is consistent with the
consolidated financial statements and our knowledge and
understanding of the Group and its environment obtained in
the course of the audit.
In addition, based on the work undertaken as part of our audit,
it was concluded that each of the following elements of the
corporate governance statement is materially consistent with
the consolidated financial statements and our knowledge
obtained during the audit:
A the Directors’ statement that they consider the Report
and Accounts, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for the shareholders to assess the Group’s position,
performance, business model and strategy;
A the section of the Report and Accounts that describes
the review of effectiveness of risk management and
internal control systems; and
A the section of the Report and Accounts describing the
work of the audit committee.
There is nothing to report in respect of our responsibility to
report when the Directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified
under the Listing Rules for review by the auditors.
Other matter
As required by the Financial Conduct Authority Disclosure
Guidance and Transparency Rule 4.1.14R, these consolidated
financial statements will form part of the ESEF-prepared annual
financial report filed on the National Storage Mechanism of
the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (ESEF RTS). This auditor’s
report provides no assurance over whether the annual financial
report will be prepared using the single electronic format
specified in the ESEF RTS.
The engagement partner on the audit resulting in this
independent auditor’s report is Marisa Savage.
PricewaterhouseCoopers Ltd.
Chartered Professional Accountants
Bermuda
5 March 2024
Hiscox Ltd Report and Accounts 2023
173
Consolidated income statement
For the year ended 31 December 2023
Insurance revenue
Insurance service expenses
Insurance service result before reinsurance contracts held
Allocation of reinsurance premiums
Amounts recoverable from reinsurers for incurred claims
Net expenses from reinsurance contracts held
Insurance service result
Investment result
Net finance (expenses)/income from insurance contracts
Net finance income/(expenses) from reinsurance contracts
Net insurance finance (expenses)/income
Net financial result
Other income
Other operational expenses
Net foreign exchange (losses)/gains
Other finance costs
Share of profit of associates after tax
Profit before tax
Tax credit/(expense)
Profit for the year (all attributable to owners of the Company)
Earnings per share on profit attributable to owners of the Company
Basic
Diluted
*Restated for the adoption of IFRS 17 and IFRS 9, see note 2.1.
Note
4
4
4
4
4
7
7
7
8
8
9
13
22
25
25
2023
$m
4,483.2
(3,189.3)
1,293.9
(1,119.4)
317.8
(801.6)
492.3
384.4
(220.7)
81.0
(139.7)
244.7
91.1
(125.5)
(27.0)
(50.0)
0.3
625.9
86.1
712.0
2022
(restated)*
$m
4,273.3
(3,485.9)
787.4
(1,264.8)
838.3
(426.5)
360.9
(187.3)
213.7
(102.1)
111.6
(75.7)
42.3
(67.8)
54.7
(39.7)
0.9
275.6
(21.7)
253.9
206.1¢
201.5¢
73.8¢
72.7¢
Consolidated statement of comprehensive income
For the year ended 31 December 2023
Profit for the period
Other comprehensive income
Items that will not be reclassified to the income statement:
Remeasurements of the net defined benefit pension scheme
Income tax effect
Items that may be reclassified subsequently to the income statement:
Exchange gains/(losses) on translation of foreign operations
Other comprehensive income net of tax
Total comprehensive income for the year (all attributable to owners of the Company)
The notes on pages 178 to 245 are an integral part of these consolidated financial statements.
Note
24
2023
$m
712.0
(4.1)
(1.7)
(5.8)
2022
(restated)
$m
253.9
34.9
(7.7)
27.2
25.0
(118.0)
19.2
731.2
(90.8)
163.1
174
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration
Consolidated balance sheet
Assets
Employee retirement benefit asset
Goodwill and intangible assets
Property, plant and equipment
Investments in associates
Deferred tax assets
Assets included in disposal group classified as held for sale
Financial assets carried at fair value
Reinsurance contract held assets
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Equity and liabilities
Shareholders’ equity
Share capital
Share premium
Contributed surplus
Currency translation reserve
Retained earnings
Equity attributable to owners of the Company
Non-controlling interest
Total equity
Employee retirement benefit obligations
Deferred tax liabilities
Liabilities included in disposal group classified as held for sale
Insurance contract liabilities
Financial liabilities
Current tax liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
31 December
2023
$m
Note
31 December
2022
(restated)
$m
1 January
2022
(restated)
$m
24
11
12
13
23
8
14
20
15
18
19
19
19
24
23
8
20
14
21
44.4
323.9
130.3
0.8
180.7
59.1
6,574.4
2,098.3
206.5
5.1
1,437.0
11,060.5
38.8
528.8
184.0
(379.2)
2,923.2
3,295.6
1.1
3,296.7
–
56.9
54.8
6,604.0
674.7
10.9
362.5
7,763.8
11,060.5
20.9
320.4
133.1
5.6
38.2
–
5,812.1
2,517.2
160.6
4.0
1,350.9
10,363.0
38.7
517.6
184.0
(404.2)
2,297.8
2,633.9
1.1
2,635.0
–
4.1
–
6,694.3
636.2
14.1
379.3
7,728.0
10,363.0
–
313.1
90.4
5.7
70.3
–
6,041.3
2,856.9
155.4
4.9
1,300.7
10,838.7
38.7
516.8
184.0
(286.2)
2,108.8
2,562.1
1.1
2,563.2
35.1
4.5
–
7,186.9
746.7
21.3
281.0
8,275.5
10,838.7
The notes on pages 178 to 245 are an integral part of these consolidated financial statements.
The consolidated financial statements were approved by the Board of Directors on 5 March 2024 and signed on its behalf by:
Aki Hussain
Group Chief Executive Officer
Paul Cooper
Group Chief Financial Officer
175
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration Consolidated statement of changes in equity
Balance at 31 December 2021
(as previously reported)
IFRS 17 and IFRS 9 opening
equity adjustments (note 2.1)
Balance at 1 January 2022
Profit for the year
Other comprehensive
income net of tax
Employee share options:
Equity settled
share-based payments
Proceeds from
shares issued
Deferred and current tax
on employee share options
Shares issued in relation
to Scrip Dividend
Dividends paid to owners
of the Company
Balance at 31 December 2022
Profit for the year
Other comprehensive
income net of tax
Employee share options:
Equity settled
share-based payments
Proceeds from
shares issued
Deferred and current tax on
employee share options
Shares issued in relation
to Scrip Dividend
Dividends paid to owners
of the Company
Balance at 31 December 2023
Note
Share
capital
$m
Share
premium
$m
Contributed
surplus
$m
Currency
translation
reserve
$m
Retained
earnings
$m
Equity
attributable to
owners of the
Company
$m
Non-controlling
interest
$m
Total
equity
$m
38.7
516.8
184.0
(289.3)
2,088.0
2,538.2
1.1
2,539.3
–
38.7
–
516.8
–
184.0
3.1
(286.2)
20.8
2,108.8
23.9
2,562.1
–
1.1
23.9
2,563.2
–
–
–
–
–
–
–
–
–
–
0.1
–
0.7
–
–
–
–
–
–
–
–
–
253.9
253.9
(118.0)
27.2
(90.8)
–
–
–
–
–
27.2
27.2
–
1.2
–
0.1
1.2
0.7
(120.5)
(120.5)
–
–
–
–
–
–
–
253.9
(90.8)
27.2
0.1
1.2
0.7
(120.5)
38.7
517.6
184.0
(404.2) 2,297.8
2,633.9
1.1
2,635.0
19
19, 26
26
–
–
–
19
0.1
–
–
–
19, 26
26
–
–
–
9.6
–
1.6
–
–
–
–
–
–
–
–
–
712.0
712.0
25.0
(5.8)
19.2
–
–
–
–
–
43.2
43.2
–
2.1
–
9.7
2.1
1.6
(126.1)
(126.1)
–
–
–
–
–
–
–
712.0
19.2
43.2
9.7
2.1
1.6
(126.1)
38.8
528.8
184.0
(379.2)
2,923.2
3,295.6
1.1
3,296.7
The notes on pages 178 to 245 are an integral part of these consolidated financial statements.
176
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration
Consolidated statement of cash flows
For the year ended 31 December 2023
Profit before tax
Adjustments for:
Net foreign exchange losses/(gains)
Interest and equity dividend income
Interest expense
Net fair value (gains)/losses on financial assets
Depreciation, amortisation and impairment
Charges in respect of share-based payments
Realised gain/(loss) on sale of subsidiary undertaking,
intangible assets and property plant and equipment
Changes in operational assets and liabilities:
Insurance and reinsurance contracts
Financial assets carried at fair value
Financial liabilities carried at amortised cost
Other assets and liabilities
Cash paid to the pension fund
Interest received
Equity dividends received
Interest paid
Tax paid
Net cash flows from operating activities
Proceeds from sale of associate
Purchase of property, plant and equipment
Proceeds from the sale of property, plant and equipment
Purchase of intangible assets
Net cash flows used in investing activities
Proceeds from the issue of ordinary shares
Proceeds from the issue of loan notes
Distributions made to owners of the Company
Repayment of borrowings
Principal elements of lease payments
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Net increase in cash and cash equivalents
Effect of exchange rate fluctuations on cash and cash equivalents
Cash and cash equivalents at 31 December
Note
7
7
8, 11, 12
19
2023
$m
625.9
27.0
(237.0)
50.0
(170.6)
77.1
43.2
2022
(restated)
$m
275.6
(54.7)
(119.5)
39.7
254.2
60.0
27.2
(4.0)
0.1
248.3
(549.6)
0.7
(15.6)
(24.8)
218.1
1.5
(48.5)
(9.6)
232.1
9.5
(1.1)
–
(42.6)
(34.2)
9.6
–
(124.5)
–
(14.0)
(128.9)
69.0
2.2
(128.3)
0.9
(49.8)
(13.5)
109.1
3.9
(31.3)
(2.4)
373.4
–
(20.9)
0.9
(61.9)
(81.9)
0.1
279.1
(119.8)
(336.6)
(13.7)
(190.9)
100.6
1,350.9
69.0
17.1
1,437.0
1,300.7
100.6
(50.4)
1,350.9
24
11
18
The purchase, maturity and disposal of financial assets and liabilities, including derivatives, is part of the Group’s insurance
activities and is therefore classified as an operating cash flow.
Included within cash and cash equivalents held by the Group are balances totalling $181 million (2022: $178 million) not
available for immediate use by the Group outside of the Lloyd’s Syndicate within which they are held. Additionally, $108 million
(2022: $89 million) is pledged cash held against Funds at Lloyd’s, and $10.1 million (2022: $0.5 million) is held within trust funds
against reinsurance arrangements.
The notes on pages 178 to 245 are an integral part of these consolidated financial statements.
177
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration Notes to the consolidated financial statements
1 General information
The Hiscox Group, which is headquartered in Hamilton,
Bermuda, comprises Hiscox Ltd (the parent company, referred
to herein as the ‘Company’) and its subsidiaries (collectively,
the ‘Hiscox Group’ or the ‘Group’). For the current period
the Group provided insurance and reinsurance services to
its clients worldwide. It has operations in Bermuda, the UK,
Europe, Asia and the USA and currently has over 3,000 staff.
The Company is registered and domiciled in Bermuda and
its ordinary shares are listed on the London Stock Exchange.
The address of its registered office is: Chesney House,
96 Pitts Bay Road, Pembroke HM 08, Bermuda.
2 Basis of preparation
The financial statements of the Group have been prepared
in accordance with UK-adopted International Accounting
Standards, and Section 4.1 of the Disclosure and Transparency
Rules and the Listing Rules, both issued by the Financial
Conduct Authority (FCA) and in accordance with the
provisions of the Bermuda Companies Act 1981.
The consolidated financial statements have been prepared
on a going concern basis. In adopting the going concern
basis, the Board has reviewed the Group’s current and
forecast solvency and liquidity positions for the next
12 months and beyond. As part of the consideration of
the appropriateness of adopting the going concern basis,
the Directors use scenario analysis and stress testing to
assess the robustness of the Group’s solvency and liquidity
positions. In undertaking this analysis, no material uncertainty
in relation to going concern has been identified, due to the
Group’s strong capital and liquidity positions providing
resilience to shocks, underpinned by the Group’s approach
to risk management described in note 3. After making
enquiries, the Directors have a reasonable expectation
that the Group has adequate resources to continue in
operational existence over a period of at least 12 months
from the date of this report. For this reason, the Group
continues to adopt the going concern basis in preparing
the consolidated financial statements.
financial statements are presented in US Dollars millions ($m)
and rounded to the nearest hundred thousand Dollars,
unless otherwise stated.
The balance sheet of the Group is presented in order of
increasing liquidity. All amounts presented in the income
statement and statement of comprehensive income relate
to continuing operations.
The financial statements were approved for issue by the
Board of Directors on 5 March 2024.
2.1 Material accounting policies information
The principal accounting policies applied in the preparation
of these consolidated financial statements are set out below.
The most critical individual components of these financial
statements that involve the highest degree of judgement
or significant assumptions and estimations are identified
in note 2.1.1.
Except as described in section (a) below and overleaf, the
accounting policies adopted are consistent with those of the
previous financial year.
(a) New accounting standards, interpretations and
amendments to published standards
In these consolidated financial statements, the Company
has applied IFRS 17 and IFRS 9 for the first time.
Equity as at 31 December 2021
as previously reported
Impact of IFRS 17
Impact of IFRS 9
Restated equity 1 January 2022
$m
2,539.3
25.1
(1.2)
2,563.2
2.1.1 IFRS 17 Insurance Contracts
The Group has restated comparative information for 2022
applying the full retrospective transitional provisions of
IFRS 17 Insurance Contracts.
The nature of the changes in accounting policies can be
summarised as follows.
Items included in the financial statements of each of the
Group’s entities are measured in the currency of the
primary economic environment in which that entity
operates (the functional currency). The consolidated
Measurement
IFRS 17 requires a current measurement model where
estimates are remeasured each reporting period. Under
the General Measurement Model (GMM), contracts are
178
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.1 Material accounting policies information
2.1.1 IFRS 17 Insurance Contracts continued
measured using the building blocks of discounted
probability-weighted fulfilment cash flows, including an
explicit risk adjustment, and a contractual service margin
(CSM) representing the unearned profit of the contract
which is recognised as revenue over the coverage period. A
simplification, the premium allocation approach (PAA), can be
applied if certain eligibility criteria are met. The majority of the
Group’s policies have a coverage period of 12 months or less
and so are eligible for the PAA. Management applies significant
judgements in assessing whether applying the PAA to groups
of contracts with a coverage period extending beyond
12 months would produce a measurement of the liability for
remaining coverage (LRC) that would not differ materially
from the one that would be produced applying GMM.
Management has concluded that a majority of the Group’s
insurance contracts issued and reinsurance contracts held
meet the criteria and the PAA is applied to measure them.
The measurement principles differ from the approach used
by the Group under IFRS 4. The key areas are:
A the LRC reflects premiums received less insurance
acquisition cash flows and less amounts recognised
in insurance service revenue;
A measurement of the LRC is adjusted if a group of
contracts is expected to be onerous (for example, loss
making) over the remaining coverage period and a loss
is recognised immediately in the consolidated income
statement under ‘insurance service expenses’ with
the recoveries in ‘amounts recoverable from reinsurers
for incurred claims’. A loss component is measured
as the excess of the fulfilment cash flows that relate
to the remaining coverage of the group over the
carrying amount of the LRC of the group of contracts;
A measurement of the liability for incurred claims (LIC)
is determined on a probability-weighted expected
value basis. In contrast to IFRS 4, the LIC is discounted.
The LIC also includes an explicit risk adjustment
to compensate for non-financial risk. The liability
includes the Group’s obligation to pay other incurred
insurance expenses;
A the discount rates used to calculate the LIC are
constructed using risk-free rates, plus an illiquidity
premium, where applicable. Risk-free rates are
determined by reference to the market observable
data (swap rates or highly liquid sovereign bonds) in
the currencies of the respective (re)insurance contract
liabilities. The illiquidity premium is determined based
on market observable illiquidity premiums in financial
assets, adjusted to reflect the liquidity characteristics
of the liability cash flows;
A the risk adjustment for non-financial risk is the estimated
compensation that the Group requires for bearing the
uncertainty about the amount and timing of the cash
flows of groups of insurance contracts. Management
applies significant judgements in determining the risk
adjustment amount;
A measurement of the reinsurance contract asset for
remaining coverage (ARC) reflecting reinsurance
premiums paid for reinsurance held is adjusted to
include a loss-recovery component to reflect the
expected recovery of onerous contract losses where
such contracts reinsure onerous contracts;
A measurement of the reinsurance asset for incurred
claims (AIC) is similar to the LIC as set out above
except for the adjustment for the effect of the risk
of reinsurer’s non-performance;
A the expected premium receipts are recognised in
the consolidated income statement as part of
insurance revenue over the insurance coverage
period on the basis of the passage of time unless
the expected pattern of release from risk differs
significantly from the passage of time, in which
case it is recognised based on the expected
timing of incurred claims and benefits;
A all insurance and reinsurance contract assets
and liabilities are monetary items. As a result,
those balances denominated in foreign
currencies are subject to revaluation at foreign
exchange rates prevailing at the reporting
date, with the impact of changes in foreign
exchange rates recognised in the consolidated
income statement;
A under IFRS 4, acquisition costs were recognised
and presented separately as ‘deferred acquisition
costs’. Under IFRS 17, the Group has taken the
option to include directly attributable acquisition
cash flows in the LRC which are tested separately
for recoverability and are amortised as part of
insurance service expenses.
Changes to presentation and disclosure
The presentation of the consolidated income statement
changes, with premium and claims figures being replaced
with insurance revenue, insurance service expense and
insurance finance income and expenses. Gross and net
written premium will no longer be presented on the face
of the consolidated income statement.
Further, reinsurance commission income that is contingent
on claims, for example profit commission income, is treated
as part of claims recoveries cash flows and that which is
not contingent on claims, for example overrider commission,
is accounted for as part of premium paid or received
cash flows.
Transition
On transition date, 1 January 2022, the Group:
A has identified, recognised and measured each group
of insurance contracts as if IFRS 17 requirements had
always applied;
A derecognised any existing balances that would not
exist had IFRS 17 requirements always applied;
A performed a PAA eligibility assessment for the
2021 and prior unexpired groups of insurance and
reinsurance contracts with coverage periods of longer
than 12 months;
A has determined that the net impact to equity at
1 January 2022 was $25.1 million (increase) driven
by the following factors:
A the application of the discounting of the
insurance contract liabilities and assets of
$55.0 million (increase); and
A offset by other differences including the recognition
of onerous contract net loss components,
non-performance risk, and alignment of risk
adjustment and accounting policies on a consistent
basis under IFRS 17 of $29.9 million (decrease).
Hiscox Ltd Report and Accounts 2023
179
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.1 Material accounting policies information continued
2.1.2 IFRS 9 Financial Instruments
The Group has adopted IFRS 9 Financial Instruments with
effect from 1 January 2023. IFRS 9 replaces IAS 39 and
addresses the classification and measurement of financial
assets and liabilities; impairment of financial assets; and
general hedge accounting. Comparatives have been
restated with adjustments to the carrying amounts of
financial assets and liabilities at the date of transition
recognised in retained earnings.
The adoption of IFRS 9 has resulted in changes to the
Group’s accounting policies for recognition, classification
and measurement of financial assets and liabilities.
Transition
On the transition date, 1 January 2022, the net impact
recognised in equity is $1.2 million (decrease) driven by the
recognition of expected credit losses (ECL) under IFRS 9
for financial assets carried at amortised cost, net of tax.
Classification and measurement of financial instruments
IFRS 9 contains three principal classification categories for
financial assets: amortised cost; fair value through other
comprehensive income (FVOCI); and fair value through
profit or loss (FVPL). On transition to IFRS 9, the Group
assessed the business models and contractual cash
flows of its financial instruments.
Classification and measurement of financial instruments
The below table reconciles the carrying amounts of financial
instruments, from their previous measurement category in
accordance with IAS 39, to the measurement categories
upon transition to IFRS 9 on 1 January 2022, including any
remeasurement impact. Certain balances previously disclosed
within trade and other receivables/payables are in scope of
IFRS 17 as they are attributable to insurance contracts; these
balances have been excluded from the table below as they are
not in scope of IFRS 9.
The classification of financial instruments under IFRS 9 has
had no impact on the carrying values previously measured
under IAS 39.
The difference in the carrying amount for trade and other
receivables is due to the ECL impairment methodology
introduced by IFRS 9.
Impairment allowances
IFRS 9 introduces an ECL approach for measuring
impairment allowances. The ECL methodology is an
unbiased, probability-weighted estimation that incorporates
all available information relevant to the assessment of
credit risk, including information about past events, current
conditions and reasonable and supportable forecasts
of economic conditions at the reporting date. The
forward-looking aspect of IFRS 9 requires judgement
as to how changes in economic factors affect ECLs.
Financial assets
Government gilts/bonds
Corporate bonds
Asset backed securities
Mortgage-backed securities
Other fixed income holdings
Hedge/equity funds
Strategic investments
Insurance-linked funds
Deposits with credit institutions
(Lloyd’s deposits)
Derivatives
Trade and other receivables
Cash and cash equivalents
Total
Financial liabilities
Borrowings and accrued interest
Derivatives
Trade and other payables
Total
180
Hiscox Ltd Report and Accounts 2023
31 December 2021
IAS 39
1 January 2022
IFRS 9
Measurement
category
Carrying amount
$m
Measurement
category
Carrying amount
$m
FVPL
FVPL
FVPL
FVPL
FVPL
FVPL
FVPL
FVPL
Loans and receivables
(Amortised cost)
FVPL
Loans and receivables
(Amortised cost)
Amortised cost
Amortised cost
FVPL
Amortised cost
907.4
3,600.8
116.6
360.1
434.3
417.0
44.2
50.9
108.9
FVPL (mandatory)
FVPL (mandatory)
FVPL (mandatory)
FVPL (mandatory)
FVPL (mandatory)
FVPL (mandatory)
FVPL (mandatory)
FVPL (mandatory)
Amortised cost
1.1
68.5
FVPL (mandatory)
Amortised cost
1,300.7
7,410.5
746.5
0.2
22.4
769.1
Amortised cost
Amortised cost
FVPL (mandatory)
Amortised cost
907.4
3,600.8
116.6
360.1
434.3
417.0
44.2
50.9
108.9
1.1
67.3
1,300.7
7,409.3
746.5
0.2
22.4
769.1
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Performance
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Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.1 Material accounting policies information continued
2.1.3 Amendments to IAS 1 Presentation of Financial
Statements and IFRS Practice Statement 2, Making
Materiality Judgements — Disclosure of Accounting Policies
The Group has adopted the amendments to IAS 1 for the
first time in the current year. The amendments change the
requirements in IAS 1 with regard to disclosure of accounting
policies. The amendments replace all instances of the term
‘significant accounting policies’ with ‘material accounting
policy information’. These amendments had no impact on
the consolidated financial statements of the Group.
2.1.4 Amendments to IAS 12 Income Taxes
The Group has adopted the amendments to IAS 12 published
on 12 May 2023 for the first time in the current year. The
amendments address accounting for income taxes arising
from tax law enacted to implement the Pillar Two model rules
published by the Organisation for Economic Co-operation
and Development (OECD) (‘Pillar Two legislation’). Various
jurisdictions in which the Hiscox Group operates have enacted
or substantively enacted Pillar Two legislation before the balance
sheet date, including domestic top-up tax and multinational
top-up taxes, effective for accounting periods starting on or
after 31 December 2023. The Group has applied the exception
under the IAS 12 amendment to recognising and disclosing
information about deferred tax assets and liabilities related
to top-up income taxes. See note 23 for details of potential
impact of these new rules on future accounting periods.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not
yet effective. Other than discussed as above, new standards,
amendments to standards and interpretations, as adopted
by the UK, that are effective for annual periods beginning
on 1 January 2023 have been applied in preparing these
consolidated financial statements and had no material
impact on the Group.
A Amendments to IAS 12 Income Taxes – Deferred
Tax related to Assets and Liabilities arising from a
Single Transaction.
A Amendments to IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors – Definition of
Accounting Estimates.
(b) Future accounting developments
The following new standards, and amendments to
standards, are effective for annual periods beginning after
1 January 2023 and have not been applied in preparing these
financial statements:
A Amendments to IAS 1 Classification of Liabilities
as Current or Non-Current and Non-current Liabilities
with Covenants.
A Amendments to IFRS 16 – Lease Liability in a Sale
and Leaseback.
A Amendments to IAS 7 and IFRS 7 – Supplier
Finance Arrangements.
A Amendments to IFRS 10 and IAS 28 – Sale or
Contribution of Assets between an Investor and
its Associate or Joint Venture.
2.2 Basis of consolidation
(a) Subsidiaries
Subsidiaries are those entities controlled by the Group.
Control exists when the Group has power over an entity,
exposure or rights to variable returns from its involvement with
the investee and ability to use its power to affect those returns.
The consolidated financial statements include the assets,
liabilities and results of the Group up to 31 December each
year. The financial statements of subsidiaries are included in
the consolidated financial statements only from the date that
control commences until the date that control ceases.
The Group applies the acquisition method to account for
business combinations. The consideration transferred for
the acquisition of a subsidiary is the fair value of the assets
transferred, the liabilities incurred to the former owners of the
acquiree and the equity interests issued by the Group. The
consideration transferred also includes the fair value of any
asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired, liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. The
Group recognises any non-controlling interest in the acquiree
on an acquisition-by-acquisition basis, either at fair value or
at the non-controlling interest’s proportionate share of the
recognised amounts of the acquiree’s identifiable net assets.
Transactions with non-controlling interests that do not result in
loss of control are accounted for as equity transactions – that is,
as transactions with the owners in their capacity as owners. The
difference between fair value of any consideration paid and the
relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to
non-controlling interests are also recorded in equity.
(b) Associates
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Significant influence is generally identified with a
shareholding of between 20% and 50% of an entity’s voting
rights. The consolidated financial statements include the
Group’s share of the total recognised gains and losses of
associates on an equity-accounted basis from the date that
significant influence commences until the date that significant
influence ceases.
The Group’s share of its associate’s post-acquisition profits
or losses after tax is recognised in the income statement for
each period, and its share of the movement in the associate’s
net assets is reflected in the investments’ carrying values on
the balance sheet. When the Group’s share of losses equals
or exceeds the carrying amount of the associate, the carrying
amount is reduced to nil and recognition of further losses is
discontinued except to the extent that the Group has incurred
obligations in respect of the associate.
(c) Transactions eliminated on consolidation
Intragroup balances, transactions and any unrealised
gains arising from intragroup transactions are eliminated in
preparing the consolidated financial statements. Unrealised
losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Foreign
currency gains and losses on intragroup monetary assets and
liabilities may not fully eliminate on consolidation when the
intragroup monetary item concerned is transacted between
two Group entities that have different functional currencies.
Unrealised gains arising from transactions with associates
are eliminated to the extent of the Group’s interest in the
entity. Unrealised losses are eliminated in the same way
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Performance
and purpose
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Chapter 2
A closer look
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Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.2 Basis of consolidation
(c) Transactions eliminated on consolidation continued
as unrealised gains, but only to the extent that there is no
evidence of impairment.
when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance items
are charged to the income statement during the financial period
in which they are incurred.
2.3 Foreign currency translation
(a) Functional currency
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the
primary economic environment in which the entity operates
(the ‘functional currency’). Entities operating in France,
Germany, The Netherlands, Spain, Portugal, Ireland and
Belgium have functional currency of Euros; those subsidiary
entities operating from the USA, Bermuda, Guernsey and
Syndicates have functional currency of US Dollars with the
exception of Hiscox Ltd, a public company incorporated and
domiciled in Bermuda with functional currency of Sterling.
Functional currencies of entities operating in Asia include
US Dollars, Singapore Dollars and Thai Baht. All other
entities have a functional currency of Sterling.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from
the retranslation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are
recognised in the income statement, except when deferred
in equity as IFRS 9 effective net investment hedges or when
the underlying balance is deemed to form part of the Group’s
net investment in a subsidiary operation and is unlikely to be
settled in the foreseeable future. Non-monetary items carried
at historical cost are translated on the balance sheet at the
exchange rate prevailing on the original transaction date.
Non-monetary items measured at fair value are translated using
the exchange rate ruling when the fair value was determined.
(c) Group companies
The results and financial position of all the Group entities that
have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
A assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
A income and expenses for each income statement are
translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the date of
the transactions); and
A all resulting exchange differences are recognised as a
separate component of equity.
When a foreign operation is sold, such exchange differences
are recognised in the income statement as part of the gain,
or loss, on sale.
2.4 Property, plant and equipment
Property, plant and equipment are stated at historical cost, less
depreciation and any impairment loss. Historical cost includes
expenditure that is directly attributable to the acquisition of the
items. Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate, only
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Land is not depreciated as it is deemed to have an indefinite
useful economic life. The cost of leasehold improvements
is amortised over the unexpired term of the underlying
lease or the estimated useful life of the asset, whichever is
shorter. Depreciation on other assets is calculated using the
straight-line method to allocate their cost, less their residual
values, over their estimated useful lives.
The rates applied are as follows:
A buildings
A vehicles
A leasehold improvements including
fixtures and fittings
A furniture, fittings and equipment
20–50 years
3 years
10–15 years
3–15 years
The assets’ residual values and useful lives are reviewed at
each balance sheet date and adjusted if appropriate.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. Gains and losses on
disposals are determined by comparing proceeds with the
carrying amount. These are included in the income statement.
2.5 Intangible assets
(a) Goodwill
Goodwill represents amounts arising on acquisition of
subsidiaries and associates. In respect of acquisitions that
have occurred since 1 January 2004, goodwill represents
the excess of the fair value of consideration of an acquisition
over the fair value of the Group’s share of the net identifiable
assets and contingent liabilities assumed of the acquired
subsidiary or associate at the acquisition date.
In respect of acquisitions prior to 1 January 2004, goodwill is
included on the basis of its deemed cost, which represents
the amount recorded under previous generally accepted
accounting principles.
Goodwill on acquisition of subsidiaries is included in
intangible assets. Goodwill on acquisition of associates
is included in investments in associates.
Goodwill is not amortised but is tested at least annually
for impairment and carried at cost, less accumulated
impairment losses.
Goodwill is allocated to the Group’s cash-generating units
identified according to the smallest identifiable unit to which
cash flows are generated.
The impairment review process examines whether or not
the carrying value of the goodwill attributable to individual
cash-generating units exceeds its recoverable amount. Any
excess of goodwill over the recoverable amount arising from
the review process indicates impairment. Any impairment
charges are presented as part of operational expenses.
Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Chapter 1
Performance
and purpose
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Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.5 Intangible assets continued
(b) Other intangible assets
Intangible assets acquired separately from a business are
carried initially at cost. An intangible asset acquired as part
of a business combination is recognised outside of goodwill
if the asset is separable or arises from contractual or other
legal rights and its fair value can be measured reliably.
Customer relationships, syndicate capacity and software
acquired are capitalised at cost, being the fair value of the
consideration paid. Software is capitalised on the basis of
the costs incurred to acquire and bring it into use. Intangible
assets with indefinite lives such as syndicate capacity are
subsequently valued at cost and are subject to annual
impairment assessment.
Intangible assets with finite useful lives are consequently
carried at cost, less accumulated amortisation and impairment.
The useful life of the asset is reviewed annually. Any changes in
estimated useful lives are accounted for prospectively with the
effect of the change being recognised in the current and future
periods, if relevant.
Amortisation is calculated using the straight-line method
to allocate the cost over the estimated useful lives of the
intangible assets.
Subsequent expenditure on other intangible assets is
capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates.
All other expenditure is expensed as incurred.
Those intangible assets with finite lives are assessed for
indicators of impairment at each reporting date. Where there is an
indication of impairment then a full impairment test is performed.
An impairment loss recognised for an intangible asset in prior
years should be reversed if, and only if, there has been a change
in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognised.
2.6 Impairment of non-financial assets
Non-financial assets (such as goodwill, an intangible asset or
item of property, plant and equipment) that have an indefinite
useful life are not subject to amortisation and are tested
annually or whenever there is an indication of impairment.
Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
Objective factors that are considered when determining
whether a non-financial asset or group of non-financial assets
may be impaired include, but are not limited to, the following:
A adverse economic, regulatory or environmental
conditions that may restrict future cash flows and
asset usage and/or recoverability;
A the likelihood of accelerated obsolescence arising
from the development of new technologies and
products; and
A the disintegration of the active market(s) to which the
asset is related.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an
asset’s fair value less costs to sell or value in use.
For the purpose of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). Where an impairment
loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset in prior periods. A reversal of an
impairment loss is recognised as income immediately.
Impairment losses recognised in respect of goodwill are
not subsequently reversed.
2.7 Financial assets and liabilities
The Group classifies its financial assets in the following
measurement categories, which depends on the business
model for managing the financial assets and the contractual
terms of the cash flows.
A Amortised cost: assets that are held for collection
of contractual cash flows where those cash flows
represent solely payments of principal and interest
(SPPI), and that are not designated at fair value through
profit or loss (FVPL), are measured at amortised cost.
Interest income from these financial assets is included in
interest income using the effective interest rate method.
Such assets held by the Group include cash and cash
equivalents, receivables from brokers, prepayments and
accrued income, receivables and accrued interest and
other debtors.
A Fair value through other comprehensive income (FVOCI):
assets that are held for collection of contractual cash
flows and for selling the financial assets, and where the
cash flows represent SPPI, and that are not designated
as FVPL, are measured at FVOCI. Movements in the
carrying amount are taken through OCI, except for
the recognition of impairment gains or losses, interest
revenue and foreign exchange gains and losses which
are recognised in profit or loss. When the financial asset
is derecognised, the cumulative gain or loss on the
instrument’s amortised cost previously recognised in
OCI is reclassified from equity to profit or loss. Interest
from these financial assets is included in interest income
using the effective interest rate method. The Group does
not hold any assets at FVOCI as the business model
criteria are not met.
A Fair value through profit or loss (FVPL): assets that do
not meet the criteria for amortised cost or FVOCI are
measured at FVPL. Assets can also be designated
to FVPL if in doing so it eliminates, or significantly
reduces, an accounting mismatch. The gains or
losses arising from fair value changes on assets
measured at FVPL are recognised in profit or loss
and presented within investment result in the period
in which they arise. The Group’s investment assets in
this category include government bonds, corporate
bonds, asset and mortgage-backed securities, other
fixed income holdings, equities, investment funds,
insurance-linked funds and derivatives. All these
assets are at FVPL because of the business model
test and the characteristics of the associated
contractual cash flows.
(a) Recognition
The Group recognises a financial asset or a financial liability
in its balance sheet when, and only when, it becomes a
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Chapter 2
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Chapter 3
Governance
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Chapter 4
Remuneration
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Chapter 5
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information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.7 Financial assets and liabilities
(a) Recognition continued
party to the contractual provisions of the instrument. At initial
recognition, the Group measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs that are incremental
and directly attributable to the acquisition or issue of the
financial asset. Transaction costs of financial assets carried
at FVPL are expensed in profit or loss.
(b) Impairment allowances
An expected credit loss (ECL) model is applicable for all assets
measured at amortised cost and FVOCI. The assessment
of credit risk and the estimation of an ECL are unbiased,
probability-weighted and incorporate all available information
relevant to the assessment, including information about
past events, current conditions and reasonable and
supportable forecasts of economic conditions at the
reporting date. The forward-looking aspect of IFRS 9
requires judgement as to how changes in economic factors
affect ECLs. Impairment charges are recognised in the
income statement within operational expenses.
The ECL is a three-stage model based on forward-looking
information regarding changes in credit quality since inception.
Credit risk is measured using a probability of default (PD);
exposure at default (EAD); and loss given default (LGD)
as follows.
A PD is an estimate of the likelihood of default of the asset.
A EAD is an estimate of the exposure at that future default
date, taking into account expected changes in the
exposure after the reporting date.
A LGD is an estimate of the loss arising in the case where a
default occurs at a given time. It is based on the difference
between the contractual cash flows due and those that
the Group would expect to receive. It is usually expressed
as a percentage of the exposure at default.
The three stages of ECL are defined and assessed as follows.
A Stage 1 – no significant increase in credit risk since
inception, ECL is calculated using a 12-month PD.
A Stage 2 – a significant increase in credit risk since
inception, ECL is calculated using a lifetime PD.
A Stage 3 – credit impaired, ECL is calculated using
a lifetime PD.
A significant increase in credit risk is considered to have incurred
when payments are 30 days past due, or earlier if other factors
indicate the risk has increased significantly since inception.
Financial assets are written off when there is no reasonable
expectation of recovery on a case-by-case basis.
(c) Derecognition
Financial assets are derecognised when the contractual
rights to receive the cash flows from the financial assets have
expired; or they have been transferred and the Group transfers
substantially all the risks and rewards of ownership; or they
have been transferred and the Group neither transfers nor
retains substantially all the risks and rewards of ownership and
the Group has not retained control. Any gain or loss arising
from derecognition is recognised directly in profit or loss.
A financial liability is derecognised when the obligation under
that liability is discharged, cancelled or expires.
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(d) Investment income
The total gain/loss from financial assets carried at fair value
through profit or loss (FVPL) is recognised in profit or loss
and disclosed in the notes as investment income comprising
interest received, realised gains/losses and unrealised
gains/losses.
(e) Financial liabilities
At initial recognition, the Group classifies a financial liability
at fair value and subsequently at amortised cost using the
effective interest rate method. Financial liabilities mainly
include payables to brokerage customers, short-term
borrowings, long-term borrowings and bonds payable.
When all or part of the current obligations of a financial
liability have been discharged, the Group derecognises the
portion of the financial liability or obligation that has been
discharged. The difference between the carrying amount of
the derecognised liability and the consideration is recognised
in profit or loss.
Derivative financial liabilities are measured at fair value
through profit or loss. All the related realised and unrealised
gains or losses and transaction costs are recognised in
profit or loss.
2.8 Cash and cash equivalents
The Group has classified cash deposits and short-term
highly liquid investments as cash and cash equivalents.
These assets are readily convertible into known amounts of
cash and are subject to inconsequential changes in value.
Cash equivalents are financial investments with less than
three months to maturity at the date of acquisition.
2.9 Derivative financial instruments
Derivatives are initially recognised at fair value on the date on
which a derivative contract is entered into and are subsequently
valued at fair value at each balance sheet date. Fair values are
obtained from quoted market values and, if these are not available,
valuation techniques including option pricing models are used as
appropriate. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. For
derivatives not formally designated as a hedging instrument, fair
value changes are recognised immediately in the consolidated
income statement. Changes in the value of derivatives and
other financial instruments formally designated as hedges of net
investments in foreign operations are recognised in the currency
translation reserve to the extent they are effective; gains or losses
relating to the ineffective portion of the hedging instruments are
recognised immediately in the consolidated income statement.
The Group had no derivative instruments designated for hedge
accounting during the current and prior financial year.
2.10 Own shares
Where any Group company purchases the Parent Company’s
equity share capital (own shares), the consideration paid,
including any directly attributable incremental costs (net of
income taxes) is deducted from equity attributable to the
Company’s owners on consolidation. Where such shares are
subsequently sold, reissued or otherwise disposed of, any
consideration received is included in equity attributable to the
Company’s owners, net of any directly attributable incremental
transaction costs and the related tax effects.
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation continued
2.11 Insurance and reinsurance contracts
The accounting policy set out below is applicable to insurance
and reinsurance contracts that are issued by the Group
and reinsurance contracts held by the Group unless
indicated otherwise.
(a) Classification
Insurance contracts are defined as those containing significant
insurance risk. Significant insurance risk criteria are met if,
and only if, an insured event could cause an insurer to make
significant additional payments in any scenario, excluding
scenarios that lack commercial substance, at the inception
of the contract. Such contracts remain insurance contracts
until all rights and obligations are extinguished or expire.
The Group issues short-term casualty and property
(re)insurance contracts in the normal course of business,
under which it accepts significant insurance risk from its
policyholders. The Group also enters into ceded reinsurance
contracts with reinsurers, under which the Group transfers
significant insurance risk to reinsurers and is compensated
for claims on contracts issued by the Group.
(b) Separating components
The Group assesses its insurance and reinsurance products
to determine whether they contain distinct components which
must be accounted for under another IFRS instead of under
IFRS 17. After separating any distinct components, the Group
applies IFRS 17 to all remaining components of the (host)
insurance contract. Currently, the Group’s products do not
include any distinct components that require separation.
Some reinsurance contracts issued contain profit commission
arrangements. Under these arrangements, there is a
guaranteed minimum amount that the policyholder will always
receive – either in the form of profit commission, or as claims,
or another contractual payment irrespective of the insured
event happening. The guaranteed minimum amounts have
been assessed to be highly interrelated with the insurance
component of the reinsurance contracts and are, therefore,
non-distinct investment components which are not accounted
for separately. However, receipts and payments of these
investment components are excluded from insurance
service revenue and expenses.
(c) Level of aggregation
Insurance contracts are aggregated into groups for
measurement purposes. The level of aggregation for the
Group is determined firstly by grouping contracts into portfolios
which, with some limited exceptions, are set as the reserving
classes of each legal entity. Portfolios comprise groups of
contracts with similar risks which are managed together.
Portfolios are further divided based on expected profitability
at inception into three categories: onerous contracts,
contracts with no significant risk of becoming onerous, and
the remainder. No group for level of aggregation purposes
may contain contracts issued more than one year apart.
The grouping of contracts is not subsequently reconsidered.
A group of insurance contracts is considered to be onerous
at initial recognition if the fulfilment cash flows allocated to
that group of contracts in total are a net outflow. That is if the
present value of expected claims, attributable expenses and
risk adjustment exceeds the premium.
Portfolios of reinsurance contracts held are assessed for
aggregation separately from portfolios of insurance contracts
issued. Reinsurance contracts held cannot be onerous.
(d) Recognition and derecognition
Groups of insurance contracts issued are initially recognised
from the earliest of the following:
A the beginning of the coverage period;
A the date when the first payment from the policyholder is
due, or actually received if there is no due date; and
A when the Group determines that a group of contracts
becomes onerous.
Insurance contracts acquired in a business combination
within the scope of IFRS 3 Business Combinations or a
portfolio transfer are accounted for as if they were entered
into at the date of acquisition or transfer.
Reinsurance contracts held are recognised as follows:
A a group of reinsurance contracts held that provide
proportionate coverage is recognised at the later of the
following dates (unless underlying contracts are onerous,
in which case earlier recognition is required):
A the beginning of the coverage period of the group; and
A the initial recognition of any underlying
insurance contract;
A all other groups of reinsurance contracts held are
recognised from the beginning of the coverage period
of the group of reinsurance contracts held; unless the
Group entered into the reinsurance contract held at or
before the date when an onerous group of underlying
contracts is recognised prior to the beginning of the
coverage period of the group of reinsurance contracts
held, in which case the reinsurance contract held is
recognised at the same time as the group of underlying
insurance contracts is recognised.
Only contracts that individually meet the recognition criteria
by the end of the reporting period are included in the groups.
When contracts meet the recognition criteria in the groups after
the reporting date, they are added to the groups in the reporting
period in which they meet the recognition criteria. Composition
of the groups is not reassessed in subsequent periods.
An insurance contract is derecognised when it is:
A extinguished (that is, when the obligation specified in the
insurance contract expires or is discharged or cancelled); or
A the contract is modified such that the modification results
in a change in the measurement model, for example:
GMM, or the applicable standard for measuring a
component of the contract, substantially changes the
contract boundary, or requires the modified contracts
to be included in a different group.
When a modification is not treated as a derecognition,
the Group recognises amounts paid or received for the
modification of the contract as an adjustment to the relevant
liability or asset for remaining coverage.
When a group of insurance contracts is derecognised,
adjustments to remove related rights and obligations result
in the following amounts being charged immediately to the
consolidated income statement:
A if the contract is extinguished, any net difference between
the derecognised part of the liability for remaining
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Chapter 2
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Chapter 3
Governance
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Remuneration
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Chapter 5
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information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.11 Insurance and reinsurance contracts
(d) Recognition and derecognition continued
coverage (LRC) of the original contract and any other
cash flows arising from extinguishment;
A if the contract is transferred to the third party, any net
difference between the derecognised part of the LRC
of the original contract and the premium charged by the
third party; or
A if the original contract is modified resulting in its
derecognition, any net difference between the
derecognised part of the LRC and the hypothetical
premium that the entity would have charged if it had
entered into a contract with equivalent terms as the
new contract at the date of the contract modification,
less any additional premium charged for the modification.
(e) Contract boundary
The Group uses the concept of contract boundary to determine
what cash flows should be considered in the measurement
of groups of insurance contracts. Cash flows are within the
boundary of an insurance contract if they arise from substantive
rights and obligations that exist during the reporting period
in which the Group can compel the policyholder to pay the
premiums, or in which the Group has a substantive obligation to
provide the policyholder with services. A substantive obligation
to provide services ends when:
A the Group has the practical ability to reassess the risks of
the particular policyholder and, as a result, can set a price
or level of benefits that fully reflects those risks; or
A both of the following criteria are satisfied:
A the Group has the practical ability to reassess the
risks of the portfolio of insurance contracts that
contain the contract and, as a result, can set a
price or level of benefits that fully reflects the risk
of that portfolio; and
A the pricing of the premiums for coverage up to
the date when the risks are reassessed does
not take into account the risks that relate to
periods after the reassessment date.
A liability or asset relating to expected premiums or claims
outside the boundary of the insurance contract is not
recognised. Such amounts relate to future insurance contracts.
(f) Measurement – premium allocation approach
Initial measurement
The Group applies the premium allocation approach (PAA)
to the majority of the insurance contracts that it issues
and reinsurance contracts that it holds, because:
A the coverage period of each contract in the group is
one year or less; or
A for contracts longer than one year, the Group has
modelled possible future scenarios and reasonably
expects that the measurement of the LRC for the
group containing those contracts under the PAA
does not differ materially from the measurement that
would be produced applying the general model.
For insurance contracts issued, on initial recognition, the Group
measures the LRC as the amount of premiums received, less
any acquisition cash flows paid and any amounts arising from
the derecognition of the insurance acquisition cash flows asset
and the derecognition of any other relevant pre-recognition
cash flows.
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For reinsurance contracts held, on initial recognition, the Group
measures assets for the remaining coverage at the amount
of ceding premiums paid, plus broker fees paid to a party
other than the reinsurer and any amounts arising from the
derecognition of any other relevant pre-recognition cash flows.
For insurance contracts issued, insurance acquisition cash
flows allocated to a group are recognised over the coverage
period of contracts in the group. For reinsurance contracts
held, broker fees are recognised over the coverage period of
contracts in a group.
Subsequent measurement
For insurance contracts issued, at each of the subsequent
reporting dates, the LRC is:
A increased for premiums received in the period;
A decreased for insurance acquisition cash flows paid in
the period;
A decreased for the amounts of expected premium receipts
recognised as insurance revenue for the services
provided in the period;
A increased for the amortisation of insurance acquisition
cash flows in the period recognised as insurance service
expenses; and decreased for any investment component
paid or transferred to the liability for incurred claims.
For reinsurance contracts held, at each of the subsequent
reporting dates, the remaining coverage is:
A increased for ceding premiums paid in the period;
A increased for broker fees paid in the period;
A decreased for the expected amounts of ceding premiums
and broker fees recognised as reinsurance expenses for
the services received in the period; and
A decreased for any investment component paid or
transferred to the reinsurance assets for incurred claims.
The Group does not adjust the LRC for insurance contracts
issued or the remaining coverage for reinsurance contracts held
for the effect of the time value of money, because associated
premiums are due within one year of the coverage period. The
Group only adjusts the remaining coverage for reinsurance
contracts held for the time value of money in relation to the legacy
portfolio transactions (LPT) that were held, as the associated
premiums are not due within one year of the coverage period.
The Group estimates the liability for incurred claims (LIC)
as the fulfilment cash flows related to incurred claims. The
fulfilment cash flows incorporate, in an unbiased way, all
reasonable and supportable information available without
undue cost or effort about the amount, timing and uncertainty
of those future cash flows, and they reflect current estimates
from the perspective of the entity.
If facts and circumstances indicate that a group of insurance
contracts measured under the PAA is onerous on initial
recognition or has become onerous subsequently, the Group
increases the carrying amount of the LRC, recognising a loss
component, to the amounts of the excess of the fulfilment
cash flows that relate to the remaining coverage of the group
of contracts, over the carrying amount of the LRC of the group.
The amount of such an increase is recognised in insurance
service expenses. Subsequently, the loss component is
amortised over the coverage period of the group of contracts.
When a loss is recognised on initial recognition of an
onerous group of underlying insurance contracts or on
addition of onerous underlying insurance contracts to that
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106
Chapter 5
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information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.11 Insurance and reinsurance contracts
(f) Measurement – premium allocation approach continued
group, the carrying amount of the reinsurance asset for
remaining coverage for reinsurance contracts held measured
under the PAA is increased by the amount of expected
recoveries that will be in the consolidated income statement
and a loss recovery component is established or adjusted
for that amount. The loss recovery component is calculated
by multiplying the loss component recognised on underlying
insurance contracts by the percentage of claims on underlying
insurance contracts that the Group expects to recover from
the reinsurance contracts held that are entered into before or
at the same time as the loss is recognised on the underlying
insurance contracts. When underlying insurance contracts
that are reinsured are included in the same group as insurance
contracts issued that are not reinsured, the Group applies a
systematic and rational method of allocation to determine the
portion of losses that relates to underlying insurance contracts.
(g) Insurance revenue
The insurance revenue for the period is the amount of expected
premium receipts (excluding any investment component)
allocated to the period. The Group allocates the expected
premium receipts to each period of insurance contract
services on the basis of the passage of time. But if the
expected pattern of release of risk during the coverage
period differs significantly from the passage of time, for
example a group of contracts that is exposed to large
natural catastrophe risk concentrated in the first or second
half of the year, then the allocation is made on the basis of
the expected timing of incurred insurance service expenses.
Changes to the basis of allocation are accounted for
prospectively as a change in accounting estimate.
(h) Insurance service expenses
Insurance service expenses include the following:
A incurred claims, excluding investment components
reduced by loss component allocations;
A other incurred directly attributable expenses;
A insurance acquisition cash flows amortisation using the
pattern that is consistent with the insurance revenue;
A changes that relate to past service;
A changes that relate to future service;
A insurance acquisition cash flows assets impairment; and
A mandatory reinstatement premiums.
Other expenses not meeting the above categories are
included in other operating expenses in the consolidated
income statement.
(i) Allocation of reinsurance premiums
The allocation of reinsurance premiums includes reinsurance
premiums and other incurred directly attributable expenses.
Reinsurance premium and expenses are recognised
similarly to insurance revenue. The amount of reinsurance
expenses recognised in the reporting period depicts the
transfer of received insurance contract services at an
amount that reflects the portion of ceding premiums that
the Group expects to pay in exchange for those services.
Additionally, broker fees and ceding commissions that are
not contingent on claims of the underlying contracts issued
reduce ceding premiums and are accounted for as part of
reinsurance premiums.
In addition, the allocation of reinsurance premiums includes
changes in the reinsurance assets arising from retroactive
reinsurance contracts held and voluntary reinstatement
ceded premiums.
(j) Amounts recoverable from reinsurers for incurred claims
The amounts recoverable from reinsurers for incurred
claims include:
A incurred claims recoveries, excluding
investment components;
A loss-recovery component allocations;
A changes that relate to past service;
A effect of changes in the risk of reinsurers’
non-performance;
A amounts relating to accounting for onerous
groups of underlying insurance contracts issued;
A ceding commissions that are contingent on
claims of the underlying contracts issued reducing
incurred claims recovery; and
A mandatory reinstatement ceded premiums.
(k) Insurance finance income or expenses
Insurance finance income or expenses comprise the
change in the carrying amount of the group of insurance
contracts arising from:
A the effect of the time value of money and changes
in the time value of money. This mainly comprises
interest accreted on the LIC and interest unwind on
the AIC; and
A the effect of financial risk and changes in financial risk.
This mainly includes the effect of changes in interest
rates, for example, discount rates.
The Group does not disaggregate changes in the risk
adjustment for non-financial risk between insurance
service result and insurance finance income or expenses.
The change in the risk adjustment is entirely presented as
part of the insurance service result.
Foreign exchange gains and losses continue to be presented
as a net other foreign exchange gain/(loss) line item.
2.12 Taxation
Current tax, including corporation tax and foreign tax, is
provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date. A provision
is recognised for those matters for which the tax determination
is uncertain but it is considered probable that there will be a
future outflow of funds to a tax authority. The provisions are
measured at the best estimate of the amount expected to
become payable. The assessment is based on the judgement
of tax professionals within the Group supported by previous
experience in respect of such activities and, in certain cases,
based on advice sought from specialist tax advisors.
Deferred tax is provided in full, using the liability method,
on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
financial statements. However, if the deferred income tax
arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable
profit or loss, it is not recognised. With the exception of
deferred tax related to top-up income taxes arising from tax
Hiscox Ltd Report and Accounts 2023
187
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Performance
and purpose
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Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.12 Taxation continued
law enacted to implement Pillar Two legislation, deferred
tax is determined using tax rates and laws that have been
enacted or substantively enacted by the balance sheet
date and are expected to apply when the related deferred
tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against
which the temporary differences can be utilised. Deferred tax
is provided on temporary differences arising on investments in
subsidiaries and associates, except where the Group controls
the timing of the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
2.13 Employee benefits
(a) Pension obligations
The Group has defined contribution and defined benefit
pension schemes. The defined benefit scheme closed to
future accrual with effect from 31 December 2006 and
active members were offered membership of the defined
contribution scheme from 1 January 2007. A defined
contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity and has
no further obligation beyond the agreed contribution rate.
A defined benefit plan is a pension plan that defines an
amount of pension benefit that an employee will receive
on retirement, usually dependent on one or more factors
such as age, years of service and compensation.
For defined contribution plans, the Group pays contributions
to publicly or privately administered pension insurance
plans on a contractual basis. The contributions are
recognised as an employee benefit expense when they
are due. Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in future
payments is available.
The amount recognised on the balance sheet in respect
of defined benefit pension plans is the present value of the
defined benefit obligation at the balance sheet date, less
the fair value of plan assets. The calculation of the defined
benefit obligation is performed annually by a qualified
actuary using the projected unit method. As the plan is
closed to all future benefit accrual, each participant’s
benefits under the plan are based on their service to
the date of closure or earlier leaving date and their final
pensionable earnings. The service cost is the expected
administration cost during the year. Past service costs
are recognised immediately in the income statement.
Remeasurements of the net defined benefit liability, which
comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any),
are recognised immediately in other comprehensive income.
The Group determines the net interest expense (income) on the
net defined benefit liability (asset) for the period by applying the
discount rate used to measure the defined benefit obligation
at the beginning of the annual period to the then net defined
benefit liability (asset), taking into account any changes in the
net defined benefit liability (asset) during the period as a result of
contributions and benefit payments. Net interest expense and
other expenses related to defined benefit plans are recognised
in the income statement through operating expenses.
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Hiscox Ltd Report and Accounts 2023
To the extent that a surplus emerges on the defined
benefit obligation, it is only recognisable as an asset when
it is probable that future economic benefits will be recovered
by the Group.
(b) Other long-term employee benefits
The Group provides sabbatical leave to employees on
completion of every five years’ service. The present value of the
expected costs of these benefits is accrued over the period of
employment. In determining this liability, consideration is given
to future increases in salary levels, experience with employee
departures and periods of service.
(c) Share-based compensation
The Group operates equity settled share-based employee
compensation plans. These include the share option schemes,
and the Group’s Performance Share Plans, outlined in the
Directors’ remuneration report, together with the Group’s Save
As You Earn (SAYE) schemes. The fair value of the employee
services received, measured at grant date, in exchange for
the grant of the awards is recognised as an expense, with the
corresponding credit being recorded in retained earnings
within equity. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the awards
granted, excluding the impact of any non-market vesting
conditions (for example, profitability or net asset growth targets).
Non-market vesting conditions are included in assumptions
about the number of awards that are expected to become
exercisable. At each balance sheet date, the Group revises its
estimates of the number of awards that are expected to vest.
The Group recognises the impact of the revision of
original estimates, if any, in the income statement, and a
corresponding adjustment to equity, in periods in which
the estimates are revised.
When the terms and conditions of an equity settled
share-based employee compensation plan are modified,
and the expense to be recognised increases as a result of the
modification, then the increase is recognised evenly over the
remaining vesting period. When a modification reduces the
expense to be recognised, there is no adjustment recognised
and the pre-modification expense continues to be applied.
The proceeds received, net of any directly attributable
transaction costs, are credited to share capital and share
premium when the options are exercised.
(d) Termination benefits
Termination benefits are payable when employment is
terminated before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits when it is
demonstrably committed to either: terminating the employment
of current employees according to a detailed formal plan without
possibility of withdrawal; or providing termination benefits as a
result of an offer made to encourage voluntary redundancy.
(e) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses
and profit sharing, based on a formula that takes into
consideration the profit attributable to the Company’s
shareholders after certain adjustments. The Group recognises
a provision where a contractual obligation to employees
exists or where there is a past practice that has created a
constructive obligation.
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation continued
2.14 Finance costs
Finance costs consist of interest charges accruing on the
Group’s borrowings and bank overdrafts together with
commission fees charged in respect of Letters of Credit
and interest in respect of lease liabilities and funds withheld.
Arrangement fees in respect of financing arrangements
are charged over the life of the related facilities.
2.15 Leases
(a) Hiscox as lessee
The Group recognises right-of-use assets at the
commencement date of the lease (for example, the date the
underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before
the commencement date, less any lease incentives
received. Unless the Group is reasonably certain to obtain
ownership of the leased asset at the end of the lease term,
the recognised right-of-use assets are depreciated on a
straight-line basis over the shorter of their estimated useful
life and the lease term. Right-of-use assets are subject to
impairment. Right-of-use assets are presented on the
balance sheet as property, plant and equipment.
At the commencement date of the lease, the Group
recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease
payments include fixed payments less any lease incentives
receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments also include
the exercise price of a purchase option reasonably certain
to be exercised by the Group and payments of penalties
for terminating a lease, if the lease term reflects the Group
exercising the option to terminate. The variable lease payments
that do not depend on an index or a rate are recognised as
an expense in the period in which the event or condition that
triggers the payment occurs. Lease liabilities are included in
trade and other payables on the balance sheet.
In calculating the present value of lease payments, the
Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is
not readily determinable. After the commencement date, the
amount of lease liabilities is increased to reflect the accretion
of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured
if there is a modification that is not accounted for as a separate
lease: future lease payments that are linked to a rate or index,
a change in the lease term, a change in the in-substance fixed
lease payments, a change in the assessment to purchase the
underlying asset or a change in the amounts expected to be
payable under a residual value guarantee.
The Group applies the short-term lease recognition
exemption to its applicable short-term leases. It also applies
the low-value assets recognition exemption to leases of office
equipment that are considered of low value. Lease payments
on short-term leases and leases of low-value assets are
recognised as an expense on a straight-line basis over the
lease term.
(b) Hiscox as lessor
Rental income from operating leases is recognised
on a straight-line basis over the term of the relevant
contractual agreement.
2.16 Dividend distribution
Dividend distribution to the Company’s shareholders is
recognised as a liability in the Group’s financial statements
in the period in which the dividends are approved.
2.17 Operations held for sale
Assets and liabilities held for disposal as part of operations
which are held for sale are shown separately in the consolidated
statement of financial position. Operations held for sale are
recorded at the lower of their carrying amount and their fair
value less the estimated selling costs.
2.18 Use of significant judgements, estimates
and assumptions
The preparation of financial statements requires the Group
to select accounting policies and make judgements,
estimates and assumptions that affect the reported
amounts of assets, liabilities, income and expenses in
the consolidated financial statements.
The Audit Committee reviews the reasonableness of critical
judgements, estimates and assumptions applied and the
appropriateness of material accounting policies information.
The significant issues considered by the Committee in the
year are included within the Audit Committee report on
pages 99 to 101.
Significant accounting judgements
The following accounting policies are those considered to
have a significant impact on the amounts recognised in the
consolidated financial statements.
A Consolidation: assessment of whether the Group controls
or has significant influence over underlying entity, for
example, the treatment of insurance-linked securities
funds including consideration of its decision-making
authority and its rights to the variable returns from the entity.
A Financial investments: classification and measurement
of investments including the application of the fair
value option.
Insurance and reinsurance contracts
(a) Liability for incurred claims
The ultimate cost of outstanding claims is estimated by
using a range of standard actuarial claims projection
techniques. The Group relies on actuarial analysis to
estimate the settlement cost of future claims. Via a formal
governed process, there is close communication between
the actuaries and other key stakeholders, such as the
underwriters, claims and finance teams when setting
and validating the assumptions. The main assumption
underlying these techniques is that a Group’s past claims
development experience can be used to project future
claims development and hence ultimate claims costs.
These methods extrapolate the development of paid and
incurred losses, average costs per claim (including claims
handling costs), and claim numbers based on the observed
development of earlier years and expected loss ratios.
Historical claims development is mainly analysed by accident
years, but can also be further analysed by geographical area,
Hiscox Ltd Report and Accounts 2023
189
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.18 Use of significant judgements, estimates
and assumptions
(a) Liability for incurred claims continued
as well as by significant business lines and claim types. In
most cases, no explicit assumptions are made regarding
future rates of claims inflation or loss ratios. Instead, the
assumptions used are those implicit in the historical claims
development data on which the projections are based.
Additional qualitative judgement is used to assess the extent
to which past trends may not apply in future (for example, to
reflect one-off occurrences, changes in external or market
factors such as public attitudes to claiming, economic
conditions, levels of claims inflation, judicial decisions and
legislation, as well as internal factors such as portfolio mix,
policy features and claims handling procedures) in order to
arrive at the estimated ultimate cost of claims that present
the probability-weighted expected value outcome from
the range of possible outcomes, taking account of all the
uncertainties involved.
(b) Risk adjustment for non-financial risk
The risk adjustment for non-financial risk is the compensation
that the Group requires for bearing the uncertainty about the
amount and timing of the cash flows of groups of insurance
contracts. The risk adjustment reflects an amount that an
insurer would charge to make it indifferent between the cash
flows with a range of probable scenarios versus equivalent
fixed cash flows.
To determine the risk adjustment for non-financial risk for
reinsurance contracts, the Group applies a combination
of a value at risk (VaR) (or a percentile) approach and a
scenario-based approach both gross and net of reinsurance
and derives the amount of risk being transferred to the
reinsurer as the difference between the two results. Most
business is measured under the PAA model and therefore
the Group does not calculate a risk adjustment in relation to
LRC excluding loss component.
For the incurred claim liabilities measurement purposes,
the Group calculates the risk adjustment at each insurance
undertaking entity in accordance with its risk profile using
a combination of VaR method and scenario analysis
targeting an overall confidence level for the aggregate risk
distribution. Scenario analysis is used to determine the level of
compensation that the Group requires for bearing uncertainty
about the large event-driven claims, for example natural
catastrophe. This element of the compensation for risk takes
into consideration the range of potential outcomes from an
event and the sensitivities of the loss positions in any modelled
scenarios. Given the nature of the underlying business and
losses it is normal for new risks to become apparent or for
the magnitude of existing risks to change over time.
Group diversification benefit is not considered at the individual
insurance undertaking entity level but is considered in
determining the confidence level at a consolidated level
for disclosure purposes. At 31 December 2023, the risk
adjustment in respect of the LIC net of reinsurance is at the
83rd percentile (31 December 2022: 78th percentile).
(c) Premium allocation approach eligibility assessment
A simplified measurement model, the PAA, can be applied if
certain eligibility criteria are met. The majority of the Group’s
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Hiscox Ltd Report and Accounts 2023
policies have a coverage period of 12 months or less and
so are eligible for the PAA. Management applies significant
judgment whether applying PAA to those groups of contracts
would differ materially from GMM with a coverage period
extending beyond 12 months.
Significant accounting estimates
All estimates are based on management’s knowledge
of current facts and circumstances, assumptions based
on that knowledge and their predictions of future events.
Actual results may differ from those estimates, possibly
significantly. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any
future periods affected.
The most critical estimate included within the Group’s
balance sheet is the measurement of insurance contract
liabilities and reinsurance contract held assets, and in
particular the estimate of the liability for incurred claims (LIC).
The total gross estimate of LIC as at 31 December 2023 is
$6,604.0 million (2022: $6,694.3 million). The total estimate for
reinsurance asset for incurred claims as at 31 December 2023
is $ 2,098.3 million (2022: $2,517.2 million).
Insurance and reinsurance contracts
In applying IFRS 17 measurement requirements, the following
inputs and methods were used that include significant
estimates. The present value of future cash flows is estimated
using deterministic scenarios. The assumptions used in
the deterministic scenarios are derived to approximate the
probability-weighted mean of a full range of scenarios. For
the sensitivities with regard to the assumptions made that
have the most significant impact on measurement under
IFRS 17, please refer to note 3, management of risk.
(a) Discount rates
Insurance contract liabilities are calculated by discounting
expected future cash flows at a risk-free rate, plus an
illiquidity premium where applicable. Risk-free rates were
derived using swap rates available in the market denominated
in the same currency as the insurance contracts being
measured. When swap rates are not available, highly liquid
sovereign bonds with the highest, for example, AAA/AA
credit rating were used.
Management uses judgement to assess liquidity
characteristics of the liability cash flows. The illiquidity
premium was estimated based on market observable liquidity
premiums in financial assets, adjusted to reflect the illiquidity
characteristics of the liability cash flows. The illiquidity premium
is determined by reference to market observable AA-rated
bonds yield curve in the currency of the insurance contract
being measured, adjusted to remove both expected and
unexpected credit risk.
The following discount rates were applied for the currencies
and periods presented below:
USD
GBP
EUR
CAD
1 year
%
4.83
4.97
3.49
4.63
Year end 31 December 2023
3 year
%
3.92
4.12
2.75
3.69
5 year
%
3.74
3.82
2.65
3.39
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
2 Basis of preparation
2.18 Use of significant judgements, estimates
and assumptions
(a) Discount rates continued
USD
GBP
EUR
CAD
1 year
%
4.90
4.59
3.12
4.66
Year end 31 December 2022
3 year
%
4.24
4.64
3.28
4.03
5 year
%
4.00
4.55
3.31
3.74
(b) Estimates of future cash flows to fulfil insurance contracts
Included in the measurement of each group of contracts
within the scope of IFRS 17 are all of the future cash flows
within the boundary of each group of contracts. The estimates
of these future cash flows are based on probability-weighted
expected future cash flows. The Group estimates which
cash flows are expected and the probability that they will
occur as at the measurement date. In setting these
expectations, the Group uses information about past
events, current conditions and forecasts of future conditions.
The Group’s estimate of future cash flows is the mean of
a range of scenarios that reflect the full range of possible
outcomes. Each scenario specifies the amount, timing and
probability of cash flows. The probability-weighted average
of the future cash flows is calculated using a deterministic
scenario representing the probability-weighted mean of
a range of scenarios.
Where estimates of expenses-related cash flows are
determined at the portfolio level or higher, they are allocated
to groups of contracts on a systematic basis, such as
activity-based costing method. The Group has determined
that this method results in a systematic and rational allocation.
Similar methods are consistently applied to allocate expenses
of a similar nature. Acquisition cash flows are typically allocated
to groups of contracts based on gross premiums written.
This includes an allocation of acquisition cash flows among
existing groups of insurance contracts issued. Claims
settlement-related expenses are largely allocated based
on claims costs.
Uncertainty in the estimation of future claims and benefit
payments arises primarily from the severity and frequency
of claims and uncertainties regarding future inflation rates
leading to claims and claims-handling expenses growth.
Assumptions used to develop estimates about future cash
flows are reassessed at each reporting date and adjusted
where required.
(c) Fair value measurement
The Group carries its financial investments at fair value
through profit or loss, with fair values determined using
published price quotations in the most active financial markets
in which the assets trade, where available. Where quoted
market prices are not available, valuation techniques are
used to value financial instruments. These include third-party
valuation reports and models utilising both observable and
unobservable market inputs. Valuation techniques involve
judgement, including the use of valuation models and their
inputs, which can lead to a range of plausible valuations for
financial investments. Note 3.3(a) discusses the reliability of
the Group’s fair values.
(d) Employee benefit
The employee retirement benefit scheme obligations are
calculated and valued with reference to a number of actuarial
assumptions including mortality, inflation rates and discount
rate, many of which have been subject to recent volatility.
This complex set of economic variables can have a significant
impact on the financial statements, as shown in note 24.
(e) Tax
The Group operates in a multinational environment, and
legislation concerning the determination of taxation of assets
and liabilities is complex and continually evolving. In preparing
the financial statements, the Group applies significant
judgements in identifying uncertainties over tax treatments and
in the measurement of the provision being the best estimate of
the amount expected to become payable. The assessment is
based on the judgement of tax professionals within the Group
supported by previous experience in respect of such activities
and based on advice sought from specialist tax advisors.
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 in the Group. In preparing the
Group’s financial statements, management estimates taxation
assets and liabilities after taking appropriate professional
advice, as shown in note 22. Significant estimates and
assumptions used in the valuation of deferred tax relate to
the forecast taxable profits, taking into account the Group’s
financial and strategic plans. See note 23 for further details of
adjustments made to deferred tax during the year.
The determination and finalisation of agreed taxation assets
and liabilities may not occur until several years after the
reporting date and consequently the final amounts payable
or receivable may differ from those presented in these
financial statements.
2.19 Reporting of additional performance measures
The Directors consider that the combined, claims and expense
ratio measures reported in respect of operating segments
and the Group overall in note 4, net asset value per share and
return on equity measures disclosed in notes 5 and 6 and
prior-year developments disclosed in note 20, provide useful
information regarding the underlying performance of the
Group’s businesses.
These measures are widely recognised by the insurance industry
and are consistent with the internal performance measures
reviewed by senior management including the chief operating
decision-maker. However, these measures are not defined
within the accounting standards and interpretations, and
therefore may not be directly comparable with similarly titled
additional performance measures reported by other companies.
3 Management of risk
The Group’s overall appetite for accepting and managing varying
classes of risk is defined by the Group’s Board of Directors. The
Board has developed a governance framework and has set
Group-wide risk management policies and procedures which
include risk identification, risk management and mitigation and
risk reporting. The objective of these policies and procedures
is to protect the Group’s shareholders, policyholders and other
stakeholders from negative events that could hinder the Group’s
Hiscox Ltd Report and Accounts 2023
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and purpose
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22
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72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk continued
delivery of its contractual obligations and its achievement of
sustainable profitable economic and social performance.
The Board exercises oversight of the development and
operational implementation of its risk management policies
and procedures through the Risk Committee, and ongoing
compliance through a dedicated internal audit function, which
has operational independence, clear terms of reference
influenced by the Board’s Non Executive Directors and a
clear upwards reporting structure back into the Board. The
Group, in line with the non-life insurance industry generally, is
fundamentally driven by a desire to originate, retain and service
insurance contracts to maturity. The Group’s cash flows are
funded mainly through advance premium collections and the
timing of such premium inflows is reasonably predictable. In
addition, the majority of material cash outflows are typically
triggered by the occurrence of insured events, although the
timing, frequency and severity of claims can fluctuate.
The principal sources of risk relevant to the Group’s operations
and its financial statements fall into three broad categories:
operational risk, insurance risk and financial risk, which are
described in notes 3.1, 3.2 and 3.3 below. The Group also
actively manages its capital risks as detailed in note 3.4 and tax
risks as detailed in note 3.5. Additional unaudited information is
also provided in the corporate governance, risk management
and capital sections of this Report and Accounts.
3.1 Operational risk
The Group is exposed to the risk of direct or indirect loss
resulting from internal processes, people or systems, or
from external events. This includes cyber security risk, as
well as major IT, systems or service failures. The Group has
demonstrated continued resilience, underscoring the benefits
of its business model, disciplined risk management and
ongoing investment in technology and infrastructure.
Hiscox has implemented several operational risk management
processes, which include enhancing its defences and
response to information security and cyber threats. Hiscox
regularly reassesses its information security standards
and methodologies to ensure appropriate governance and
consistency in its approach.
In line with its ‘future of work’ programme, Hiscox continues
to monitor and adapt its hybrid working policies and practices
and ensure that the workforce is equipped with the necessary
technology to enable this. In the second half of 2023, the
organisation also completed a ‘ways of working’ review.
These measures have continued to be successful in
addressing employee engagement and a number of
operational risks.
In 2023, Hiscox also focused on Group-wide crisis
management response planning, including conducting
cyber crisis simulations to test and enhance its response
plans. The organisation has also established an enterprise
portfolio management (EPM) capability aimed at
strengthening operational maturity and controls in relation
to its change agenda over the next two-to-three years.
3.2 Insurance risk
The predominant risk to which the Group is exposed is
insurance risk which is assumed through the underwriting
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Hiscox Ltd Report and Accounts 2023
process. Insurance risk can be sub-categorised into
i) underwriting risk including the risk of catastrophe and
systemic insurance losses and the insurance competition
and cycle, and ii) reserving risk.
i) Underwriting risk
The Board sets the Group’s underwriting strategy and risk
appetite, seeking to exploit identified opportunities in light of
other relevant anticipated market conditions.
The Board requires all underwriters to operate within an overall
Group appetite for individual events. This defines the maximum
exposure that the Group is prepared to retain on its own
account for any one potential catastrophe event or disaster.
In addition, the Group’s overall underwriting risk appetite
seeks to ensure that in a 1-in-200 bad year we are within the
underwriting risk limit. The limit is calibrated each year based
on exposure, expected profit and the size of other correlated
risks to enable us to continue in business and take advantage
of market opportunities that arise.
Specific underwriting objectives such as aggregation limits,
reinsurance protection thresholds and geographical disaster
event risk exposures are prepared and reviewed by the Group
Chief Underwriting Officer in order to translate the Board’s
summarised underwriting strategy into specific measurable
actions and targets. These actions and targets are reviewed
and approved by the Board in advance of each underwriting
year. The Board continually reviews its underwriting strategy
throughout each underwriting year in light of the evolving
market pricing and loss conditions and as opportunities
present themselves. The Group’s underwriters and
management consider underwriting risk at an individual
contract level, and also from a portfolio perspective, where
the risks assumed in similar classes of policies are aggregated
and the exposure evaluated in light of historical portfolio
experience and prospective factors.
To assist with the process of pricing and managing
underwriting risk, the Group routinely performs a wide
range of activities including the following:
A regularly updating the Group’s risk models;
A documenting, monitoring and reporting on the Group’s
strategy to manage risk;
A developing systems that facilitate the identification of
emerging issues promptly;
A utilising sophisticated computer modelling tools to
simulate catastrophes and measure the resultant
potential losses before and after reinsurance;
A monitoring legal developments and amending the
wording of policies when necessary;
A regularly aggregating risk exposures across individual
underwriting portfolios and known accumulations of risk;
A examining the aggregated exposures in advance of
underwriting further large risks; and
A developing processes that continually factor market
intelligence into the pricing process.
The delegation of underwriting authority to specific individuals,
both internally and externally, is subject to regular review.
All underwriting staff and binding agencies have strict
parameters in relation to the levels and types of business
they can underwrite, based on individual levels of experience
and competence. These parameters cover areas such as the
maximum sums insured per insurance contract, maximum
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72
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Remuneration
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Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.2 Insurance risk
i) Underwriting risk continued
gross premiums written and maximum aggregated exposures
per geographical zone and risk class. Regular meetings
are held between the Group Chief Underwriting Officer and
a specialist team in order to monitor claims development
patterns and discuss individual underwriting issues as they
arise. The Group compiles estimates of losses arising from
extreme loss events using statistical models alongside input
from its underwriters. These require significant management
judgement. The extreme loss scenarios, shown on pages 38 to
39, represent hypothetical major events occurring in areas with
large insured values.
They also represent areas of potentially significant exposure for
Hiscox. In addition to understanding the loss Hiscox may suffer
from an event, it is important to ensure that the risk models
used are calibrated to the risks faced today. This includes
recognising and forecasting inflationary trends, updating trends
in claims payments, and capturing climate change-related
impacts. Hiscox has a climate risk framework, which is used
to assess where research resources should be focused, and
models updated, and as a result improves not only the Group’s
understanding of the potential impact of a changing climate
but also the Group’s ability to respond.
The selection of extreme loss scenario events is adjusted
each year and they are not therefore necessarily directly
comparable from one year to the next. The events are extreme
and unprecedented, and as such these estimates may prove
inadequate as a result of incorrect assumptions, model
deficiencies, or losses from unmodelled risks. This means that
should an extreme loss event actually occur, the Group’s final
ultimate losses could materially differ from those estimates
modelled by management. The Group’s insurance contracts
include provisions to contain losses, such as the ability to
impose deductibles and demand reinstatement premiums
in certain cases. In addition, in order to manage the Group’s
exposure to repeated catastrophic events (both man-made
and natural catastrophes), relevant policies frequently contain
payment limits to cap the maximum amount payable from
these insured events over the contract period. In the case of
climate-exposed risks specifically, the vast majority of contracts
written by the Group are annual in nature and thus can be
revised frequently. This flexibility is a key tool for managing
the multi-decade challenge of climate risks holistically.
Estimated concentration of insurance risk in 2023
The Group also manages underwriting risk by purchasing
reinsurance. Reinsurance protection is purchased at an entity
level and is also considered at an overall Group level to mitigate
the effect of catastrophes and unexpected concentrations of risk.
However, the scope and type of reinsurance protection purchased
may change depending on the extent and competitiveness of
cover available in the market.
The estimated liquidity profile to settle the net claims liabilities
is given in note 3.3(e).
The specific insurance risks accepted by the Group fall
broadly into the following main categories: reinsurance
inwards, marine and major asset property, other property
risks, casualty professional indemnity and casualty other
insurance risks. These specific categories are defined for
risk review purposes only, as each contains risks specific
to the nature of the cover provided. They are not exclusively
aligned to any specific reportable segment in the Group’s
operational structure or to the primary internal reports
reviewed by the chief operating decision-maker. The Group
also considers climate change to be a cross-cutting risk
with potential to impact each existing risk type, rather than a
stand-alone risk. By design, the established and embedded
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. This is supported by equally
robust processes and policies that address climate-related
underwriting risks, such as the Group-wide ESG exclusions
policy which represents a commitment to reduce steadily,
and eliminate by 2030, both underwriting and investment
exposure to coal-fired power plants and coal mines; Arctic
energy exploration, beginning with the Arctic National
Wildlife Refuge; oil sands; and controversial weapons
such as landmines.
More information on the strategy and governance structures
in place to manage climate-related risks can be found on
pages 50 to 61. The following describes the policies and
procedures used to identify and measure the risks
associated with each individual category of business.
Estimated concentration of insurance risks measured in
insurance revenue is as follows:
Total
Reinsurance
inwards
$m
976.2
Property –
marine and
major assets
$m
345.0
Property –
other
assets
$m
903.3
Casualty –
professional
indemnity
$m
1,077.1
Casualty –
other risks
$m
789.2
Other*
$m
Total
$m
392.4
4,483.2
Types of insurance risk in the Group
Estimated concentration of insurance risk in 2022 (restated)
Total
Reinsurance
inwards
$m
931.6
Property –
marine and
major assets
$m
287.1
Property –
other
assets
$m
846.4
Casualty –
professional
indemnity
$m
1,046.8
Casualty –
other risks
$m
780.6
Other*
$m
Total
$m
380.8
4,273.3
Types of insurance risk in the Group
*Includes a diverse mix of certain specialty lines such as kidnap and ransom, terrorism and other risks which contain a mix of property and casualty exposures.
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Performance
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Chapter 2
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22
Chapter 3
Governance
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Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.2 Insurance risk continued
Reinsurance inwards
The Group’s reinsurance inwards acceptances are primarily
focused on large commercial property, homeowner and marine
and short-tail specialty exposures held by other insurance
companies, predominantly in North America and other
developed economies. This business is characterised more
by large claims arising from individual events or catastrophes
than the high-frequency, low-severity attritional losses
associated with certain other business written by the Group.
Multiple insured losses can periodically arise out of a single
natural or man-made occurrence. The main circumstances
that result in claims against the reinsurance inwards book are
conventional catastrophes, such as earthquakes or storms,
but also includes other events including fires, explosions and
cyber events. The occurrence and impact of these events are
very difficult to predict over the short term, which complicates
attempts to anticipate claims frequencies on an annual
basis. In those years where there is a low incidence of severe
catastrophes, claims frequencies on the reinsurance inwards
book can be relatively low.
A significant proportion of the reinsurance inwards business
provides cover on an excess of loss basis for individual events.
The Group agrees to reimburse the cedant once their losses
exceed a minimum level. Consequently, the frequency and
severity of reinsurance inwards claims are related not only to
the number of significant insured events that occur, but also to
their individual magnitude. If numerous catastrophes occurred
in any one year, but the cedant’s individual loss on each was
below the minimum stated, then the Group would have no
liability under such contracts. Maximum gross line sizes and
aggregate exposures are set for each type of programme.
The Group writes reinsurance risks for periods of mainly one
year so that contracts can be assessed for pricing and terms
and adjusted to reflect any changes in market conditions and
the evolving impact of climate change.
Property risks – marine and major assets
The Group directly underwrites a diverse range of property
risks. The risk profile of the property covered under marine and
major asset policies is different to that typically contained in
the other classes of property (such as private households and
contents insurance) covered by the Group.
Typical property covered by marine and other major property
contracts includes fixed and moveable assets such as
ships and other vessels, cargo in transit, energy platforms
and installations, pipelines, other subsea assets, satellites,
commercial buildings and industrial plant and machinery.
These assets are typically exposed to a blend of catastrophic
and other large loss events and attritional claims arising from
conventional hazards such as collision, flooding, fire and theft.
Climate change may give rise to more frequent and severe
extreme weather events (for example, windstorms and river
flooding) and it may be expected that their frequency will
increase over time.
For this reason, the Group accepts major property insurance
risks for periods of mainly one year so that each contract can
be repriced on renewal to reflect the continually evolving risk
profile. The most significant risks covered for periods exceeding
one year are certain specialist lines such as marine and
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Hiscox Ltd Report and Accounts 2023
offshore construction projects which can typically have building
and assembling periods of between three and four years.
These form a small proportion of the Group’s overall portfolio.
Marine and major property contracts are normally underwritten
by reference to the commercial replacement value of the
property covered. The cost of repairing or rebuilding assets, of
replacement or indemnity for contents and time taken to restart
or resume operations to original levels for business interruption
losses are the key factors that influence the level of claims
under these policies. The Group’s exposure to commodity
price risk in relation to these types of insurance contracts is
very limited, given the controlled extent of business interruption
cover offered in the areas prone to losses of asset production.
Other property risks
The Group provides home and contents insurance, together
with cover for artwork, antiques, classic cars, jewellery,
collectables and other assets. The Group also extends cover
to reimburse certain policyholders when named insureds or
insured assets are seized for kidnap and a ransom demand is
subsequently met. Events which can generate claims on these
contracts include burglary, kidnap, seizure of assets, acts of
vandalism, fires, flooding and storm damage. Losses on most
classes can be predicted with a greater degree of certainty as
there is a rich history of actual loss experience data and the
locations of the assets covered, and the individual levels of
security taken by owners, are relatively static from one year
to the next.
The losses associated with these contracts tend to be of a
higher frequency and lower severity than the marine and other
major property assets covered above. The Group’s home and
contents insurance contracts are exposed to weather and
climate-related risks such as floods and windstorms and their
consequences. As outlined earlier, the frequency and severity
of these losses do not lend themselves to accurate prediction
over the short term. Contract periods are therefore not
normally more than one year at a time to enable risks to
be regularly repriced.
Contracts are underwritten by reference to the commercial
replacement value of the properties and contents insured.
Claims payment limits are always included to cap the amount
payable on occurrence of the insured event.
Casualty insurance risks
The casualty underwriting strategy attempts to ensure that
the underwritten risks are well diversified in terms of type and
amount of potential hazard, industry and geography. However,
the Group’s exposure is more focused towards professional,
general, technological and marine liability risks rather than
human bodily injury risks, which are only accepted under limited
circumstances. Claims typically arise from incidents such as
errors and omissions attributed to the insured, professional
negligence and specific losses suffered as a result of electronic
or technological failure of software products and websites.
The provision of insurance to cover allegations made against
individuals acting in the course of fiduciary or managerial
responsibilities, including directors and officers’ insurance, is
one example of a casualty insurance risk.
The Group’s casualty insurance contracts mainly experience
low-severity attritional losses. By nature, some casualty losses
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.2 Insurance risk
Casualty insurance risks continued
may take longer to settle than other categories of business.
In addition, there is increased potential for accumulation
in casualty risk due to the growing complexity of business,
technological advances, and greater interconnectivity and
interdependency across the world due to globalisation.
The Group’s pricing strategy for casualty insurance
policies is typically based on historical claim frequencies
and average claim severities, adjusted for inflation and
extrapolated forwards to incorporate projected changes in
claims patterns. In determining the price of each policy, an
allowance is also made for acquisition and administration
expenses, reinsurance costs, investment returns and the
Group’s cost of capital.
For the inwards reinsurance lines, there is often a time lag
between the establishment and re-estimate of case reserves
and reporting to the Group. The Group works closely with
the reinsured to ensure timely reporting and also centrally
analyses industry loss data to verify the reported reserves.
The Group maintains explicit reserve uplifts to allow for
the impact of high inflation in recent years. Loss ratios
are also closely monitored to ensure they include an
appropriate allowance for future inflation.
Losses from Covid-19 continue to settle well within
expectations. As time passes and legal cases are gradually
settled, the outcome becomes more certain and so the
level of risk adjustment above the best estimate can
be reduced.
The market for cyber insurance is still a relatively immature one,
complicated by the fast-moving nature of the threat, as the
world becomes even more connected. The risks associated
with cyber insurance are multiplying in both diversity and scale,
with associated financial and reputational consequences of
failing to prepare for them. The Group has focused its cyber
expertise on prevention, in addition to the more traditional
recovery product. Cyber products are sold through our
businesses in the UK, USA and Europe, and the product is
sold both direct to consumers and through a more traditional
broker channel.
ii) Reserving risk
The Group’s procedures for estimating the outstanding
costs of settling insured losses at the balance sheet date,
including liability of incurred claims, are detailed in note 20.
The Group’s provision estimates are subject to rigorous
review by senior management from all areas of the business.
The managed Syndicates and US business receive a review
of their estimates from independent actuaries. The final
provision is approved by the relevant boards on the
recommendation of dedicated reserving committees. Similar
to the underwriting risk detailed above, the Group’s reserve
risks are well diversified. Short-tailed claims are normally
notified and settled within 12 to 24 months of the insured
event occurring. Those claims taking the longest time to
develop and settle typically relate to casualty risks, where
legal complexities occasionally develop regarding the
insured’s alleged omissions or negligence. The length of
time required to obtain definitive legal judgments and make
eventual settlements exposes the Group to a degree of
reserving risk in an inflationary environment.
The final quantum for casualty claims may not be established
for many years after the event. A significant proportion of the
casualty insurance amounts reserved on the balance sheet
may not be expected to settle within 24 months of the balance
sheet date. Consequently, our approach is not to recognise
favourable experience in the early years of development in
the reserving process when setting the booked reserve.
Certain marine and property insurance contracts, such as
those relating to subsea and other energy assets and the
related business interruption risks, can also take longer than
normal to settle. This is because of the length of time required
for detailed subsea surveys to be carried out and damage
assessments agreed, together with difficulties in predicting
when the assets can be brought back into full production.
3.3 Financial risk
Overview
The Group is exposed to financial risk through its ownership of
financial instruments, including financial liabilities. These items
collectively represent a significant element of the Group’s net
shareholder funds. The Group invests in financial assets in
order to fund obligations arising from its insurance contracts
and financial liabilities.
The key financial risk for the Group is that the proceeds from
its financial assets and investment result generated thereon
are not sufficient to fund the Group’s obligations. The most
important elements and economic variables that could result in
such an outcome relate to the reliability of fair value measures,
equity price risk, interest rate risk, credit risk, liquidity risk
and currency risk. The Group’s policies and procedures for
managing exposure to these specific categories of risk are
detailed below.
(a) Reliability of fair values
The Group has elected to carry trade and other receivables
at amortised cost and all financial investments at fair
value through profit or loss as they are managed and
evaluated on a fair value basis in accordance with a
documented strategy.
With the exception of any unquoted investments shown
in note 17, all of the financial investments held by the Group
are available to trade in markets and the Group therefore
seeks to determine fair value by reference to published
prices or as derived by pricing vendors using observable
quotations in the most active financial markets in which
the assets trade.
The fair value of financial assets is measured primarily with
reference to their closing market prices at the balance
sheet date. The ability to obtain quoted market prices may
be reduced in periods of diminished liquidity. In addition,
those quoted prices that may be available may represent
an unrealistic proportion of market holdings or individual
trade sizes that could not be readily available to the Group.
In such instances, fair values may be determined or partially
supplemented using other observable market inputs such as
prices provided by market makers such as dealers and brokers,
and prices achieved in the most recent regular transaction
of identical or closely related instruments occurring before
the balance sheet date, but updated for relevant perceived
changes in market conditions.
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Governance
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Remuneration
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information
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165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.3 Financial risk
(a) Reliability of fair values continued
Valuation of securities will continue to be impacted by external
market factors including interest rates, default rates, rating
agency actions and liquidity. The Group will make adjustments
to the investment portfolio as appropriate as part of its overall
portfolio strategy, but its ability to mitigate its risk by selling or
hedging its exposures may be limited by the market environment.
terms to maturity. The portfolio is managed to minimise the
impact of interest rate risk on anticipated Group cash flows.
The Group may also, from time to time, enter into interest rate
future contracts in order to reduce interest rate risk on specific
portfolios. The fair value of debt and fixed income assets
in the Group’s balance sheet at 31 December 2023 was
$6,334 million (2022: $5,427 million). These may be analysed
below as follows:
Nature of debt and fixed income holdings
The Group’s future results may be impacted, both
positively and negatively, by the valuation adjustments
applied to securities.
Note 17 provides an analysis of the measurement
attributes of the Group’s financial instruments.
(b) Price risk
The Group is exposed to price risk through its holdings of
equities and investment funds. This is limited to a relatively
small and controlled proportion of the overall investment
portfolio and the equities and investment funds involved
are diversified over a number of companies and industries.
The fair value of equities and investment fund assets in
the Group’s balance sheet at 31 December 2023 was
$205 million (2022: $339 million). A 10% downward correction
in equities and investment fund prices at 31 December 2023
would have been expected to reduce Group equity and profit
after tax by approximately $18 million (2022: $30 million).
These may be analysed as follows:
Nature of equity and investment fund holdings
Directly held equity securities
Equity funds
Hedge funds
Geographic focus
Specific UK mandates
Global mandates
2023
% weighting
2022
% weighting
15
32
53
39
61
8
43
49
22
78
The allocation of price risk is not heavily confined to any
one market index so as to reduce the Group’s exposure to
individual sensitivities. We make allocations to diversifying
and less volatile strategies, such as absolute return strategies,
so as to balance our desire to maximise returns with the need
to ensure capital is available to support our underwriting
throughout any downturn in financial markets.
(c) Interest rate risk
Debt and fixed income investments represent a significant
proportion of the Group’s assets and the Board continually
monitors investment strategy to minimise the risk of a fall in
the portfolio’s market value which could affect the amount
of business that the Group is able to underwrite or its ability
to settle claims as they fall due. The fair value of the Group’s
investment portfolio of debt and fixed income holdings
is normally inversely correlated to movements in market
interest rates. If market interest rates rise, the fair value
of the Group’s debt and fixed income investments would
tend to fall and vice versa if credit spreads remained constant.
Debt and fixed income assets are predominantly invested in
high-quality corporate, government and asset-backed bonds.
The investments typically have relatively short durations and
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Hiscox Ltd Report and Accounts 2023
Government issued
Agency and government supported
Asset-backed securities
Mortgage-backed instruments
Corporate bonds
Lloyd’s deposits and bond funds
Credit funds
2023
% weighting
2022
% weighting
20
4
8
6
60
1
1
20
3
4
5
64
2
2
One method of assessing interest rate sensitivity is through
the examination of duration-convexity factors in the underlying
portfolio. Duration is the weighted average length of time
required for an instrument’s cash flow stream to be recovered,
where the weightings involved are based on the discounted
present values of each cash flow. A closely related concept,
modified duration, measures the sensitivity of the instrument’s
price to a change in its yield to maturity. Convexity measures
the sensitivity of modified duration to changes in the yield to
maturity. Using these three concepts, scenario modelling
derives the below estimated impact on instruments’ fair values
for a 100 basis point change in the term structure of market
interest rates.
The Group has used a duration-convexity-based sensitivity
analysis for the debt and fixed income holdings, and
recalculated the discounting impact for the reinsurance
contract assets and insurance contract liabilities. If market
interest rates had increased or decreased by 100 basis points
at the balance sheet date, the Group equity and profit after tax
for the year might have been expected to decrease or increase
by the following amounts:
31 December 2023
Reinsurance contract held assets
Insurance contract liabilities
Debt and fixed income holdings
31 December 2022 (restated)
Reinsurance contract held assets
Insurance contract liabilities
Debt and fixed income holdings
1% increase/decrease in interest rates
Equity/profit after tax
$m
(34)/34
87/(87)
(91)/91
1% increase/decrease in interest rates
Equity/profit after tax
$m
(43)/43
92/(92)
(77)/77
The liability for incurred claims, reinsurance assets for incurred
claims and certain reinsurance assets for remaining coverage
are subject to discounting. Please refer to note 2.18(a) for
further details regarding the discount rate used.
At 31 December 2023, the Group had borrowings at nominal
value of £525 million (2022: £525 million). The borrowings
Chapter 1
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Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.3 Financial risk
(c) Interest rate risk continued
comprised £525 million (2022: £525 million) of long-term
debt, which includes two listed instruments of £275 million
and £250 million, as explained in note 14: the first being
fixed-to-floating rate callable subordinated notes where the
floating rate becomes effective from November 2025; the
second being fixed rate notes maturing in September 2027.
The Group also has a revolving credit facility of $600 million
(2022: $600 million), which is $nil drawn (2022: $nil) and,
therefore, is not presenting interest rate risk. The Group has
no other significant borrowings or other assets or liabilities
carrying interest rate risk, other than the facilities and Letters
of Credit (LOCs) outlined in note 27.
(d) Credit risk
The Group has exposure to credit risk, which is the risk
that a counterparty will suffer a deterioration in actual or
perceived financial strength and be unable to pay amounts
in full when due, or that for any other reason they renege
on a contract or alter the terms of an agreement. The
concentrations of credit risk exposures held by insurers
may be expected to be greater than those associated with
other industries, due to the specific nature of reinsurance
markets and the extent of investments held in financial
markets. In both markets, the Group interacts with a number
of counterparties who are engaged in similar activities with
similar customer profiles, and often in the same geographical
areas and industry sectors. Consequently, as many of these
counterparties are themselves exposed to similar economic
characteristics, one single localised or macroeconomic
change could severely disrupt the ability of a significant
number of counterparties to meet the Group’s agreed
contractual terms and obligations.
Key areas of exposure to credit risk include:
A reinsurance asset for incurred claims including
amounts due from reinsurers in respect of claims
already paid;
The Group Reinsurance Credit Committee (RCC) assesses
the creditworthiness of all reinsurers by reviewing credit
grades provided by rating agencies and other publicly available
financial information detailing their financial strength and
performance, as well as detailed analysis from the Group’s
analysis team. The financial analysis of reinsurers produces an
assessment categorised by factors including their S&P rating
(or equivalent when not available from S&P).
Despite the rigorous nature of this assessment exercise, and
the resultant restricted range of reinsurance counterparties
with acceptable strength and credit credentials that emerges
therefrom, some degree of credit risk concentration
remains inevitable.
While the rating agencies provide strong analysis on the
financials and governance of a reinsurance security, the RCC
also takes account of qualitative factors. The RCC considers
the reputation of its reinsurance partners and also receives
details of recent payment history and the status of any ongoing
negotiations between Group companies and these third
parties. The final score that a security receives will determine
how much reinsurance credit risk Hiscox is willing to have
with that security based on the exposure guidelines.
This information is used to update the reinsurance
purchasing strategy.
Individual operating units maintain records of the payment
history for significant brokers and contract holders with whom
they conduct regular business. The exposure to individual
counterparties is also managed by other mechanisms, such
as the right of offset, where counterparties are both debtors
and creditors of the Group, and obtaining collateral from
unrated counterparties. Management information reports detail
provisions for impairment on trade and other receivables and
subsequent write-off. Exposures to individual intermediaries
and groups of intermediaries are collected within the ongoing
monitoring of the controls associated with regulatory solvency.
A amounts due from insurance contract holders; and
A counterparty risk with respect to investments, derivative
transactions and catastrophe bonds.
The Group also mitigates counterparty credit risk by focusing
debt and fixed income investments in a portfolio of typically
high-quality corporate and government bonds.
The Group’s maximum exposure to credit risk is represented
by the carrying values of financial assets and reinsurance
assets included in the consolidated balance sheet at any
given point in time. The Group does not use credit derivatives
or other products to mitigate maximum credit risk exposures
on reinsurance assets, but collateral may be requested to be
held against these assets. The Group structures the levels of
credit risk accepted by placing limits on its exposure to a single
counterparty, or groups of counterparties, and having regard to
geographical locations. Such risks are subject to an annual or
more frequent review.
There is no significant concentration of credit risk with respect
to trade and other receivables, as the Group has a large number
of internationally dispersed debtors with unrelated operations.
Reinsurance is used to contain insurance risk. This does not,
however, discharge the Group’s liability as primary insurer. If a
reinsurer fails to pay a claim for any reason, the Group remains
liable for the payment to the policyholder. The creditworthiness
of reinsurers is therefore continually reviewed throughout
the year.
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Chapter 5
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information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.3 Financial risk
(d) Credit risk continued
An analysis of the Group’s major exposures to counterparty credit risk, excluding trade and other receivables, and equities and
units in unit trusts, based on S&P or equivalent rating, is presented below:
As at 31 December 2023
Debt and fixed income holdings
Reinsurance contract held assets
Total
As at 31 December 2022 (restated)*
Debt and fixed income holdings
Reinsurance contract held assets
Total
*Restated for the adoption of IFRS 17.
Note
14
20
Note
14
20
AAA
$m
847.1
524.9
1,372.0
AAA
$m
521.6
1,097.5
1,619.1
AA
$m
1,751.1
1,039.4
2,790.5
AA
$m
1,475.2
689.2
2,164.4
A
$m
1,721.8
525.0
2,246.8
A
$m
1,580.7
715.0
2,295.7
BBB
$m
1,608.9
–
1,608.9
BBB
$m
1,449.3
0.9
1,450.2
Other/
non-rated
$m
404.7
9.0
413.7
Other/
non-rated
$m
399.8
14.6
414.4
Total
$m
6,333.6
2,098.3
8,431.9
Total
$m
5,426.6
2,517.2
7,943.8
Within the debt and fixed income holdings, which include debt securities, deposits with credit institutions, credit funds and cash
equivalent assets, there are exposures to a range of government borrowers, on either a direct or guaranteed basis, and banking
institutions. The Group, together with its investment managers, closely manages its geographical exposures across government
issued and supported debt.
The largest aggregated counterparty exposure related to debt and fixed income holdings at 31 December 2023 of $994 million is
to the US Treasury (2022: $827 million).
The Group is exposed to concentrations of risk with individual reinsurers due to the nature of the reinsurance market and the
restricted range of reinsurers that have acceptable credit ratings. The largest counterparty exposure included in reinsurance
assets at 31 December 2023 is to Munich Reinsurance Company (2022: Blue Jay Reinsurance). The recoverable amount from
Munich Reinsurance Company represents 17% (2022: Blue Jay Reinsurance 26%) of this category of assets.
For the current period and prior period, the Group did not experience any material defaults on debt securities. The Group’s
AAA-rated reinsurance assets include fully collateralised positions at 31 December 2023 and 2022.
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Chapter 5
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information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.3 Financial risk continued
(e) Liquidity risk
The Group is exposed to daily calls on its available cash resources, mainly from claims arising from insurance and reinsurance
contracts. Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Board
sets limits on the minimum level of cash and maturing funds available to meet such calls and on the minimum level of borrowing
facilities that should be in place to cover unexpected levels of claims and other cash demands.
A significant proportion of the Group’s investments is in highly liquid assets which could be converted to cash in a prompt fashion
and at minimal expense. The Group’s exposure to equities is concentrated on shares and funds that are traded on internationally
recognised stock exchanges.
The main focus of the investment portfolio is on high-quality, short-duration debt and fixed income securities and cash. There
are no significant holdings of investments with specific repricing dates. Notwithstanding the regular interest receipts and also
the Group’s ability to liquidate these securities and the majority of its other financial instrument assets for cash in a prompt and
reasonable manner, the contractual maturity profile of the fair value of these securities at 31 December is as follows.
As at 31 December 2023
Debt and fixed income holdings
Cash and cash equivalents
Total
As at 31 December 2022 (restated)*
Debt and fixed income holdings
Cash and cash equivalents
Total
*Restated for the adoption of IFRS 17.
Within
one year
$m
Between one
and two years
$m
Between two
and three years
$m
Between three
and four years
$m
Between four
and five years
$m
1,595.7
1,437.0
3,032.7
1,587.7
–
1,587.7
1,489.3
–
1,489.3
659.9
–
659.9
366.6
–
366.6
Within
one year
$m
Between one
and two years
$m
Between two
and three years
$m
Between three
and four years
$m
Between four
and five years
$m
1,355.5
1,350.9
2,706.4
1,519.6
–
1,519.6
1,296.1
–
1,296.1
495.0
–
495.0
272.7
–
272.7
Over
five years
$m
634.4
–
634.4
Over
five years
$m
487.7
–
487.7
2023
total
$m
6,333.6
1,437.0
7,770.6
2022
total
$m
5,426.6
1,350.9
6,777.5
The Group’s equities, equity funds, hedge funds and credit funds and other non-dated instruments have no contractual maturity
terms but predominantly could be liquidated in an orderly manner for cash in a prompt and reasonable timeframe within one year
of the balance sheet date.
The available headroom of working capital is monitored through the use of a detailed Group cash flow forecast which is reviewed
by management monthly, or more frequently as required.
Average contractual maturity analysed by denominational currency of investments as at 31 December
US Dollar
Sterling
Euro
Canadian Dollar
2023
in years
4.03
2.18
2.55
2.59
2022
in years
3.77
2.65
2.67
2.48
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Chapter 4
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106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.3 Financial risk
(e) Liquidity risk continued
The following is an analysis by liability type of the estimated timing of net cash flows based on the liability for incurred claims. The
estimated phasing of settlement is based on current estimates and historical trends and the actual timing of future settlement cash
flows may differ materially from the disclosure below.
Estimated profile of net undiscounted liability for incurred claims on balance sheet
As at 31 December 2023
Total
Within
one year
$m
Between one
and two years
$m
Between two
and three years
$m
Between three
and four years
$m
Between four
and five years
$m
1,821.6
1,042.6
557.3
359.5
202.2
As at 31 December 2022 (restated)*
Total
*Restated for the adoption of IFRS 17.
Within
one year
$m
Between one
and two years
$m
Between two
and three years
$m
Between three
and four years
$m
Between four
and five years
$m
1,642.8
975.9
521.6
336.5
189.3
Over
five years
$m
368.5
Over
five years
$m
344.8
2023
total
$m
4,351.7
2022
total
$m
4,010.9
Details of the payment profile of the Group’s borrowings, derivative instruments and other liabilities are given in notes
14, 16 and 21.
(f) Currency risk
Currency risk is the risk of loss resulting from fluctuations in exchange rates. The Group operates internationally and therefore is
exposed to the financial impact of fluctuations in the exchange rates of various currencies.
The Group’s exposures to foreign exchange risk arise mainly with respect to the US Dollar, Sterling and the Euro. These exposures
may be classified in two main categories:
A operational foreign exchange exposure arises from the conversion of foreign currency transactions resulting from the
activities of entering into insurance, investment, financing and operational contracts in a currency that is different to each
respective entity’s functional currency; and
A structural foreign exchange exposure arises from the translation of the Group’s net investment in foreign operations to the
US Dollar, the Group’s presentation currency.
Operational currency risk
Operational foreign exchange risk is principally managed within the Group’s individual entities by broadly matching assets and
liabilities by currency and liquidity. Due attention is paid to local regulatory solvency and risk-based capital requirements. All
foreign currency derivative transactions with external parties are managed centrally. The Group also manages some exchange
risk centrally through matching intragroup loans and balances.
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Chapter 2
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Chapter 4
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Chapter 5
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information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.3 Financial risk
(f) Currency risk continued
Structural currency risk
The Group’s exposure to structural currency risks mainly relates to Sterling and Euro net investments in businesses operating in
the UK and Europe. The Group does not ordinarily seek to use derivatives to mitigate the structural risk because:
A the currency translation gains and losses are accounted for in the currency translation reserve (a component of equity) and
do not affect the income statement unless the related foreign operation is disposed of;
A the currency translation gains and losses have no cash flow.
In periods of significant volatility that are expected to persist for an extended period of time, the Group may elect to utilise
derivatives to mitigate or reduce the risk in order to preserve capital.
The currency profile of the Group’s assets and liabilities is as follows:
Year ended 31 December 2023
Goodwill and intangible assets
Financial assets carried at fair value
Cash and cash equivalents
Reinsurance contract held assets
Other assets
Total assets
Insurance contract liabilities
Other liabilities
Total liabilities
Total equity
Year ended 31 December 2022 (restated)
Goodwill and intangible assets
Financial assets carried at fair value
Cash and cash equivalents
Reinsurance contract held assets
Other assets
Total assets
Insurance contract liabilities
Other liabilities
Total liabilities
Total equity
US Dollar
$m
126.8
4,691.8
819.7
1,710.7
385.2
7,734.2
4,893.2
92.4
4,985.6
2,748.6
US Dollar
$m
135.7
4,165.8
773.1
1,839.9
99.1
7,013.6
4,677.0
62.5
4,739.5
2,274.1
Sterling
$m
125.8
1,045.2
321.2
203.5
146.7
1,842.4
764.7
939.6
1,704.3
138.1
Sterling
$m
131.7
938.5
248.9
404.0
212.8
1,935.9
963.1
856.6
1,819.7
116.2
Euro
$m
65.3
635.7
219.1
157.9
39.6
1,117.6
845.4
96.8
942.2
175.4
Euro
$m
46.7
511.8
229.8
179.3
33.9
1,001.5
849.3
110.7
960.0
41.5
Other
$m
6.0
201.7
77.0
26.2
55.4
366.3
100.7
31.0
131.7
234.6
Other
$m
6.3
196.0
99.1
94.0
16.6
412.0
204.9
3.9
208.8
203.2
2023
$m
323.9
6,574.4
1,437.0
2,098.3
626.9
11,060.5
6,604.0
1,159.8
7,763.8
3,296.7
2022
$m
320.4
5,812.1
1,350.9
2,517.2
362.4
10,363.0
6,694.3
1,033.7
7,728.0
2,635.0
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Chapter 2
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22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.3 Financial risk
(f) Currency risk continued
Sensitivity analysis
As at 31 December 2023, the Group used closing rates of exchange of $1: £0.78 and $1: €0.91 (2022: $1: £0.83 and $1: €0.94).
The Group performs a sensitivity analysis based on a 10% strengthening or weakening of the US Dollar against Sterling.
This analysis assumes that all other variables, in particular interest rates, remain constant and that the underlying valuation of
assets and liabilities in their base currency is unchanged. The estimated sensitivities below take account of the retranslation
movements of foreign currency monetary assets and liabilities in Group entities, and, for the effect on equity, the impact on the
retranslation of entities with non-US Dollar functional currencies. The methodology includes inter-company balances that are
eliminated on consolidation, but still expose the Group to foreign currency risk.
During the year, the Group transacted in a number of over-the-counter forward currency derivative contracts. The impact of these
contracts on the sensitivity analysis is negligible.
As at 31 December
Strengthening of Sterling
Weakening of Sterling
December 2023
effect on equity
after tax
$m
December 2023
effect on profit
before tax
$m
December 2022
effect on equity
after tax
(restated)
$m
December 2022
effect on profit
before tax
(restated)
$m
77.4
(77.4)
13.6
(13.6)
62.2
(62.2)
17.4
(17.4)
(g) Limitations of sensitivity analysis
The sensitivity information given in notes 3.3 (a) to (f) demonstrates the estimated impact of a change in a major input assumption,
while other assumptions remain unchanged. In reality, there are normally significant levels of correlation between the assumptions
and other factors. It should also be noted that these sensitivities are non-linear, and larger or smaller impacts should not be
interpolated or extrapolated from these results. The same limitations exist in respect to the retirement benefit scheme sensitivities
presented in note 24 to these financial statements. Furthermore, estimates of sensitivity may become less reliable in unusual
market conditions, such as instances when risk-free interest rates fall towards zero.
The sensitivity analysis does not take into consideration that the Group’s assets and liabilities are actively managed. Additionally,
the financial position of the Group may vary at the time that any actual market movement occurs. For example, the Group’s
financial risk management strategy aims to manage the exposure to market fluctuations. As investment markets move past
various trigger levels, management actions could include selling investments, changing investment portfolio allocation and
taking other protective action.
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Chapter 5
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information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk continued
3.4 Capital risk management
The Group’s primary objectives when managing its capital position are:
A to safeguard its ability to continue as a going concern, so that it can continue to provide long-term growth and progressive
dividend returns for shareholders;
A to provide an adequate return to the Group’s shareholders by pricing its insurance products and services commensurately
with the level of risk;
A to maintain an efficient cost of capital;
A to comply with all regulatory requirements by an appropriate margin;
A to maintain financial strength ratings of A in each of its insurance entities; and
A to settle policyholders’ claims as they arise.
The Group sets the amount of capital required in its funding structure in proportion to risk. The Group then manages the capital
structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying
assets. In order to obtain or maintain an optimal capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares, assume debt, or sell assets to reduce debt.
The Group measures its capital requirements against its available capital. Available capital is defined by the Group as the total of
net tangible asset value and subordinated debt.
The subordinated debt issued by the Group is hybrid in nature, which means it counts towards regulatory and rating agency
capital requirements.
At 31 December 2023, the available capital was $3,323.4 million (2022 restated: $2,645.4 million), comprising net tangible asset
value of $2,972.8 million (2022 restated: $2314.6 million) and subordinated debt of $350.6 million (2022: $330.8 million).
The Group can source additional funding from revolving credit and Letter of Credit (LOC) facilities. Standby funding from these
sources comprised $931 million at 31 December 2023 (2022: $931 million).
The Group’s borrowing facilities include financial covenants that are standard in such arrangements, including certain balance
sheet metrics. These are monitored on a regular basis, at least quarterly, but more frequently where necessary.
The Board ensures that the use and allocation of capital are given a primary focus in all significant operational actions. With that
in mind, the Group has developed and embedded capital modelling tools within its business. These join together short-term and
long-term business plans and link divisional aspirations with the Group’s overall strategy.
The model provides the basis of the allocation of capital to different business lines, as well as the regulatory and rating agency
capital processes.
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Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.4 Capital risk management continued
Gearing
The Group currently utilises gearing as an additional source of funds to maximise the opportunities from strong markets and to
reduce the risk profile of the business in weaker markets, particularly with respect to the more volatile business. The Group’s
gearing is obtained from a number of sources, including:
A LOC and revolving credit facility – the Group’s main facility may be drawn in cash up to $600 million under a revolving credit
facility and utilised as LOC up to $266 million. The facility was renewed during 2022, enabling the Group to utilise the LOC
as Funds at Lloyd’s to support underwriting on the 2022, 2023 and 2024 years of account. The revolving credit facility is
available until the end of 2024. As at 31 December 2023, $266 million was utilised by way of LOC to support the Funds
at Lloyd’s requirement and the revolving credit facility was undrawn (2022: $266 million and the revolving credit facility
was undrawn);
A In 2020, the Group sourced an additional $65 million of funding in the form of a Funds at Lloyd’s facility. Under this facility
assets are pledged with the Corporation of Lloyd’s on the Group’s behalf, providing regulatory Tier 1 capital. As at
31 December 2023 and 2022 the facility was fully drawn;
A £275 million of fixed-to-floating rate subordinated notes that are classified as Tier 2 debt. This was raised in November 2015
and matures in 2045. The debt is rated BBB- by S&P and Fitch;
A £250 million of fixed rate senior notes raised in September 2022 and maturing in September 2027. The debt is rated BBB+
by S&P and Fitch;
A External Names – 27.4% of Syndicate 33’s capacity is capitalised by third parties, who also pay a profit share of
approximately 20%;
A Syndicate 6104 at Lloyd’s – with a capacity of £57 million for the 2024 year of account (2023 year of account: £19.4 million).
This Syndicate is wholly backed by external members and takes pure year of account quota share of Syndicate 33’s
applicable excess of loss property catastrophe reinsurance, marine, terrorism and cyber accounts;
A gearing quota shares – historically the Group has used reinsurance capital to fund its capital requirement for short-term
expansions in the volume of business underwritten by the Syndicate; and
A qualifying quota shares and legacy portfolio transactions – these are reinsurance arrangements that allow the Group to
increase the amount of premium it writes.
Financial strength
The financial strength ratings of the Group’s significant insurance company subsidiaries are outlined below:
Hiscox Insurance Company Limited
Hiscox Insurance Company (Bermuda) Limited
Hiscox Insurance Company (Guernsey) Limited
Hiscox Insurance Company Inc.
Hiscox Société Anonyme
A.M. Best
Fitch
S&P
A (Excellent)
A (Excellent)
A (Excellent)
A (Excellent)
–
A+ A (Strong)
A+ A (Strong)
–
A+
–
–
– A (Strong)
Syndicate 33 benefits from an A.M. Best rating of A (Excellent). In addition, the Syndicate also benefits from the Lloyd’s ratings
of A (Excellent) from A.M. Best, AA- (Very strong) from S&P, AA- (Very strong) from Fitch and AA- (Very strong) from Kroll Bond
Rating Agency.
Capital performance
The Group’s main capital performance measure is the achieved return on equity (ROE). This marker aligns the aspirations of
employees and shareholders. As variable remuneration relates directly to ROE and it is used as a key metric within the business
planning process, this concept is embedded in the workings and culture of the Group. The Group seeks to maintain its cost of
capital levels and its debt to overall equity ratios in line with others in the non-life insurance industry.
Capital modelling and regulation
The capital requirements of an insurance group are determined by its exposure to risk and the solvency criteria established by
management and statutory regulations.
The Group’s capital requirements are managed both centrally and at a regulated entity level. The assessed capital requirement
for the business placed through Hiscox Insurance Company Limited, Hiscox Insurance Company (Bermuda) Limited, Hiscox
Insurance Company (Guernsey) Limited, Hiscox Insurance Company Inc., Hiscox Société Anonyme and Direct Asia Insurance
(Singapore) Pte Limited is driven by the level of resources necessary to maintain regulatory requirements.
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Chapter 2
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22
Chapter 3
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72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
3 Management of risk
3.4 Capital risk management
Capital modelling and regulation continued
The Group’s regulatory capital is supervised by the Bermuda Monetary Authority (BMA). The Group had sufficient capital at all
times throughout the year to meet the BMA’s requirements. The Solvency II regime came into force in Europe on 1 January 2016.
This requires insurance companies to calculate their capital requirements using either an internal model or a standard formula.
Hiscox Insurance Company Limited and Hiscox Société Anonyme use the standard formula to calculate their regulatory capital
requirements. Their risk profiles are sufficiently well represented by the standard formula not to warrant going through the internal
model approval process. Hiscox’s Lloyd’s operations use the internal model that has been built to meet the requirements of the
Solvency II regime. The model is concentrated specifically on the particular product lines, market conditions and risk appetite of
each risk carrier.
For Syndicate 33 and Syndicate 3624, internal model results are uplifted by Lloyd’s to the level of capital required to support its
ratings. Capital models are used more widely across the Group to monitor exposure to key risk types, inform decision-making and
measure ROE across different segments of the business. From the 2016 year end, the Group has been required to publish
a financial condition report, as part of its regulatory filing with the BMA. This is a public document and sets out the financial
performance and solvency position of the Group in accordance with the economic balance sheet return filed with the BMA. It is
intended to provide the public with certain information to be able to make informed assessments about the Group. In the Group’s
other geographical territories, including the USA and Asia, its subsidiaries underwriting insurance business are required to
operate within broadly similar risk-based externally imposed capital requirements when accepting business.
During the year the Group was in compliance with capital requirements imposed by regulators in each jurisdiction where the
Group operates.
3.5 Tax risk
The Group is subject to income taxes levied by the various jurisdictions in which the Group operates, and the division of taxing
rights between these jurisdictions results in the Group tax expense and effective rate of income tax disclosed in these financial
statements. Due to the Group’s operating model, there is an unquantifiable risk that this division of taxing rights could be altered
materially, either by a change to the tax residence, or permanent establishment profile, of Hiscox Ltd or its principal subsidiaries;
or due to the repricing or recharacterisation for tax purposes of transactions between members of the Group, under local transfer
pricing or related tax legislation. The Group seeks to manage this risk by:
A maintaining appropriate internal policies and controls over its operations worldwide;
A monitoring compliance with these policies on an ongoing basis;
A adhering to internationally recognised best practice in determining the appropriate division of profits between
taxing jurisdictions;
A taking additional advice and obtaining legal opinions from local third-party professionals with the necessary experience
in the particular area.
The Group seeks to maintain an open dialogue with the relevant tax authorities and to resolve any issues arising promptly.
Various jurisdictions in which the Group operates have now enacted legislation implementing the principles of the OECD ‘Pillar
Two’ tax rules, intended to apply a global minimum tax to the profits of multinational enterprises such as Hiscox with effect from
1 January 2024. The anticipated impact of these legislative changes on the Group is discussed in note 23. Pillar Two legislation
represents a departure from existing corporate income tax principles, introducing new concepts and design features to the
corporate income tax landscape; and since the release of model rules by the OECD in December 2021, has been designed and
implemented at speed. In this context, there is a risk that the new legislation could prove to have unintended and/or unforeseen
consequences for the Group, which could have an impact on the Group’s income tax payable in future periods. The Group relies
on expert advice from third-party professionals, as well as open dialogue with implementing tax authorities, to manage this risk.
In alignment with the adoption of Pillar Two legislation by other jurisdictions, in December 2023 Bermuda enacted a corporate
income tax which will apply to the Group’s Bermudian resident entities with effect from 1 January 2025 at a rate of 15%. It is
anticipated that the introduction of this tax will increase the income tax payable and therefore the effective tax rate to which the
Group is exposed with effect from 1 January 2025.
The Group recognises uncertain tax provisions where there is uncertainty that a tax treatment will be accepted under local law,
including matters which are under discussion with the tax authorities. Based on facts and circumstances at the balance sheet
date, the range of the total exposure is estimated between $19 million and $53 million. The estimate is subject to review on an
ongoing basis and is susceptible to the progress of the settlement discussions with the tax authorities. Matters under discussion
which could affect the estimate include the Hiscox Group’s policy on the allocation of expenses between companies within the
Group, the allocation of income and expenses between branches of the same company, and the period subject to re-assessment.
Hiscox Ltd Report and Accounts 2023
205
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
4 Operating segments
The Group’s operating segment reporting follows the organisational structure and management’s internal reporting systems,
which form the basis for assessing the financial reporting performance of, and allocation of resources to, each business segment.
The Group’s four primary business segments are identified as follows:
A Hiscox Retail brings together the results of the Group’s retail business divisions in the UK, Europe, USA and Asia. Hiscox UK
and Hiscox Europe underwrite personal and commercial lines of business through Hiscox Insurance Company Limited and
Hiscox Société Anonyme (Hiscox SA), together with the fine art and non-US household insurance business written through
Syndicate 33. Hiscox USA comprises commercial, property and specialty business written by Hiscox Insurance Company
Inc. and Syndicate 3624;
A Hiscox London Market comprises the internationally traded insurance business written by the Group’s London-based
underwriters via Syndicate 33, including lines in property, marine and energy, casualty and other specialty insurance lines;
A Hiscox Re & ILS is the reinsurance division of the Hiscox Group, combining the underwriting platforms in Bermuda and
London. The segment comprises the performance of Hiscox Insurance Company (Bermuda) Limited, excluding the internal
quota share arrangements, with the reinsurance contracts written by Syndicate 33. In addition, the healthcare and casualty
reinsurance contracts previously written in Bermuda on Syndicate capacity are also included. The segment also includes the
performance and fee income from the ILS funds, along with the gains and losses made as a result of the Group’s investment
in the funds;
A Corporate Centre comprises finance costs and administrative costs associated with Group management activities and
intragroup borrowings, as well as all foreign exchange gains and losses.
All amounts reported on the following pages represent transactions with external parties only. In the normal course of trade,
the Group’s entities enter into various reinsurance arrangements with one another. The related results of these transactions are
eliminated on consolidation and are not included within the results of the segments. This is consistent with the information used by
the chief operating decision-maker when evaluating the results of the Group. Performance is measured based on each reportable
segment’s profit or loss before tax and combined ratio.
206
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
4 Operating segments continued
(a) Profit before tax by segment
Year ended 31 December 2023
Insurance revenue
Insurance service expenses
Incurred claims and changes to liabilities for incurred claims
Acquisition costs*
Other attributable expenses*
Losses on onerous contracts and reversals
Insurance service result before reinsurance contracts held
Allocation of reinsurance premiums
Amount recoverable from reinsurers for incurred claims
Net expense from reinsurance contracts held
Insurance service result
Investment result
Net finance expense from insurance contracts
Net finance income from reinsurance contracts
Net insurance finance income
Net financial result
Other income
Other operational expenses*
Net foreign exchange losses
Other finance costs
Share of profits of associates
Profit/(loss) before tax
Ratio analysis
Claims ratio (%)
Expense ratio (%)
Combined ratio (%)
* Total marketing expenditure for the year was $85.0 million (2022: $65.8 million).
Hiscox
Retail
$m
2,337.7
(2,072.3)
(983.6)
(668.2)
(407.3)
(13.2)
265.4
(250.6)
165.4
(85.2)
180.2
203.9
(110.9)
21.5
(89.4)
114.5
21.3
(47.8)
–
(0.9)
–
267.3
41.6
50.0
91.6
Hiscox
London
Market
$m
1,175.6
(856.5)
(486.5)
(251.1)
(118.9)
–
319.1
(336.5)
193.4
(143.1)
176.0
109.9
(61.1)
23.7
(37.4)
72.5
22.0
(18.8)
–
(0.3)
–
251.4
35.5
43.6
79.1
Hiscox
Re & ILS
$m
969.9
(260.5)
(55.6)
(119.7)
(85.2)
–
709.4
(532.3)
(41.0)
(573.3)
136.1
70.6
(48.7)
35.8
(12.9)
57.7
41.5
(12.8)
–
(1.1)
–
221.4
20.5
47.8
68.3
Corporate
Centre
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.3
(46.1)
(27.0)
(47.7)
0.3
(114.2)
Total
$m
4,483.2
(3,189.3)
(1,525.7)
(1,039.0)
(611.4)
(13.2)
1,293.9
(1,119.4)
317.8
(801.6)
492.3
384.4
(220.7)
81.0
(139.7)
244.7
91.1
(125.5)
(27.0)
(50.0)
0.3
625.9
–
–
–
37.4
48.1
85.5
The claims ratio is calculated as incurred claims and losses on onerous contracts net of reinsurance recoveries, as a proportion
of insurance revenue net of allocation of reinsurance premiums. The expense ratio is calculated as acquisition costs and other
attributable expenses, as a proportion of insurance revenue net of allocation of reinsurance premiums. The combined ratio is the
total of the claims and expense ratios. All ratios are on an own-share basis, which reflects the Group’s share in Syndicate 33, and
includes a reclassification of LPT premium from allocation of reinsurance premium into amounts recoverable from reinsurers as
detailed below.
Costs allocated to Corporate Centre along with other non-attributable expenses are non-underwriting-related costs and are not
included within the combined ratio.
Hiscox Ltd Report and Accounts 2023
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
4 Operating segments
(a) Profit before tax by segment continued
As noted above, the claims ratio, expense ratio and combined ratio include a reclassification of LPT premium from allocation of
reinsurance premiums into amounts recoverable from reinsurers for incurred claims. The subsequent impacts of LPTs within
reinsurance expenses and reinsurance income are analysed on a net basis within the net claims to provide a view of the underlying
development on these contracts, against the corresponding development of the gross reserves, consistent with the focus on
net performance when assessing underwriting performance. The impact on profit is neutral, however, this reclassification for the
ratios removes any volatility on a year-on-year comparison.
Hiscox
Retail
$m
Year ended 31 December 2023
2,337.7
Insurance revenue
(250.6)
Allocation of reinsurance premiums
62.4
LPT premium
(188.2)
Allocation of reinsurance premiums after reclassifying LPT premium
2,149.5
Adjusted net insurance revenue
(983.6)
Incurred claims and changes to liabilities for incurred claims
165.4
Amounts recoverable from reinsurers for incurred claims
LPT premium
(62.4)
Amounts recoverable from reinsurers for incurred claims after reclassifying LPT premium 103.0
(880.6)
Adjusted net incurred claims
(98.5)
Remove benefit from discounting of claims
(979.1)
Undiscounted adjusted net incurred claims
Hiscox
London
Market
$m
1,175.6
(336.5)
7.9
(328.6)
847.0
(486.5)
193.4
(7.9)
185.5
(301.0)
(39.5)
(340.5)
Hiscox
Re & ILS
$m
969.9
(532.3)
(8.6)
(540.9)
429.0
(55.6)
(41.0)
8.6
(32.4)
(88.0)
(6.3)
(94.3)
Total
$m
4,483.2
(1,119.4)
61.7
(1,057.7)
3,425.5
(1,525.7)
317.8
(61.7)
256.1
(1,269.6)
(144.3)
(1,413.9)
The following ratios reflect the reclassification of LPT premium and remove the impact of discounting.
Ratio analysis (undiscounted)
Claims ratio (%)
Expense ratio (%)
Combined ratio (%)
46.2
50.0
96.2
40.2
43.6
83.8
22.0
47.8
69.8
41.7
48.1
89.8
The impact on profit before tax of a 1% change in each component of the segmental combined ratios is shown in the following
table. Any further ratio change is linear in nature.
1% change in claims or expense ratio
Year ended 31 December 2023
Hiscox
Retail
$m
21.5
Hiscox
London
Market
$m
8.5
Hiscox
Re & ILS
$m
4.3
208
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
4 Operating segments
(a) Profit before tax by segment continued
Year ended 31 December 2022 (restated)
Insurance revenue
Insurance service expenses
Incurred claims and changes to liabilities for incurred claims
Acquisition costs
Other attributable expenses
Losses on onerous contracts and reversals
Insurance service result before reinsurance contracts held
Allocation of reinsurance premiums
Amount recoverable from reinsurers for incurred claims
Net expense from reinsurance contracts held
Insurance service result
Investment result
Net finance expense from insurance contracts
Net finance income from reinsurance contracts
Net insurance finance expense
Net financial result
Other income
Other operational expenses
Net foreign exchange losses
Other finance costs
Share of profit of associates
Profit/(loss) before tax
Ratio analysis
Claims ratio (%)
Expense ratio (%)
Combined ratio (%)
Hiscox
Retail
$m
2,218.0
(2,002.2)
(958.0)
(618.4)
(422.5)
(3.3)
215.8
(293.3)
260.0
(33.3)
182.5
(98.9)
107.0
(38.5)
68.5
(30.4)
11.7
(32.1)
–
(1.5)
–
130.2
40.0
51.0
91.0
Hiscox
London
Market
$m
1,130.6
(881.9)
(506.4)
(276.6)
(98.7)
(0.2)
248.7
(356.3)
230.9
(125.4)
123.3
(54.4)
56.0
(27.5)
28.5
(25.9)
7.4
(3.8)
–
–
–
101.0
37.3
47.2
84.5
Hiscox
Re & ILS
$m
924.7
(601.8)
(436.7)
(110.5)
(54.3)
(0.3)
322.9
(615.2)
347.4
(267.8)
55.1
(34.0)
50.7
(36.1)
14.6
(19.4)
20.8
(8.4)
–
(1.2)
–
46.9
38.1
46.4
84.5
Corporate
Centre
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.4
(23.5)
54.7
(37.0)
0.9
(2.5)
Total
$m
4,273.3
(3,485.9)
(1,901.1)
(1,005.5)
(575.5)
(3.8)
787.4
(1,264.8)
838.3
(426.5)
360.9
(187.3)
213.7
(102.1)
111.6
(75.7)
42.3
(67.8)
54.7
(39.7)
0.9
275.6
–
–
–
39.1
49.6
88.7
Hiscox Ltd Report and Accounts 2023
209
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
4 Operating segments
(a) Profit before tax by segment continued
The impact of the reclassification of LPT premium is shown in the following table.
Hiscox
Retail
$m
Year ended 31 December 2022
2,218.0
Insurance revenue
(293.3)
Allocation of reinsurance premiums
114.0
LPT premium
(179.3)
Allocation of reinsurance premiums after reclassifying LPT premium
2,038.7
Adjusted net insurance revenue
(958.0)
Incurred claims and changes to liabilities for incurred claims
260.0
Amounts recoverable from reinsurers for incurred claims
LPT premium
(114.0)
Amounts recoverable from reinsurers for incurred claims after reclassifying LPT premium 146.0
(812.0)
Adjusted net incurred claims
(53.9)
Remove benefit from discounting of claims
(865.9)
Undiscounted adjusted net incurred claims
Hiscox
London
Market
$m
1,130.6
(356.3)
20.8
(335.5)
795.1
(506.4)
230.9
(20.8)
210.1
(296.3)
(17.7)
(314.0)
Hiscox
Re & ILS
$m
924.7
(615.2)
46.0
(569.2)
355.5
(436.7)
347.4
(46.0)
301.4
(135.3)
(4.0)
(139.3)
Total
$m
4,273.3
(1,264.8)
180.8
(1,084.0)
3,189.3
(1,901.1)
838.3
(180.8)
657.5
(1,243.6)
(75.6)
(1,319.2)
Ratio analysis (undiscounted)
Claims ratio (%)
Expense ratio (%)
Combined ratio (%)
42.7
51.0
93.7
39.5
47.2
86.7
39.2
46.4
85.6
41.5
49.6
91.1
The impact on profit before tax of a 1% change in each component of the segmental combined ratios is shown in the following
table. Any further ratio change is linear in nature.
1% change in claims or expense ratio
Year ended 31 December 2022
Hiscox
Retail
$m
20.4
Hiscox
London
Market
$m
8.0
Hiscox
Re & ILS
$m
3.6
210
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
4 Operating segments continued
(b) Geographical information
The Group’s operational segments underwrite business domestically in Bermuda and from locations in the UK, USA, Guernsey,
France, Germany, Belgium, The Netherlands, Spain, Portugal, Ireland, Singapore and Thailand.
The following table provides an analysis of the Group’s insurance revenue by material geographical location from external parties:
Group’s insurance revenue from external parties
Year to 31 December 2023
Hiscox
Retail
$m
729.8
597.4
932.4
78.1
2,337.7
Hiscox
London
Market
$m
96.2
81.1
729.6
268.7
1,175.6
Hiscox
Re & ILS
$m
41.0
62.9
552.9
313.1
969.9
Corporate
Centre
$m
–
–
–
–
–
Total
$m
867.0
741.4
2,214.9
659.9
4,483.2
Hiscox
Retail
$m
757.7
478.4
909.0
72.9
2,218.0
Hiscox
London
Market
$m
89.1
81.8
673.7
286.0
1,130.6
Hiscox
Re & ILS
$m
37.0
49.8
531.4
306.5
924.7
Year to 31 December 2022
(restated)
Corporate
Centre
$m
–
–
–
–
–
Total
$m
883.8
610.0
2,114.1
665.4
4,273.3
UK
Europe
USA
Rest of world
The following table provides an analysis of the Group’s non-current assets by material geographical location excluding financial
instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts:
Non-current assets
UK
Europe
USA
Rest of world
2023
total
$m
254.5
83.5
109.0
8.0
455.0
2022
total
$m
267.5
59.9
120.7
11.0
459.1
Hiscox Ltd Report and Accounts 2023
211
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
5 Net asset value per share and net tangible asset value per share
Net asset value
Net tangible asset value
2023
net asset value
(total equity)
$m
2023
net asset value
per share
cents
3,296.7
2,972.8
951.1
857.7
2022
(restated)
net asset value
(total equity)
$m
2,635.0
2,314.6
2022
(restated)
net asset value
per share
cents
764.5
671.5
The NAV per share is based on 346,612,554 shares (2022: 344,672,172), being the shares in issue at 31 December 2023, less
those held in treasury and those held by the Group Employee Benefit Trust. Net tangible assets comprise total equity excluding
intangible assets.
Previously reported NAV as at 31 December 2022 was $2,416.7 million (701.2 cents) and previously reported net tangible asset
value as at 31 December 2022 was $2,096.3 million (608.2 cents). Comparatives have been restated for the adoption of IFRS 17
and IFRS 9.
6 Return on equity
Profit for the year (all attributable to owners of the Company)
Opening total equity
Adjusted for the time-weighted impact of capital distributions and issuance of shares
Adjusted opening total equity
Return on equity (%)
2023
$m
712.0
2,635.0
(54.3)
2,580.7
27.6
2022
(restated)
$m
253.9
2,563.2
(54.9)
2,508.3
10.1
The return on equity is calculated by using profit for the period divided by the adjusted opening total equity. The adjusted opening
total equity represents the equity on 1 January of the relevant year as adjusted for time-weighted aspects of capital distributions
and issuing of shares or treasury share purchases during the period. The time-weighted positions are calculated on a daily basis
with reference to the proportion of time from the transaction to the end of the period. Previously reported ROE was 1.7% as at
31 December 2022. Comparatives have been restated for the adoption of IFRS 17 and IFRS 9.
7 Net investment and insurance finance result
The total investment result for the Group comprises:
Investment result
Investment income including interest receivable
Net realised losses on financial investments at fair value through profit or loss
Net fair value gains/(losses) on financial investments at fair value through profit or loss
Investment return – financial assets
Net fair value gains on derivative financial instruments
Investment expenses
Total investment return
Net finance (expense)/income from insurance contracts:
Interest accreted
Effects of changes in interest rates and other financial assumptions
Total net finance (expense)/income from insurance contracts
Net finance income/(expenses) from reinsurance contracts:
Interest accreted
Effects of changes in interest rates and other financial assumptions
Total net finance income/(expenses) from reinsurance contracts
Net insurance finance (expense)/income
Net financial result
212
Hiscox Ltd Report and Accounts 2023
Note
2023
$m
2022
$m
16
237.0
(17.6)
170.6
390.0
1.1
(6.7)
384.4
(228.5)
7.8
(220.7)
87.5
(6.5)
81.0
(139.7)
244.7
119.5
(54.1)
(254.2)
(188.8)
8.5
(7.0)
(187.3)
(35.7)
249.4
213.7
9.5
(111.6)
(102.1)
111.6
(75.7)
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
8 Other income and operational expenses
Other income
Staff costs
Depreciation, amortisation and impairment
Other expenses
Operational expenses
2023
$m
91.1
373.0
77.1
286.8
736.9
2022
(restated)
$m
42.3
313.4
60.0
269.9
643.3
Other income includes management fees and is recognised when the investment management services are rendered to the ILS
funds and commissions paid to Group-owned Syndicate managing agent by third-party Names.
On 4 July 2023, the Group disposed of an investment in associate, Media Insurance Brokers International Ltd, for $9.5 million
resulting in a gain of $4.0 million also presented in other income.
Operational expenses comprise attributable expenses amounting to $611.4 million (2022: $575.5 million) included within
insurance service expense, and non-attributable expenses amounting to $125.5 million (2022: $67.8 million) included within
other operational expenses.
Total operational expenses have been restated for the year ended 31 December 2022 to include reclassification from acquisition
costs under IFRS 17 and the impact of IFRS 9 credit loss impairment charges. The restatement results in an increase of total
operational expenses by $1.0 million.
On 27 September 2023, the Group announced its agreement to divest DirectAsia to Ignite Thailand Holdings Limited. The
transaction remains subject to regulatory approval. As such, the DirectAsia business has been classed as a disposal group held
for sale in the financial statements. The disposal group has been valued at its expected recoverable amount, which has resulted in
a charge of $18.5 million to operational expenses. The DirectAsia business is part of the retail operating segment but the assets,
liabilities and results of DirectAsia are not material to the segment. Assets held for sale include reinsurance contract held assets
and cash, while liabilities held for sale include insurance contract liabilities and trade and other payables.
9 Other finance costs
Interest charge associated with borrowings
Other interest expenses*
Other finance costs
Note
14
2023
$m
39.4
10.6
50.0
2022
(restated)
$m
32.2
7.5
39.7
* Other interest expenses included interest on funds withheld which is included in insurance finance expenses under IFRS 17. Previously reported finance costs for
the year ended 31 December 2022 were $48.1 million.
10 Auditor’s remuneration
Fees payable to the Group’s external auditor, PwC, its member firms and its associates (exclusive of VAT) include the following
amounts recorded in the consolidated income statement:
Group
Amounts receivable by the auditors and its associates in respect of:
The auditing of the accounts of the Group and its subsidiaries
All audit-related assurance services
All other non-audit services
2023
$m
6.8
0.4
0.1
7.3
2022
$m
5.6
0.3
–
5.9
Fees for the auditing of the Group and its subsidiaries in 2023 include audit work relating to the implementation of IFRS 17
Insurance Contracts of $1.8 million (2022: $1.6 million). The full audit fee payable for the Syndicate 33 and Syndicate 6104
audit has been included above, although an element of this is borne by the third-party participants in the Syndicate.
Hiscox Ltd Report and Accounts 2023
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
11 Goodwill and intangible assets
At 1 January 2022
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 31 December 2022
Opening net book amount
Additions
Disposals
Amortisation charges
Foreign exchange movements
Closing net book amount
At 31 December 2022
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 31 December 2023
Opening net book amount
Additions
Amortisation charges
Impairment charge*
Foreign exchange movements
Closing net book amount
At 31 December 2023
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$m
11.5
(3.2)
8.3
8.3
–
–
–
(0.5)
7.8
10.2
(2.4)
7.8
7.8
–
–
–
0.4
8.2
10.8
(2.6)
8.2
Syndicate
capacity
$m
State
authorisation
licences
$m
Software and
development
costs
$m
Other
$m
Total
$m
33.1
–
33.1
33.1
–
–
–
–
33.1
33.1
–
33.1
33.1
–
–
–
–
33.1
33.1
–
33.1
8.5
–
8.5
8.5
–
–
–
–
8.5
8.5
–
8.5
8.5
–
–
–
–
8.5
8.5
–
8.5
386.4
(127.6)
258.8
258.8
59.2
(1.1)
(35.5)
(14.9)
266.5
409.8
(143.3)
266.5
266.5
42.6
(37.0)
(6.0)
5.1
271.2
467.3
(196.1)
271.2
20.2
(15.8)
4.4
4.4
2.7
–
(1.8)
(0.8)
4.5
20.3
(15.8)
4.5
4.5
–
(1.9)
–
0.3
2.9
23.4
(20.5)
2.9
459.7
(146.6)
313.1
313.1
61.9
(1.1)
(37.3)
(16.2)
320.4
481.9
(161.5)
320.4
320.4
42.6
(38.9)
(6.0)
5.8
323.9
543.1
(219.2)
323.9
*The impairment charge for the year relates to DirectAsia business classed as a disposal group held for sale.
Goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the smallest identifiable unit to which
cash flows are generated. $7.4 million (2022: $7.0 million) is allocated to the Lloyd’s corporate member entity CGU and $0.8 million
(2022: $0.8 million) is allocated to the CGUs within the Hiscox Retail business segment. Goodwill is considered to have an
indefinite life and as such is tested annually for impairment based on the recoverable amount which is considered to be the higher
of the fair value, less cost to sell or value in use. During 2023, there was no impairment charge on goodwill (2022: $nil).
Value in use is considered to be the best indication of the recoverable amount for goodwill. Value in use calculations are performed
using cash flow projections based on financial forecasts. A discount factor, based on a weighted average cost of capital (WACC)
for the Group, of 10.0% to 10.3%, depending on the underlying currency (2022: 11.0% to 11.5%), has been applied to the cash flow
projections to determine the net present value. The outcome of the value in use calculation is measured against the carrying value
of the asset and, where the carrying value is in excess of the value in use, the asset is written down to this amount.
Impairment assessments
To test the sensitivity of the assessment, management flexed the key assumptions within a reasonably expected range. Within this
range, goodwill and other intangible assets recoveries were stress tested and remain supportable across all cash-generating
units or assets.
Intangible assets
All intangible assets have a finite useful life except for the Syndicate capacity and US state authorisation licences.
214
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and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
11 Goodwill and intangible assets continued
(a) Syndicate capacity
The cost of purchasing the Group’s participation in the Lloyd’s insurance syndicates is not amortised, but is tested annually for
impairment and is carried at cost less accumulated impairment losses. Having considered the future prospects of the London
insurance market, the Board believes that the Group’s ownership of Syndicate capacity will provide economic benefits over an
indefinite number of future periods. This assumption is reviewed annually to determine whether the asset continues to have an
indefinite life.
The Group’s intangible asset relating to Syndicate capacity has been allocated, for impairment testing purposes, to one
individual CGU, being the active Lloyd’s corporate member entity. The asset is tested annually for impairment based on its
recoverable amount which is considered to be the higher of the asset’s fair value less costs to sell or its value in use. The value
in use is determined using cash flow projections based on business plans approved by management and discounted at the
applicable WACC rate. At 31 December 2023, the value in use or the fair value less cost to sell exceeded the carrying value of
Syndicate capacity recognised on the balance sheet.
(b) US state authorisation licences
In 2007, the Group acquired insurance authorisation licences for 50 US states as part of a business combination. The licences are
allocated for impairment testing to the Group’s North American underwriting business. The carrying value of this asset calculated
using a projected cash flow based on business plans approved by management and discounted at the same rate used for
goodwill, is tested annually for impairment based on its value in use, and the results show no impairment.
(c) Software and development costs
The Group capitalises acquired software licenses based on the costs incurred. Amortisation is calculated using the straight-line
method over a period of three to ten years.
Internally developed software is capitalised only if future economic benefits are probable and can be measured reliably.
Amortisation of internally developed computer software begins when the software is available for use and is allocated on a
straight-line basis over the expected useful life of the asset.
The useful life of the asset is reviewed annually and, if different from previous estimates, is revised accordingly with the change
being accounted for as a change in accounting estimates in accordance with IAS 8.
The carrying value of software and development costs is reviewed for impairment on an ongoing basis by reference to the stage
and expectation of a project. Additionally, at the end of each reporting period, the Group reviews the positions for any indication
of impairment, and as a result of this impairment of $6.0 million was recorded in 2023 on DirectAsia business classed as a disposal
group held for sale (2022: $nil).
At 31 December 2023 there were $34.1 million of assets under development on which amortisation is yet to be charged
(2022: $71.7 million).
The assets are expected to be recovered or settled more than 12 months after the reporting date and as such are considered to
be non-current.
(d) Rights to customer contractual relationships (included in other)
Intangible costs related to securing customer contractual relationships are recognised as an asset where they can be identified
separately and measured reliably and it is probable that they will be recovered by directly related future profits. These costs are
amortised on a straight-line basis over the useful economic life which is deemed to be ten years and are carried at cost less
accumulated amortisation and impairment losses.
At the end of each reporting period, the carrying value arrived at using value in use is tested for impairment. Value in use is
calculated using the same method as described above for goodwill and the same discount rate used. The results of this test
led to no impairment charge on intangible rights to customer contractual relationships in 2023 (2022: $nil).
Hiscox Ltd Report and Accounts 2023
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
12 Property, plant and equipment
Year ended 31 December 2022
Opening net book amount
Additions
Disposals
Depreciation charge
Foreign exchange movements
Closing net book amount
At 31 December 2022
Cost
Accumulated depreciation
Net book amount
Year ended 31 December 2023
Opening net book amount
Additions
Disposals
Depreciation charge
Impairment
Foreign exchange movements
Closing net book amount
At 31 December 2023
Cost
Accumulated depreciation
Net book amount
Less: assets held for sale
Net book amount
Land and
buildings
$m
Leasehold
improvements
$m
Furniture
fittings and
equipment
and art
$m
Right-of-use
assets:
property
and other
$m
21.8
–
–
(1.1)
(2.4)
18.3
26.6
(8.3)
18.3
18.3
–
–
(1.1)
–
0.9
18.1
28.1
(10.0)
18.1
–
18.1
1.9
0.1
–
(0.7)
–
1.3
13.4
(12.1)
1.3
1.3
–
–
(0.6)
(0.4)
0.2
0.5
13.1
(12.6)
0.5
–
0.5
29.0
20.8
(0.1)
(4.3)
(2.4)
43.0
80.7
(37.7)
43.0
43.0
1.7
–
(5.1)
(0.2)
2.1
41.5
85.1
(43.6)
41.5
–
41.5
37.7
52.7
(0.8)
(16.6)
(2.5)
70.5
116.8
(46.3)
70.5
70.5
13.1
(0.7)
(12.9)
–
2.6
72.6
132.4
(59.8)
72.6
(2.4)
70.2
Total
$m
90.4
73.6
(0.9)
(22.7)
(7.3)
133.1
237.5
(104.4)
133.1
133.1
14.8
(0.7)
(19.7)
(0.6)
5.8
132.7
258.7
(126.0)
132.7
(2.4)
130.3
The Group’s land and buildings assets relate to freehold property in the UK. There was no impairment charge on these assets
during the year (2022: $nil).
The assets are expected to be recovered or settled more than 12 months after the reporting date and as such are considered to
be non-current.
The income from subleasing right-of-use assets amounted to $0.4 million (2022: $0.6 million).
216
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
13 Subsidiaries, associates and interests in other entities
This note provides details of the Syndicates and Special Purpose Insurers (SPI) managed by the Group, the acquisition and
disposal of subsidiaries and associates during the year and investments in associates.
(a) Subsidiaries
Hiscox Dedicated Corporate Member Limited (HDCM) underwrites as a corporate member of Lloyd’s on the main Syndicates
managed by Hiscox Syndicates Limited (the main managed Syndicates numbered 33 and 3624).
As at 31 December 2023, HDCM owned 72.6% of Syndicate 33 (2022: 72.6%), and 100% of Syndicate 3624 (2022: 100%). In view
of the several but not joint liability of underwriting members at Lloyd’s for the transactions of Syndicates in which they participate,
the Group’s attributable share of the transactions, assets and liabilities of these Syndicates has been included in the financial
statements. The Group manages the underwriting of, but does not participate as a member of, Syndicate 6104 at Lloyd’s which
provides reinsurance to Syndicate 33 on a normal commercial basis. Consequently, aside from the receipt of managing agency
fees, defined profit commissions as appropriate and interest arising on effective assets included within the experience account,
the Group has no share in the assets, liabilities or transactions of Syndicate 6104. The position and performance of that Syndicate
is therefore not included in the Group’s financial statements.
(b) SPIs
The Kiskadee Diversified Fund and Kiskadee Select Fund were launched in 2014 to provide investment opportunities to
institutional investors in property catastrophe reinsurance and insurance-linked strategies. The funds are managed by
Hiscox Re Insurance Linked Strategies Limited (formerly known as Kiskadee Investment Managers Limited) which is a wholly
owned subsidiary of the Group.
The Kiskadee Latitude Fund was launched in 2019 to give investors access to a more diverse portfolio of insurance and
reinsurance risks, with less focus on pure property catastrophe risk. The fund is managed by Hiscox Re Insurance Linked
Strategies Limited which is a wholly owned subsidiary of the Group.
The Group determined that it does not control the Kiskadee Diversified Fund, the Kiskadee Select Fund and the Kiskadee
Latitude Fund. Hence they are not consolidated.
The Kiskadee Cadence Fund was launched in December 2019 to achieve attractive risk-adjusted returns by investing primarily in
a worldwide reinsurance and retrocession portfolio and the Kiskadee Select Plus Fund was launched in January 2021 to achieve
attractive risk-adjusted returns that have low correlation to broader financial markets by investing primarily in a diversified,
worldwide property catastrophe reinsurance and retrocession portfolio, including a portion of non-catastrophe reinsurance.
These funds are segregated accounts of Kiskadee ILS Fund SAC Ltd, which is managed by Hiscox Re Insurance Linked
Strategies Limited, a wholly owned subsidiary of the Group. The Group determined that it does control these funds and
hence they are consolidated.
As at 31 December 2023, the Group recognised a financial asset at fair value of $35.4 million (2022: $45.3 million) in relation to
its investment in the unconsolidated funds (note 17). In assessing the maximum exposure to loss from its interest in the funds,
the Group has determined it is no greater than the fair value recognised as at the balance sheet date. The total size of the
unconsolidated funds was $505 million at 31 December 2023 (2022: $600 million). In addition to the return on the financial asset,
the Group also receives fee income through Hiscox Re Insurance Linked Strategies Limited and Hiscox Insurance Company
(Bermuda) Limited, both wholly owned subsidiaries, under normal commercial terms.
The Group is exposed to credit risk associated with reinsurance recoveries on risks fronted for the SPIs. Note 3.3(d) discusses
how the Group manages credit risk associated with reinsurance assets. The operations of the funds and SPIs are financed
through the issuance of preference shares to external investors. The Group does not intend to provide any further financial
support to the funds or SPIs.
Hiscox Ltd Report and Accounts 2023
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Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
13 Subsidiaries, associates and interests in other entities continued
(c) Investments in associates
Year ended 31 December
At beginning of year
Disposals during the year
Distributions received
Net profit from investments in associates
Foreign exchange movements
At end of year
The Group’s interests in its principal associates, all of which are unlisted, were as follows:
2023
$m
5.6
(5.2)
(0.3)
0.3
0.4
0.8
2022
$m
5.7
–
(0.3)
0.9
(0.7)
5.6
100% results
2023
Associates incorporated in the UK
Associates incorporated in Europe
Total at the end of 2023
2022
Associates incorporated in the UK and USA
Associates incorporated in Europe
Total at the end of 2022
% interest held at 31 December
Assets
$m
Liabilities
$m
Revenues
$m
Profit after tax
$m
32%
26%
from 32% to 35%
from 26% to 35%
2.8
2.6
5.4
10.3
8.6
18.9
2.1
1.4
3.5
6.7
5.4
12.1
5.3
2.8
8.1
10.9
4.1
15.0
0.1
1.1
1.2
0.9
2.0
2.9
The equity interests held by the Group in respect of associates do not have quoted market prices and are not traded regularly in
any active recognised market. The associates concerned have no material impact on the results or assets of the Group.
The assets are expected to be recovered or settled more than 12 months after the reporting date and as such are considered to
be non-current.
218
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Performance
and purpose
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Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
14 Financial assets and liabilities
Financial assets designated at fair value through profit or loss are measured at fair values, with all changes from one accounting
period to the next being recorded through the income statement.
Debt and fixed income holdings
Equities and investment funds
Total investments
Insurance-linked funds
Derivative financial instruments
Total financial assets carried at fair value
Note
17
16
2023
$m
6,333.6
205.4
6,539.0
35.4
–
6,574.4
2022
$m
5,426.6
339.1
5,765.7
45.3
1.1
5,812.1
The effective maturity of the debt and fixed income holdings due within and after one year are as follows:
Within one year
After one year
2023
$m
1,595.7
4,737.9
6,333.6
2022
$m
1,355.5
4,071.1
5,426.6
Equities, investment funds and insurance-linked securities do not have any maturity dates. The effective maturity of all other
financial assets is due within one year.
An analysis of the credit risk and contractual maturity profiles of the Group’s financial instruments is given in notes 3.3(d) and 3.3(e).
Financial liabilities of the Group are:
Derivative financial instruments
Financial liabilities carried at fair value
Borrowings
Accrued interest on borrowings
Financial liabilities carried at amortised cost
Total financial liabilities
Note
16
2023
$m
0.3
0.3
2023
$m
667.0
7.4
674.4
674.7
2022
$m
0.3
0.3
2022
$m
628.8
7.1
635.9
636.2
All of the financial liabilities carried at fair value are due within one year and all the borrowings are due after one year. Accrued
interest on long-term debt is due within one year.
On 24 November 2015, the Group issued £275.0 million 6.125% fixed-to-floating rate callable subordinated notes due 2045,
with a first call date of 2025.
The notes bear interest from, and including, 24 November 2015 at a fixed rate of 6.125% per annum annually in arrears starting
24 November 2016 up until the first call date in November 2025 and thereafter at a floating rate of interest equal to the sum of
compounded daily Sterling Overnight Index Average (SONIA), the reference rate adjustment of 0.1193% and a margin of 5.076%
payable quarterly in arrears on each floating interest payment date.
Hiscox Ltd Report and Accounts 2023
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Performance
and purpose
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Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
14 Financial assets and liabilities continued
On 25 November 2015, the notes were admitted for trading on the London Stock Exchange’s regulated market. The notes were
rated BBB- by S&P as well as by Fitch.
On 22 September 2022, the Group issued £250.0 million 6% notes due September 2027. The notes will be redeemed on the
maturity date at their principal amount together with accrued interest.
The notes bear interest from, and including, 22 September 2022 at a fixed rate of 6% per annum annually in arrears starting
22 September 2022 until maturity on 22 September 2027.
On 22 September 2022, the notes were admitted for trading on the Luxembourg Stock Exchange’s Euro MTF. The notes
were rated BBB+ by S&P as well as by Fitch.
The fair value of the borrowings is estimated at $681.0 million (2022: $623.1 million). The fair value measurement is
classified within Level 1 of the fair value hierarchy. The fair value is estimated by reference to the actively traded value
on the stock exchanges.
The increase in the carrying value of the borrowings and accrued interest during the year comprises a drawdown of new
borrowings of $nil (2022: $279.1 million), repayment of short-term borrowings of $nil (2022: repayment of $336.6 million), the
amortisation of the difference between the net proceeds received and the redemption amounts of $0.7 million (2022: $0.9 million),
the decrease in accrued interest of $0.1 million (2022: increase of $6.5 million) plus exchange movements of $37.9 million
(2022: less exchange movements of $60.5 million).
Note 9 includes details of the interest expense for the year included in finance costs.
Investments at 31 December are denominated in the following currencies at their fair value:
2023
$m
2022
$m
4,572.0
960.9
800.7
6,333.6
84.5
84.3
36.6
205.4
6,539.0
3,932.4
821.5
672.7
5,426.6
188.2
117.0
33.9
339.1
5,765.7
Debt and fixed income holdings
US Dollars
Sterling
Euro and other currencies
Equities and investment funds
US Dollars
Sterling
Euro and other currencies
Total investments
220
Hiscox Ltd Report and Accounts 2023
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Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
15 Trade and other receivables
Prepayments and accrued income
Trade and other receivables:
Accrued interest
Other debtors including related party amounts
Total trade and other receivables
The amounts expected to be recovered before and after one year are estimated as follows:
Within one year
After one year
2023
$m
31.3
55.5
119.7
206.5
2022
(restated)
$m
30.0
37.3
93.3
160.6
188.2
18.3
112.0
48.6
Hiscox Ltd Report and Accounts 2023
221
(0.1)
(0.2)
4.7
(4.8)
(0.1)
(0.3)
1.1
7.2
(7.5)
(0.3)
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
16 Derivative financial instruments
The Group entered into both exchange-traded and over-the-counter derivative contracts for a number of purposes during 2023.
The Group had the right and intention to settle each contract on a net basis. The assets and liabilities of these contracts at
31 December 2023 all mature within one year of the balance sheet date and are detailed below:
31 December 2023
Derivative financial instruments included on balance sheet
Foreign exchange forward contracts
Interest rate futures contracts
Gross contract
notional amount
$m
Fair value
of assets
$m
Fair value
of liabilities
$m
Net balance
sheet position
$m
5.5
16.9
–
–
(0.1)
(0.2)
The foreign exchange forward contracts are represented by gross fair value of assets and liabilities as detailed below:
Gross fair value of assets
Gross fair value of liabilities
–
–
–
–
–
–
4.7
(4.8)
(0.1)
31 December 2022
Derivative financial instruments included on balance sheet
Foreign exchange forward contracts
Interest rate futures contracts
Gross contract
notional amount
$m
Fair value
of assets
$m
Fair value
of liabilities
$m
Net balance
sheet position
$m
8.2
34.9
–
1.1
(0.3)
–
The foreign exchange forward contracts are represented by gross fair value of assets and liabilities as detailed below:
Gross fair value of assets
Gross fair value of liabilities
–
–
–
0.8
(0.8)
–
6.4
(6.7)
(0.3)
Foreign exchange forward contracts
During the current and prior year, the Group entered into a series of conventional over-the-counter forward contracts in order to
secure translation gains made on Euro, US Dollar and other non-Sterling denominated monetary assets. The contracts require
the Group to forward sell a fixed amount of the relevant currency for Sterling at pre-agreed future exchange rates. The Group
made a loss of $0.1 million on the forward contracts during the year (2022: gain of $1.3 million).
Interest rate futures contracts
To hedge the interest rate risk the Group is exposed to, it continued to sell a number of government bond futures denominated
in a range of currencies. All are exchange traded and the Group made a gain on these futures contracts of $1.1 million
(2022: gain of $7.2 million) as included in the investment result in note 7.
222
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Performance
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6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
17 Fair value measurements
In accordance with IFRS 13 Fair Value Measurement, the fair value of financial instruments, based on a three-level fair value
hierarchy that reflects the significance of the inputs used in measuring the fair value, is set out below.
As at 31 December 2023
Financial assets
Debt and fixed income holdings
Equities and investment funds
Insurance-linked funds
Total
Financial liabilities
Derivative financial instruments
Total
As at 31 December 2022
Financial assets
Debt and fixed income holdings
Equities and investment funds
Insurance-linked funds
Derivative financial instruments
Total
Financial liabilities
Derivative financial instruments
Total
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
1,235.2
–
–
1,235.2
5,033.5
175.4
–
5,208.9
64.9
30.0
35.4
130.3
6,333.6
205.4
35.4
6,574.4
–
–
0.3
0.3
–
–
Level 1
$m
Level 2
$m
Level 3
$m
0.3
0.3
Total
$m
1,122.4
–
–
–
1,122.4
4,237.1
311.8
–
1.1
4,550.0
67.1
27.3
45.3
–
139.7
5,426.6
339.1
45.3
1.1
5,812.1
–
–
0.3
0.3
–
–
0.3
0.3
The levels of the fair value hierarchy are defined by the standard as follows:
A Level 1 – fair values measured using quoted prices (unadjusted) in active markets for identical instruments;
A Level 2 – fair values measured using directly or indirectly observable inputs or other similar valuation techniques for
which all significant inputs are based on market observable data;
A Level 3 – fair values measured using valuation techniques for which significant inputs are not based on market
observable data.
The fair values of the Group’s financial assets are typically based on prices from numerous independent pricing services. The
pricing services used by the investment manager obtain actual transaction prices for securities that have quoted prices in active
markets. For those securities which are not actively traded, the pricing services use common market valuation pricing models.
Observable inputs used in common market valuation pricing models include, but are not limited to, broker quotes, credit ratings,
interest rates and yield curves, prepayment speeds, default rates and other such inputs which are available from market sources.
Investments in mutual funds comprise a portfolio of stock investments in trading entities which are invested in various quoted
and unquoted investments. The fair value of these investment funds is based on the net asset value of the fund as reported by
independent pricing sources or the fund manager.
Included within Level 1 of the fair value hierarchy are certain government bonds, treasury bills, corporate bonds having a quoted
price in active markets, and exchange-traded equities which are measured based on quoted prices in active markets.
The fair value of the borrowings carried at amortised cost is estimated at $681.0 million (2022: $623.1 million) and is considered
as Level 1 in the fair value hierarchy.
Hiscox Ltd Report and Accounts 2023
223
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
17 Fair value measurements continued
Level 2 of the hierarchy contains certain government bonds, US government agencies, corporate securities, asset-backed
securities and mortgage-backed securities. The fair value of these assets is based on the prices obtained from independent
pricing sources, investment managers and investment custodians as discussed above. The Group records the unadjusted price
provided and validates the price through a number of methods including a comparison of the prices provided by the investment
managers with the investment custodians and the valuation used by external parties to derive fair value. Quoted prices for US
government agencies and corporate securities are based on a limited number of transactions for those securities and as such
the Group considers these instruments to have similar characteristics to those instruments classified as Level 2. Also included
within Level 2 are units held in collective investment vehicles investing in traditional and alternative investment strategies and
over-the-counter derivatives.
Level 3 contains investments in limited partnerships, unquoted equity securities and insurance-linked funds which have limited
observable inputs on which to measure fair value. Unquoted equities, including equity instruments in limited partnerships, are
carried at fair value. Fair value is determined to be net asset value for the limited partnerships, and for the equity holdings it is
determined to be the latest available traded price. The effect of changing one or more inputs used in the measurement of fair
value of these instruments to another reasonably possible assumption would not be significant. At 31 December 2023,
the insurance-linked funds of $35.4 million represent the Group’s investment in the unconsolidated Kiskadee funds
(2022: $45.3 million) as described in note 14.
The fair value of the Kiskadee funds is estimated to be the net asset value as at the balance sheet date. The net asset value
is based on the fair value of the assets and liabilities in the fund. The majority of the assets of the funds are cash and cash
equivalents. Significant inputs and assumptions in calculating the fair value of the assets and liabilities associated with reinsurance
contracts written by the Kiskadee funds include the amount and timing of claims payable in respect of claims incurred and periods
of unexpired risk. The Group has considered changes in the net asset valuation of the Kiskadee funds if reasonably different inputs
and assumptions were used and has found that an 11% change to the fair value of the liabilities would increase or decrease the fair
value of funds by $3.0 million.
In certain cases, the inputs used to measure the fair value of a financial instrument may fall into more than one level within the fair
value hierarchy. In this instance, the fair value of the instrument in its entirety is classified based on the lowest level of input that is
significant to the fair value measurement.
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the relevant reporting
period during which the transfers are deemed to have occurred. During the year, investments of $26.0 million (2022: $25.9 million)
were transferred from Level 2 to Level 3 due to insufficient observable data being available, as a result of reduced trading volumes.
The below table sets forth a reconciliation of opening and closing balances for financial instruments classified under Level 3
of the fair value hierarchy:
Balance at 1 January
Fair value losses through profit or loss
Foreign exchange gains/(losses)
Settlements
Transfers
Closing balance
Net unrealised gains in the period on securities held at the end of the period
31 December
2023
$m
31 December
2022
$m
139.7
(11.5)
4.8
(28.7)
26.0
130.3
3.5
125.7
(0.4)
(4.4)
(7.1)
25.9
139.7
0.6
The closing balance at year end comprised $64.9 million debt and fixed income holdings (2022: $67.1 million), $30.0 million
equities and investment funds (2022: $27.3 million) and $35.4 million insurance-linked funds (2022: $45.3 million).
224
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
18 Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Total
2023
$m
1,411.2
25.8
1,437.0
2022
$m
1,276.0
74.9
1,350.9
The Group holds its cash deposits with a well-diversified range of banks and financial institutions. Cash includes overnight
deposits. Short-term deposits include debt securities with an original maturity date of less than three months and money
market funds.
19 Share capital
Group
Authorised ordinary share capital of 6.5p (2022: 6.5p)
Issued ordinary share capital of 6.5p (2022: 6.5p)
31 December 2023
31 December 2022
Share
capital
$m
Number
of shares
000
425.8 3,692,308
355,283
38.8
Share
capital
$m
Number
of shares
000
425.8 3,692,308
354,067
38.7
The amounts presented in the equity section of the Group’s consolidated balance sheet relate to Hiscox Ltd, the legal
parent company.
Changes in Group share capital and contributed surplus
At 1 January 2022
Employee share option scheme – proceeds from shares issued
Scrip Dividends to owners of the Company
At 31 December 2022
Employee share option scheme – proceeds from shares issued
Scrip Dividends to owners of the Company
At 31 December 2023
Ordinary share
capital
$000
38,661
1
5
38,667
90
10
38,767
Share
premium
$000
516,817
153
687
517,657
9,530
1,645
528,832
Contributed
surplus
$000
183,969
–
–
183,969
–
–
183,969
Contributed surplus is a distributable reserve and arose on the reverse acquisition of Hiscox plc on 12 December 2006.
The Company relies on dividend streams from its subsidiary companies to provide the cash flow required for distributions to be
made to shareholders. The ability of the subsidiaries to pay dividends is subject to regulatory restrictions within the jurisdiction
from which they operate.
Share repurchase
The trustees of the Group’s Employee Benefit Trust purchased nil shares (2022: nil shares) to facilitate the settlement of vesting
awards under the Group’s Performance Share Plan. As the Trust is consolidated into the Group financial results, these purchases
are accounted for in the same way as treasury shares and are charged against retained earnings. The shares are held by the
trustees for the beneficiaries of the Trust.
Equity structure of Hiscox Ltd
At 1 January
Employee share option scheme – ordinary shares issued
Scrip Dividends to owners of the Company
At 31 December
All issued shares are fully paid.
Note
26
Number of
ordinary shares
in issue
2023
000
Number of
ordinary shares
in issue
2022
000
354,067
1,094
122
355,283
353,986
18
63
354,067
Hiscox Ltd Report and Accounts 2023
225
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
19 Share capital continued
Performance Share Plan awards
Performance Share Plan awards are granted to Directors and other senior employees. Awards normally vest after a three-year
period subject to the achievement of performance conditions which can be a mix of financial and non-financial measures. Awards
are generally subject to continued employment, however awards may vest to leavers in certain scenarios. Awards granted under
the all-employee share ownership scheme (HSX:26) vest in April 2026 subject to continued employment and satisfactory personal
performance between the date of grant and vest.
In accordance with IFRS 2, the Group recognises an expense for the fair value of shares, share options and Performance Share
Plan award instruments issued to employees, over their vesting period through the income statement. The amount recognised
in the consolidated income statement during the year was an expense of $43.2 million (2022: expense of $27.2 million). This
comprises an expense of $28.3 million (2022: expense of $15.0 million) in respect of Performance Share Plan awards, an
expense of $3.3 million (2022: expense of $2.9 million) in respect of share option awards and an expense of $11.6 million
(2022: expense of $9.3 million) in respect of employee share awards. The Group has applied the principles outlined in the
Black-Scholes option pricing model when determining the fair value of each share option instrument. For the fair value pricing
of performance share plans, the Group uses the share price on the date of grant of the options. For any options contingent
on achieving targets linked to total shareholder returns, the fair value price on date of grant is adjusted to take account of the
probability of achieving the performance targets.
The range of principal Group assumptions applied in determining the fair value of share-based payment instruments granted
during the year under review are:
Assumptions affecting inputs to fair value models
Annual risk-free rates of return and discount rates (%)
Long-term dividend yield (%)
Expected life of options (years)
Implied volatility of share price (%)
Weighted average share price (p)
2023
2022
3.35-4.78 1.36-3.00
1.27
3.25
49.2
981.1
1.40
3.25
38.7
1,117.4
The weighted average fair value of each share option granted during the year was 392.1p (2022: 418.3p). The weighted average
fair value of each Performance Share Plan award granted during the year was 1,140.1p (2022: 983.0p).
Movements in the number of share options and Performance Share Plan awards during the year and details of the balances
outstanding at 31 December 2023 for the Executive Directors are shown in the annual report on remuneration 2023. The total
number of options and Performance Share Plan awards outstanding is 10,505,901 (2022: 10,325,738) of which 706,282 are
exercisable (2022: 1,287,068). The total number of SAYE options outstanding is 2,195,828 (2022: 2,650,322) and employee
share awards is 4,615,061 (2022: 4,765,411).
The implied volatility assumption is based on historical data for periods of between five and ten years immediately preceding
grant date.
226
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
20 Insurance liabilities and reinsurance contract
Insurance contract liabilities
Reinsurance contract held assets
Net insurance contract liabilities
2023
$m
6,604.0
(2,098.3)
4,505.7
2022
$m
6,694.3
(2,517.2)
4,177.1
Detailed reconciliations of changes in insurance contract balances during the year are included below in note 20.1.
The analysis of changes is disclosed at a consolidated level in line with how the Group manages and monitors the balance sheet.
Further details related to changes in the consolidated income statement by segmental reporting are disclosed in note 4.
20.1(a) Net insurance contract liabilities
Net insurance contracts – analysis by remaining coverage and incurred claims
Year to 31 December 2023
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
Insurance revenue, net of allocation
of reinsurance premiums†
Insurance service expenses, net of amounts
recoverable from reinsurers
Incurred claims and other attributable expenses
Acquisition costs
Adjustments to liabilities for incurred claims
relating to past service
Losses and reversals of losses on onerous contracts
Effect of changes in non-performance risk of reinsurers
Total net insurance service expenses
Insurance service result
Net finance (income)/expenses from insurance contracts
Net foreign exchange losses
Total change recognised in comprehensive income
Investment components
Transfer to other items in balance sheet
Net cash flows
Net premium received
Net claims and other insurance service expenses paid
Insurance acquisition cash flows
Total cash flows
Closing assets
Closing liabilities
Net closing balance
Net liabilities for remaining coverage
Net liabilities for incurred claims
Excluding
loss component
$m
Loss
component
$m
186.8*
287.4
474.2
(0.6)
2.5
1.9
Estimates of
present value of
future cash flows
$m
Risk adjustment
for non-financial
risk
$m
(2,282.4)
5,737.1
3,454.7
(421.0)
667.3
246.3
Total
$m
(2,517.2)
6,694.3
4,177.1
(3,363.8)
–
–
–
(3,363.8)
–
1,039.0
–
–
–
1,039.0
(2,324.8)
(9.1)
20.5
(2,313.4)
31.8
(258.3)
3,337.4
–
(806.0)
2,531.4
118.8*
346.9
465.7
(7.7)
–
–
13.2
–
5.5
5.5
–
0.1
5.6
–
–
–
–
–
–
–
7.5
7.5
1,962.5
–
(179.5)
–
(4.3)
1,778.7
1,778.7
148.8
52.3
1,979.8
(31.8)
(682.7)
–
(988.5)
–
(988.5)
(1,696.3)
5,427.8
3,731.5
72.4
–
(24.1)
–
–
48.3
48.3
–
7.4
55.7
–
(1.0)
–
–
–
–
(520.8)
821.8
301.0
2,027.2
1,039.0
(203.6)
13.2
(4.3)
2,871.5
(492.3)
139.7
80.3
(272.3)
–
(942.0)
3,337.4
(988.5)
(806.0)
1,542.9
(2,098.3)
6,604.0
4,505.7
*Includes LPT ARC gross of premium payables of $534.1 million at 31 December 2022 and $532.3 million at 31 December 2023.
†Includes allocation of LPT premium of $61.7 million.
Hiscox Ltd Report and Accounts 2023
227
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
20 Insurance liabilities and reinsurance contract
20.1(a) Net insurance contract liabilities
Net insurance contracts – analysis by remaining coverage and incurred claims (continued)
Year to 31 December 2022
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
Insurance revenue, net of allocation
of reinsurance premiums†
Insurance service expenses, net of amounts
recoverable from reinsurers
Incurred claims and other attributable expenses
Acquisition costs
Adjustments to liabilities for incurred claims
relating to past service
Losses and reversals of losses on onerous contracts
Effect of changes in non-performance risk of reinsurers
Total net insurance service expenses
Insurance service result
Net finance income/(expense) from insurance contracts
Net foreign exchange gains
Total change recognised in comprehensive income
Investment components
Transfer to other items in balance sheet
Net cash flows
Net premium received
Net claims and other insurance service expenses paid
Insurance acquisition cash flows
Total cash flows
Closing assets
Closing liabilities
Net closing balance
Net liabilities for remaining coverage
Net liabilities for incurred claims
Excluding
loss component
$m
Loss
component
$m
266.7*
130.1
396.8
(4.2)
16.5
12.3
Estimates of
present value of
future cash flows
$m
Risk adjustment
for non-financial
risk
$m
(2,616.0)
6,188.0
3,572.0
(503.4)
852.3
348.9
Total
$m
(2,856.9)
7,186.9
4,330.0
(3,008.5)
–
–
–
(3,008.5)
–
1,005.5
–
–
–
1,005.5
(2,003.0)
38.2
(65.9)
(2,030.7)
20.4
(235.9)
3,091.3
–
(767.7)
2,323.6
186.8*
287.4
474.2
(12.8)
–
–
2.5
–
(10.3)
(10.3)
–
(0.1)
(10.4)
–
–
–
–
–
–
(0.6)
2.5
1.9
2,001.5
–
(258.3)
–
(3.2)
1,740.0
1,740.0
(149.8)
(74.1)
1,516.1
(20.4)
(575.4)
–
(1,037.6)
–
(1,037.6)
(2,282.4)
5,737.1
3,454.7
32.6
–
(120.2)
–
–
(87.6)
(87.6)
–
(15.0)
(102.6)
–
–
–
–
–
–
(421.0)
667.3
246.3
2,021.3
1,005.5
(378.5)
2.5
(3.2)
2,647.6
(360.9)
(111.6)
(155.1)
(627.6)
–
(811.3)
3,091.3
(1,037.6)
(767.7)
1,286.0
(2,517.2)
6,694.3
4,177.1
*Includes LPT ARC gross of premium receivable $493.0 million at 31 December 2021 and $534.1 million at 31 December 2022.
†Includes allocation of LPT premium of $180.8 million.
Prior-year development recognised for the year amounts to $122.8 million (2022: $209.4 million) and comprises:
Adjustment to liabilities for incurred claims relating to past service,
net of reinsurance recoveries (on a present-value basis)
Adjustment for discounting impact
Adjustment for LPT premium and experience adjustment
2023
$m
2022
$m
203.6
(19.1)
(61.7)
122.8
378.5
11.7
(180.8)
209.4
228
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
20 Insurance liabilities and reinsurance contract continued
20.1(b) Insurance contract liabilities
Insurance contracts – analysis by remaining coverage and incurred claims
Liabilities for remaining coverage
Liabilities for incurred claims
LRC excluding
loss component
$m
Loss
component
$m
Estimates of
present value of
future cash flows
$m
Risk adjustment
for non-financial
risk
$m
Year to 31 December 2023
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
Insurance revenue
Insurance service expenses
Incurred claims and other attributable expenses
Acquisition costs
Adjustments to liabilities for incurred claims relating
to past service
Losses and reversals of losses on onerous contracts
Total insurance service expenses
Insurance service result
Net finance expenses from insurance contracts
Foreign exchange movements
Total change in the consolidated income statement
Investment components
Transfer to other items in balance sheet
Cash flows
Premium received
Claims and other insurance service expenses paid
Insurance acquisition cash flows
Total cash flows
Closing assets
Closing liabilities
Net closing balance
–
287.4
287.4
(4,483.2)
–
1,039.0
–
–
1,039.0
(3,444.2)
–
24.9
(3,419.3)
(1.0)
(258.0)
4,543.8
–
(806.0)
3,737.8
–
346.9
346.9
–
2.5
2.5
–
(8.3)
–
–
13.2
4.9
4.9
–
0.1
5.0
–
–
–
–
–
–
–
7.5
7.5
–
5,737.1
5,737.1
–
667.3
667.3
Total
$m
–
6,694.3
6,694.3
–
–
(4,483.2)
2,369.3
–
(372.9)
–
1,996.4
1,996.4
220.7
73.7
2,290.8
1.0
(693.1)
–
(1,908.0)
–
(1,908.0)
–
5,427.8
5,427.8
112.8
–
36.2
–
149.0
149.0
–
7.1
156.1
–
(1.6)
–
–
–
–
–
821.8
821.8
2,473.8
1,039.0
(336.7)
13.2
3,189.3
(1,293.9)
220.7
105.8
(967.4)
–
(952.7)
4,543.8
(1,908.0)
(806.0)
1,829.8
–
6,604.0
6,604.0
Hiscox Ltd Report and Accounts 2023
229
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
20 Insurance liabilities and reinsurance contract
20.1(b) Insurance contract liabilities
Insurance contracts – analysis by remaining coverage and incurred claims continued
Year to 31 December 2022
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
Insurance revenue
Incurred claims and other attributable expenses
Acquisition costs
Adjustments to liabilities for incurred claims relating
to past service
Losses and reversals of losses on onerous contracts
Total insurance service expenses
Insurance service result
Net finance income from insurance contracts
Foreign exchange movements
Total change in the consolidated income statement
Investment components
Transfer to other items in balance sheet
Cash flows
Premium received
Claims and other insurance service expenses paid
Insurance acquisition cash flows
Total cash flows
Closing assets
Closing liabilities
Net closing balance
Liabilities for remaining coverage
Liabilities for incurred claims
LRC excluding
loss component
$m
Loss
component
$m
Estimates of
present value of
future cash flows
$m
Risk adjustment
for non-financial
risk
$m
–
130.1
130.1
(4,273.3)
–
1,005.5
–
–
1,005.5
(3,267.8)
–
(45.2)
(3,313.0)
(2.0)
(235.9)
4,475.9
–
(767.7)
3,708.2
–
287.4
287.4
–
16.5
16.5
–
(17.7)
–
–
3.8
(13.9)
(13.9)
–
(0.1)
(14.0)
–
–
–
2.5
2.5
–
6,188.0
6,188.0
–
2,922.7
–
(266.4)
–
2,656.3
2,656.3
(213.7)
(140.9)
2,301.7
2.0
(575.4)
–
(2,179.2)
–
(2,179.2)
–
5,737.1
5,737.1
–
852.3
852.3
–
75.5
–
(237.5)
–
(162.0)
(162.0)
–
(23.0)
(185.0)
–
–
–
667.3
667.3
Total
$m
–
7,186.9
7,186.9
(4,273.3)
2,980.5
1,005.5
(503.9)
3.8
3,485.9
(787.4)
(213.7)
(209.2)
(1,210.3)
–
(811.3)
4,475.9
(2,179.2)
(767.7)
1,529.0
–
6,694.3
6,694.3
230
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
20 Insurance liabilities and reinsurance contract continued
20.1(c) Reinsurance contract held assets – analysis by remaining coverage and incurred claims
Asset for remaining coverage
Asset for incurred claims
ARC excluding
loss recovery
component
$m
Loss
recovery
component
$m
Estimates of
present value of
future cash flows
$m
Risk adjustment
for non-financial
risk
$m
Year to 31 December 2023
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
Allocation of reinsurance premiums
Amounts recoverable from reinsurers
Recoveries of incurred claims and other attributable expenses
Adjustments to assets for incurred claims relating
to past service
Effect of changes in non-performance risk of reinsurers
Total amounts recoverable from reinsurers
Net expense from reinsurance contracts held
Net finance income from reinsurance contracts
Foreign exchange movements
Total changes in the consolidated income statement
Investment components
Transfer to other items in balance sheet
Cash flows
Premium paid
Amounts received
Total cash flows
Closing assets
Closing liabilities
Net closing balance
(186.8)
–
(186.8)
(1,119.4)
–
–
–
–
(1,119.4)
9.1
4.4
(1,105.9)
(32.8)
0.3
1,206.4
–
1,206.4
(118.8)
–
(118.8)
0.6
–
0.6
–
(0.6)
–
–
(0.6)
(0.6)
–
–
(0.6)
–
–
–
–
–
–
–
–
2,282.4
–
2,282.4
421.0
–
421.0
Total
$m
2,517.2
–
2,517.2
–
–
(1,119.4)
406.8
(193.4)
4.3
217.7
217.7
71.9
21.4
311.0
32.8
(10.4)
–
(919.5)
(919.5)
1,696.3
–
1,696.3
40.4
60.3
–
100.7
100.7
–
(0.3)
100.4
–
(0.6)
–
–
–
520.8
–
520.8
446.6
(133.1)
4.3
317.8
(801.6)
81.0
25.5
(695.1)
–
(10.7)
1,206.4
(919.5)
286.9
2,098.3
–
2,098.3
Hiscox Ltd Report and Accounts 2023
231
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
20 Insurance liabilities and reinsurance contract
20.1(c) Reinsurance contract held assets – analysis by remaining coverage and incurred claims continued
Asset for remaining coverage
Asset for incurred claims
ARC excluding
loss recovery
component
$m
Loss
recovery
component
$m
Estimates of
present value of
future cash flows
$m
Risk adjustment
for non-financial
risk
$m
(266.7)
–
(266.7)
(1,264.8)
–
–
–
–
–
(1,264.8)
(38.2)
20.7
(1,282.3)
(22.4)
1,384.6
–
1,384.6
(186.8)
–
(186.8)
4.2
–
4.2
–
(4.9)
–
1.3
–
(3.6)
(3.6)
–
–
(3.6)
–
–
–
–
0.6
–
0.6
2,616.0
–
2,616.0
503.4
–
503.4
Total
$m
2,856.9
–
2,856.9
–
–
(1,264.8)
921.2
42.9
959.2
(8.1)
(117.3)
(125.4)
–
3.2
916.3
916.3
(63.9)
(66.8)
785.6
22.4
–
(1,141.6)
(1,141.6)
2,282.4
–
2,282.4
–
–
(74.4)
(74.4)
–
(8.0)
(82.4)
–
–
–
–
421.0
–
421.0
1.3
3.2
838.3
(426.5)
(102.1)
(54.1)
(582.7)
–
1,384.6
(1,141.6)
243.0
2,517.2
–
2,517.2
Year to 31 December 2022
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
Allocation of reinsurance premiums
Amounts recoverable from reinsurers
Recoveries of incurred claims and other insurance
service expenses
Adjustments to assets for incurred claims relating
to past service
Recoveries and reversals of recoveries of losses
on onerous contracts
Effect of changes in non-performance risk of reinsurers
Total amounts recoverable from reinsurers
Net expense from reinsurance contracts held
Net finance expense from reinsurance contracts
Foreign exchange movements
Total changes in the consolidated income statement
Investment components
Cash flows
Premium paid
Amounts received
Total cash flows
Closing assets
Closing liabilities
Net closing balance
232
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
20 Insurance liabilities and reinsurance contract continued
20.2 Claims development tables
The development of insurance liabilities provides a measure of the Group’s ability to estimate the ultimate cost of claims. The
Group analyses actual claims development compared with previous estimates on an accident year basis.
(a) Insurance liability for incurred claims – net of reinsurance
1,911.0
Accident year
Estimate of ultimate claims costs as adjusted for foreign exchange*
at end of accident year:
one period later
two periods later
three periods later
four periods later
Current estimate of cumulative claims
Cumulative payments to date
Net cumulative liability for incurred claims – accident years
from 2019-2023
Net cumulative liability for incurred claims in respect of accident
years before 2019
Effect of discounting
Total Group liability for incurred claims to external parties included in balance sheet – net
(1,120.4)
571.9
417.4
–
–
–
–
2019
$m
2020
$m
2021
$m
2022
$m
2023
$m
Total
$m
1,587.1 1,515.2 1,489.7 8,058.5
1,555.5
– 6,388.0
1,487.1 1,897.3 1,480.5 1,523.1
4,567.1
–
–
1,409.3 1,729.9 1,427.9
3,145.1
–
–
–
1,452.8 1,692.3
1,405.4
1,405.4
–
–
–
–
7,538.4
1,405.4 1,692.3 1,427.9 1,523.1 1,489.7
(3,962.6)
(303.9)
(857.0)
(988.0)
(693.3)
570.9
829.8 1,185.8
3,575.8
–
–
–
–
–
–
775.9
(319.2)
4,032.5
*The foreign exchange adjustment arises from the retranslation of the estimates at each date using the exchange rate ruling at 31 December 2023.
The table above excludes reinsurance recoveries related to the retroactive reinsurance contracts, for example legacy portfolio transfer arrangements where the
financial effect of the underlying claims is still uncertain. These are included in the reinsurance contract asset for remaining coverage.
(b) Insurance liability for incurred claims – gross
Accident year
Estimate of ultimate claims costs as adjusted for foreign exchange*
at end of accident year:
one period later
two periods later
three periods later
four periods later
Current estimate of cumulative claims
Cumulative payments to date
Gross cumulative liability for incurred claims – accident years
from 2019-2023
Gross cumulative liability for incurred claims in respect of accident
years before 2019
Effect of discounting
Total Group liability for incurred claims to external parties included in balance sheet – gross
(2,013.4)
513.0
973.1
–
–
–
–
2019
$m
2020
$m
2021
$m
2022
$m
2023
$m
Total
$m
2,807.2 3,269.0 2,550.8 2,532.2 1,996.4 13,155.6
– 10,752.1
2,555.0 3,235.6 2,439.1 2,522.4
7,724.9
–
–
2,390.9 3,058.4 2,275.6
5,352.6
–
–
–
2,366.1 2,986.5
2,313.7
2,313.7
–
–
–
–
2,313.7 2,986.5 2,275.6 2,522.4 1,996.4 12,094.6
(6,398.3)
(1,800.7)
(1,314.1)
(346.2)
(923.9)
961.5 1,598.5 1,650.2 5,696.3
–
–
–
–
–
–
998.5
(445.2)
6,249.6
*The foreign exchange adjustment arises from the retranslation of the estimates at each date using the exchange rate ruling at 31 December 2023.
Hiscox Ltd Report and Accounts 2023
233
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
21 Trade and other payables
Social security and other taxes payable
Lease liabilities
Accruals and other creditors
Total
The amounts expected to be settled before and after one year are estimated as follows:
Within one year
After one year
Total
2023
$m
12.6
79.8
270.1
362.5
2023
$m
284.9
77.6
362.5
2022
(restated)
$m
11.0
79.9
288.4
379.3
2022
$m
282.5
96.8
379.3
The carrying amounts disclosed above are reasonably approximate to the fair value at the reporting date.
The Group acts as both lessee and lessor in relation to various offices in the UK and overseas, which are held under
non-cancellable lease agreements. The leases have varying terms, escalation clauses and renewal terms.
Extension and termination options were taken into account on recognition of the lease liability if the Group was reasonably
certain that these options would be exercised in the future. As a general rule, the Group recognises non-lease components,
such as services, separately to lease payments.
Maturity analysis – contractual undiscounted cash flows:
Not later than one year
Later than one year and not later than five years
Later than five years
Total undiscounted lease liabilities
2023
$m
16.4
43.2
36.4
96.0
2022
$m
12.2
43.2
36.9
92.3
Income from subleasing
Hiscox acts as a lessor and sublets excess capacity of its office space to third parties.
The total future aggregate minimum lease rentals receivable by the Group as lessor under non-cancellable operating property
leases are as follows:
Not later than one year
Later than one year and no later than five years
2023
$m
2.2
1.0
3.2
2022
$m
2.0
2.8
4.8
234
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
22 Tax (credit)/expense
The Company and its subsidiaries are subject to enacted tax laws in the jurisdictions in which they are incorporated and
domiciled. The principal subsidiaries of the Company and the country in which they are incorporated are listed in note 29.
The amounts charged in the consolidated income statement comprise the following:
Current tax expense/(credit)
Expense for the year
Adjustments in respect of prior years
Total current tax expense
Deferred tax
Expense for the year
Adjustments in respect of prior years
Adjustment in relation to Bermuda Economic Transition Adjustment (ETA)
Effect of rate change
Total deferred tax (credit)/expense
Total tax (credit)/expense to the income statement
2023
$m
10.0
(1.8)
8.2
70.4
(13.4)
(150.0)
(1.3)
(94.3)
(86.1)
The standard rate of corporation tax in Bermuda is 0% whereas the effective rate of tax for the Group is 13.8% (2022: 7.9%).
A reconciliation of the difference is provided below:
Profit before tax
Tax calculated at the standard corporation tax rate applicable in Bermuda: 0% (2022: 0%)
Effects of Group entities subject to overseas tax at different rates
Impact of overseas tax rates on:
Effect of rate change
Expenses not deductible for tax purposes
Tax losses for which no deferred tax asset is recognised
Other
Adjustment for share-based payments
Adjustment for Bermuda ETA
Prior-year tax adjustments
Tax charge for the year
2023
$m
625.9
–
52.8
(1.3)
0.2
21.7
(0.9)
6.6
(150.0)
(15.2)
(86.1)
2022
(restated)
$m
4.5
(1.7)
2.8
16.7
(0.2)
–
2.4
18.9
21.7
2022
(restated)
$m
275.6
–
4.7
2.4
1.6
11.6
0.1
3.1
–
(1.8)
21.7
Included within the current tax, a provision is recognised for those matters for which the tax determination is uncertain but it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate
of the amount expected to become payable.
The Group companies’ tax filings include transactions which are subject to transfer pricing legislation and the taxation authorities
may challenge the tax treatment of those transactions. The Directors are proactively engaged in discussions with the tax
authorities regarding these tax positions. The Group determines, based on tax and transfer pricing advice provided by external
specialist tax advisors, that: it is probable that the tax authorities will assess additional taxes in respect of these filings, for which
provisions have been made; the amount recognised at the balance sheet date represents the best estimate of the amount
expected to be settled, taking into account the range of potential outcomes and the current progress of discussions with
tax authorities.
Hiscox Ltd Report and Accounts 2023
235
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
23 Deferred tax
Net deferred tax assets
Trading losses in overseas entities
Bermuda ETA
Deferred tax assets
Deferred tax liabilities
Total net deferred tax assets, before reclassification of assets held for sale
Less assets held for sale
Total net deferred tax assets
Net deferred tax liabilities
Deferred tax assets
Add assets held for sale
Deferred tax liabilities
Total net deferred tax liabilities
2023
$m
29.0
150.0
11.3
(7.5)
182.8
(2.1)
180.7
20.4
2.1
(79.4)
(56.9)
2022
(restated)
$m
28.4
–
69.1
(59.3)
38.2
–
38.2
–
–
(4.1)
(4.1)
Deferred tax assets and deferred tax liabilities relating to the same tax authority are presented net in the Group’s balance sheet.
Net deferred tax assets
Net deferred tax assets
At 31 December
Deferred compensation
Underwriting*
Financial assets
Tangible assets
Losses
Bermuda ETA
Other
Total deferred tax assets
Pension
Deferred compensation
Underwriting*
Intangible assets
Financial assets
Tangible assets
Losses
Other
Total deferred tax liabilities
Net total deferred tax assets
Less assets held for sale
Net Group deferred tax asset
2022
(restated)
$m
3.2
1.3
7.8
(5.0)
28.4
–
2.5
38.2
0.9
11.6
(12.7)
(10.8)
3.5
1.8
–
1.6
(4.1)
34.1
–
34.1
Income
statement
(charge)
/credit
$m
Recognised
in other
comprehensive
income/equity
$m
Foreign
exchange
$m
0.7
0.2
(5.4)
(2.4)
1.5
150.0
1.9
146.5
(11.8)
–
(33.6)
(3.1)
(6.0)
(3.4)
6.9
(1.2)
(52.2)
94.3
(2.1)
92.2
–
–
–
–
–
–
–
–
(1.6)
0.3
–
–
–
–
–
–
(1.3)
(1.3)
–
(1.3)
–
0.2
–
–
0.1
–
(0.1)
0.2
(0.3)
0.7
(1.6)
(0.7)
(0.1)
–
0.5
0.1
(1.4)
(1.2)
–
(1.2)
2023
$m
3.9
1.7
2.4
(7.4)
30.0
150.0
4.3
184.9
(12.8)
12.6
(47.9)
(14.6)
(2.6)
(1.6)
7.4
0.5
(59.0)
125.9
(2.1)
123.8
*Restated for the deferred tax impact of IFRS 17 adoption.
Movements in deferred and current tax relating to tax deductions arising on employee share options are recognised in the
statement of changes in equity to the extent that the movement exceeds the corresponding charge to the income statement.
Movements in deferred tax relating to the employee retirement benefit obligation are recognised in the statement of
comprehensive income to the extent that the movement corresponds to actuarial gains and losses recognised in the statement
of comprehensive income. The total expense recognised outside the income statement is $0.4 million (2022: expense of
$6.5 million), comprising $1.3 million deferred tax income and $1.7 million current tax expense (2022: $9.4 million deferred
tax expense and $2.9 million current tax income).
236
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
23 Deferred tax
Net deferred tax assets continued
Deferred tax assets of $37.4 million ($36.3 million excluding assets held for sale) (2022: 28.4 million), relating to losses arising in
overseas entities, which depend on the availability of future taxable profits, have been recognised. Business projections indicate
it is probable that sufficient future taxable income will be available against which to offset these recognised deferred tax assets
within five years. $27.7 million (2022: $27.7 million) of the tax losses to which these assets relate will expire within ten years; a
further $9.7 million (2022: $0.7 million) will expire after ten years or will be available indefinitely. The Group has not provided for
deferred tax assets totalling $84.8 million (2022: $56.6 million) in relation to losses in overseas companies and unutilised tax
credits of $415.5 million (2022: $279.0 million).
In accordance with IAS 12, all deferred tax assets and liabilities are classified as non-current. The amount of deferred tax asset
expected to be recovered after more than 12 months is $123.8 million (2022: $53.5 million).
Factors affecting tax charges in future years
An increase to the UK corporate tax rate to 25% from 1 April 2023 was substantively enacted on 24 May 2021. This will have
a consequential effect on the Company’s future tax charge, and deferred tax liabilities in relation to the UK have decreased by
$1.3 million. The impact of these changes in future periods will be dependent on the level of taxable profits in those periods.
One hundred and thirty countries have agreed to implement a new global minimum tax (GMT) as ‘Pillar Two’ of the OECD
two-Pillar reform framework. The GMT uses adjusted consolidated accounting data to calculate the effective tax rate (ETR) paid
on profits by a multinational in each jurisdiction in which it operates; and then applies a ‘top-up tax’ on any jurisdictions where the
ETR is below 15%.
Multiple jurisdictions in which the Group operates have substantively enacted such legislation (‘Pillar Two legislation’) before
the balance sheet date. The Hiscox Group expects to be within the scope of these rules, by virtue of the fact that the Group’s
consolidated revenue in at least two of the four years prior to 2024 exceeded €750 million.
This legislation brings into effect the Income Inclusion Rule (IIR) and Qualified Domestic Minimum Top-Up Tax (QDMTT) from
2024 (which are not expected to have a material impact on the Group), and the Undertaxed Profits Rule (UTPR) from 2025,
meaning that ‘top-up taxes’ on profits in jurisdictions where the ETR is below 15% may be payable in other jurisdictions across
the Group with effect from 2025.
Based on historic trends, the proportion of the Group’s profits expected to be impacted is between $0 million to $5 million,
and the average effective rate currently applicable to those profits is 5% to 7%.
Several other jurisdictions in which the Group operates have proposed Pillar Two legislation, which would implement changes
similar to those identified above, but the legislation has not yet been substantively enacted at the balance sheet date. Given that
Pillar Two legislation implementing both IIR and UTPR has already been substantively enacted in various jurisdictions in which
the Group operates, the Group does not expect the enactment of Pillar Two legislation by these jurisdictions to have a further
additional impact on the total income tax to which the Group is exposed.
As a response to the Pillar Two reform, Bermuda has introduced a corporate income tax (Bermuda CIT) which was substantively
enacted at the balance sheet date; and will apply at a rate of 15% to profits of certain Bermuda constituent entities with effect
from 1 January 2025. The Group expects to be subject to Bermuda CIT. The proportion of the Group’s profits arising in Bermuda
is therefore not expected to be subject to Pillar Two top-up tax and is not included in the estimated impact.
The Bermuda CIT will apply at a rate of 15% on the profits of Hiscox’s Bermudian constituent entities. This will have a
consequential effect on the Group’s future tax charge. A deferred tax asset of $150.0 million in relation to the economic transition
adjustment (ETA) required by this legislation has been recognised at the balance sheet date. On first entering the scope of
Bermuda CIT, the ETA requires each in scope entity to estimate the fair value of the assets and liabilities held by the Bermudian
business at 30 September 2023 and use this in place of book value for tax purposes, creating temporary differences. The
principal driver of this temporary difference is the customer relationships intangible asset which is subject to significant
judgement and estimates, including forecast cashflows, the discount rate and capital allocation charges. The impact of
these changes on the Group’s ETR in future periods will be dependent on the level of taxable profits in those periods for
the Group’s Bermuda constituent entities.
Hiscox Ltd Report and Accounts 2023
237
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
24 Employee retirement benefit obligations
The Company’s subsidiary Hiscox plc operates a defined benefit pension scheme based on final pensionable salary. The scheme
closed to future accruals with effect from 31 December 2006 and active members were offered membership of a defined
contribution scheme from 1 January 2007. The funds of the defined benefit scheme are controlled by the trustee and are held
separately from those of the Group. 61% of any scheme surplus or deficit is recharged to Syndicate 33. The full pension obligation
of the Hiscox defined benefit pension scheme is recorded and the recovery from the third-party Names for their share of the
Syndicate 33 recharge is shown as a separate asset.
The gross amount recognised in the Group balance sheet in respect of the defined benefit scheme is determined as follows:
Present value of scheme obligations
Fair value of scheme assets
Net amount recognised as a defined benefit surplus
2023
$m
236.2
(280.6)
(44.4)
2022
$m
213.9
(234.8)
(20.9)
As the fair value of the scheme assets exceeds the present value of scheme obligations, the scheme reports a surplus
(2022: reports a surplus).
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit actuarial cost
method. A formal full actuarial valuation is performed on a triennial basis, most recently at 31 December 2020, and updated at
each intervening balance sheet date by the actuaries. The year-end present value of the defined benefit obligation under IAS 19 is
determined by discounting the estimated future cash flows, using interest rates of AA-rated corporate bonds that have terms to
maturity that approximate to the terms of the related pension liability, and is not impacted directly by the triennial valuation.
The scheme assets are invested as follows:
At 31 December
Investment assets
Pooled investment vehicles
Equities
Bonds
Assets held by insurance company
Cash
The amounts recognised in total comprehensive income are as follows:
For the year ended 31 December
Past service cost
Interest cost on defined benefit obligation
Interest income on plan assets
Net interest (income)/cost
Administrative expenses and taxes
Total (income)/expense recognised in operational expenses in the income statement
Remeasurements
Effect of changes in actuarial assumptions
Return on plan assets (excluding interest income)
Remeasurement of third-party Names’ share of defined benefit obligation
Total remeasurement included in other comprehensive income
Total defined benefit charge/(credit) recognised in comprehensive income
2023
$m
2022
$m
55.4
–
201.3
2.8
21.1
280.6
2023
$m
–
10.9
(12.6)
(1.7)
–
(1.7)
6.3
(1.3)
(0.9)
4.1
2.4
81.4
26.1
122.2
2.5
2.6
234.8
2022
$m
–
6.4
(6.0)
0.4
–
0.4
(146.6)
104.7
7.0
(34.9)
(34.5)
238
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
24 Employee retirement benefit obligations continued
The movement in the (surplus)/liability recognised in the Group’s balance sheet is as follows:
Group defined benefit liability at beginning of year
Third-party Names’ share of liability
Net defined benefit liability at beginning of year
Defined benefit cost included in net income
Contribution by employer
Total remeasurement included in other comprehensive income
Other movements
Net defined benefit (surplus)/liability at end of year
Third-party Names’ share of liability
Group defined benefit (surplus)/liability at end of year
A reconciliation of the fair value of scheme assets is as follows:
Opening fair value of scheme assets
Interest income
Cash flows
Contribution by the employer
Benefit payments
Assets held by insurance company
Remeasurements
Return on plan assets (excluding interest income)
Foreign exchange movements
Closing fair value of scheme assets
A reconciliation of the present value of obligations of the scheme is as follows:
Opening present value of scheme obligations
Past service cost
Interest expense
Cash flows
Benefit payments
Assets held by insurance company
Remeasurements
Changes in actuarial assumptions
Foreign exchange movements
Closing present value of scheme obligations
2023
$m
(20.9)
(4.3)
(25.2)
(1.7)
(24.8)
4.1
(1.8)
(49.4)
5.0
(44.4)
2023
$m
234.8
12.6
24.8
(7.8)
–
1.3
14.9
280.6
2023
$m
213.9
–
10.9
(7.8)
–
6.3
12.9
236.2
2022
$m
35.1
(12.3)
22.8
0.4
(13.5)
(34.9)
–
(25.2)
4.3
(20.9)
2022
$m
369.0
6.0
13.5
(12.1)
2.6
(104.7)
(39.5)
234.8
2022
$m
404.1
–
6.4
(12.1)
2.6
(146.6)
(40.5)
213.9
Assumptions regarding future mortality experience are set based on the S3PA (2022: S3PA) light tables. Reductions in future
mortality rates are allowed for by using the CMI 2019 (2022: 2019) projections (core model) with 1.25% p.a. long-term trend
for improvements.
The average life expectancy in years of a pensioner retiring at age 60 on the balance sheet date is as follows:
Male
Female
2023
29.0
30.8
The average life expectancy in years of a pensioner retiring at 60, 15 years after the balance sheet date, is as follows:
Male
Female
2023
29.4
31.0
2022
28.9
30.8
2022
29.3
30.9
The weighted average duration of the defined benefit obligation at 31 December 2023 was 16.0 years (2022: 15.0 years).
Hiscox Ltd Report and Accounts 2023
239
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
24 Employee retirement benefit obligations continued
Other principal actuarial assumptions are as follows:
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Pension increases
2023
%
4.77
2.99
2.39
2.82
2022
%
4.95
3.09
2.54
2.89
The scheme operates under UK Trust law and the Trust is a separate legal entity from the Group. The scheme is governed by a
board of trustees, comprised of member-nominated and employer-appointed trustees. The trustees are required by law to act
in the best interests of scheme members and are responsible for setting certain policies together with the principal employer.
The scheme is funded by the Group when required. Funding of the scheme is based on a separate actuarial valuation for funding
purposes for which assumptions may differ from the assumptions above. Funding requirements are formally set out in the
statement of funding principles, schedule of contributions and recovery plan agreed between the trustees and the Group.
A triennial valuation was carried out as at 31 December 2020 and resulted in a deficit position of £78.0 million ($106.6 million)
on a funding basis. On 21 January 2022, the Group and the scheme’s trustees agreed a recovery plan to reduce the deficit and to
eliminate the deficit by 2027. Under the recovery plan, and taking into account the material improvement in the funding position
since the valuation date, there are six payments of £10.0 million ($13.5 million), which commenced in January 2022 and are
paid annually thereafter. The funding plan will be reviewed again following the next triennial funding valuation which will have an
effective date of 31 December 2023, for which the formal actuarial valuation is ongoing at the date of this report.
While management believes that the actuarial assumptions are appropriate, any significant changes to those could affect the
balance sheet and income statement. For example, an additional one year of life expectancy for all scheme members would
increase the scheme obligations by £5.4 million ($6.9 million) at 31 December 2023 (2022: £5.1 million ($6.1 million)), and
would increase/reduce the recorded net deficit/surplus on the balance sheet by the same amounts.
The most sensitive and judgemental financial assumptions are the discount rate and inflation. These are considered further below.
CPI revaluation in deferment is used for contracted-out members. Contracted-in members are linked to RPI, as well as for all
pension in payment increases.
The Group has estimated the sensitivity of the present value of unfunded obligations to isolated changes in these assumptions at
31 December 2023 as follows:
Effect of a change in discount rate
Use of discount rate of 5.02%
Use of discount rate of 4.52%
Effect of a change in inflation
Use of RPI inflation assumption of 3.24%
Use of RPI inflation assumption of 2.74%
Present value
of unfunded
obligations
before change
in assumption
$m
Present value
of unfunded
obligations
after change
$m
(Increase)
/decrease
in obligation
recognised on
balance sheet
$m
236.2
236.2
227.8
245.1
8.40
(8.90)
236.2
236.2
238.6
233.9
(2.40)
2.30
240
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
25 Earnings per share
Basic earnings per share (EPS) is calculated by dividing the profit or loss attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Group and
held in treasury as own shares.
Basic
Profit for the year attributable to the owners of the Company ($m)
Weighted average number of ordinary shares in issue (thousands)
Basic earnings per share (cents per share)
2023
712.0
345,402
206.1¢
2022
(restated)
253.9
344,130
73.8 ¢
Diluted
Diluted earnings per share is calculated by adjusting for the assumed conversion of all dilutive potential ordinary shares. The
Company has one category of dilutive potential ordinary shares: share options and awards. For the share options, a calculation
is made to determine the number of shares that could have been acquired at fair value (determined as the average annual market
share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share
options. The number of shares calculated as above is compared with the number of shares that would have been issued
assuming the exercise of the share options.
Profit for the year attributable to the owners of the Company ($m)
Weighted average number of ordinary shares in issue (thousands)
Adjustments for share options (thousands)
Weighted average number of ordinary shares for diluted earnings per share (thousands)
Diluted earnings per share (cents per share)
2023
712.0
345,402
7,981
353,383
201.5¢
2022
(restated)
253.9
344,130
4,908
349,038
72.7¢
Diluted earnings per share has been calculated after taking account of 5,190,855 (2022: 3,680,735) performance share plan
awards, 648,208 (2022: 352,505) options under Save As You Earn schemes and 2,142,256 (2022: 457,100) employee share
awards. Previously reported diluted EPS was 31 December 2022: 12.0 cents. Comparatives have been restated for the adoption
of IFRS 17 and IFRS 9.
Hiscox Ltd Report and Accounts 2023
241
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
26 Dividends paid to owners of the Company
Final dividend for the year ended:
31 December 2022 of 24.0¢ (net) per share
31 December 2021 of 23.0¢ (net) per share
Interim dividend for the year ended:
31 December 2023 of 12.5¢ (net) per share
31 December 2022 of 12.0¢ (net) per share
2023
$m
82.8
–
43.3
–
126.1
2022
$m
–
79.2
–
41.3
120.5
The interim and final dividend for 2022 was paid either in cash or issued as a Scrip Dividend at the option of the shareholder. The
interim dividend for the year ended 31 December 2022 was paid in cash of $40.9 million and 34,760 shares for a Scrip Dividend.
The final dividend for the year ended 31 December 2022 of 24.0¢ was paid in cash of $81.7 million and 77,904 shares for the
Scrip Dividend.
The interim dividend for 2023 was paid either in cash or issued as a Scrip Dividend at the option of the shareholder. The amounts
were $42.7 million in cash and 43,673 shares for a Scrip Dividend.
The Board recommended a final dividend of 25.0¢ per share to be paid, subject to shareholder approval, on 12 June 2024 to
shareholders registered on 3 May 2024. Dividends will be paid in Sterling unless shareholders elect to be paid in US Dollars.
The foreign exchange rate to convert the dividends declared in US Dollars into Sterling will be based on the average exchange
rate in the five business days prior to the Scrip Dividend price being determined. On this occasion, the period will be between
21 May 2024 and 28 May 2024 inclusive.
A Scrip Dividend alternative will be offered to the owners of the Company.
When determining the level of dividend each year, the Board considers the ability of the Group to generate cash; the availability
of that cash in the Group, while considering constraints such as regulatory capital requirements and the level required to invest
in the business. This is a progressive policy and is expected to be maintained for the foreseeable future.
242
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
27 Contingencies and guarantees
The Group’s parent company and subsidiaries may become involved in legal proceedings, claims and litigation in the normal
course of business. The Group reviews and, in the opinion of the Directors, maintains sufficient provision, capital and reserves
in respect of such claims.
The following guarantees have also been issued:
(a)
Hiscox Dedicated Corporate Member Limited (HDCM) and Hiscox Insurance Company (Bermuda) Limited (Hiscox Bermuda)
provide assets under a Security and Trust Deed charged to Lloyd’s of London, to meet any liabilities that occur from their
interest in Syndicates 33 and 3624. At 31 December 2023, HDCM held $69.6 million of investments (2022: $170.8 million),
$12.9 million of cash (2022: $17.1 million) and a $241.0 million LOC (2022: $241.0 million) in favour of Lloyd’s of London
under this arrangement. At 31 December 2023, Hiscox Bermuda held $384.6 million of investments (2022: $528.1 million),
$95.2 million of cash (2022: $72.2 million) and a $25.0 million LOC (2022: $25.0 million) in favour of Lloyd’s of London under
this arrangement.
(b)
(c)
In 2020, HDCM entered into a $65.0 million Funds at Lloyd’s agreement under which the lending bank provides assets on
HDCM’s behalf under a security and trust deed charged to Lloyd’s of London as part of the Company’s Fund’s at Lloyd’s
provision. At 31 December 2021 and 2022 the full $65.0 million was utilised.
Hiscox plc renewed during 2022 its LOC and revolving credit facility with Lloyds Banking Group, as agent for a syndicate
of banks. The facility may be drawn in cash up to $600.0 million (2022: £600.0 million) under a revolving credit facility or LOC
up to $266.0 million (2022: $266.0 million). The terms also provide that the facility may be drawn in USD, GBP or EUR, or
another currency with the agreement of the banks. At 31 December 2023, $266.0 million (2022: $266.0 million) was utilised
by way of LOC to support the Funds at Lloyd’s requirement and $nil cash drawings were outstanding (2022: $nil).
(d)
The Council of Lloyd’s has the discretion to call for a contribution of up to 5% of capacity if required from the
managed syndicates.
(e)
As Hiscox Bermuda is not an admitted insurer or reinsurer in the USA, the terms of certain US insurance and reinsurance
contracts require Hiscox Bermuda to provide LOCs or other terms of collateral to clients. Hiscox Bermuda has in place
an LOC reimbursement and pledge agreement with Citibank for the provision of a committed LOC facility in favour of US
ceding companies and other jurisdictions, and also committed LOC facility agreements with National Australia Bank and
Commerzbank AG. The agreements combined allow Hiscox Bermuda to request the issuance of up to $470.0 million in
committed LOCs (2022: $470.0 million). LOCs issued under these facilities are collateralised by cash, US government and
corporate securities of Hiscox Bermuda. LOCs under these facilities totalling $207.0 million were issued with an effective
date of 31 December 2023 (2022: $189.4 million) and these were collateralised by US government and corporate securities
with a fair value of $233.7 million (2022: $214.2 million). In addition, Hiscox Bermuda maintained assets in trust accounts to
collateralise obligations under various reinsurance agreements. At 31 December 2023, total cash and marketable securities
with a carrying value of approximately $36.2 million (2022: $23.2 million) were held in external trusts. Cash and marketable
securities with an approximate market value of $535.2 million (2022: $495.5 million) were held in trust in respect of internal
quota share arrangements.
(f)
Hiscox Société Anonyme has arranged bank guarantees with respect to its various office deposits for a total of €0.3 million
(2022: €0.3 million).
(g) See note 22 for tax-related contingent liabilities.
Hiscox Ltd Report and Accounts 2023
243
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
28 Capital commitments and income from subleasing
Capital commitments
Refer to note 21 for lease commitments, income from leasing and note 24 for the Group’s funding contributions to the defined
benefit scheme. The Group’s capital commitment contracted for at the balance sheet date but not yet incurred for property, plant,
equipment and software development was $1.6 million (2022: $0.7 million).
29 Principal subsidiary companies of Hiscox Ltd at 31 December 2023
Company
Nature of business
Hiscox plc*
Hiscox Insurance Company Limited
Hiscox Insurance Company (Guernsey) Limited*
Hiscox Holdings Inc.
ALTOHA, Inc.
Hiscox Insurance Company Inc.
Hiscox Inc.
Hiscox Special Risks Agency (Americas) Inc.
Hiscox Insurance Services Inc.
Hiscox Specialty Insurance Company Inc.
Hiscox Insurance Company (Bermuda) Limited*
Hiscox Dedicated Corporate Member Limited
Hiscox Re Insurance Linked Strategies Limited*
Hiscox Agency Limited*
Hiscox Holdings Limited
Hiscox Syndicates Limited
Hiscox ASM Ltd.
Hiscox Underwriting Group Services Limited
Hiscox Underwriting Ltd
Hiscox Société Anonyme*
Hiscox Insurance Services (Guernsey) Limited
Hiscox MGA Limited
Hiscox Insurance Holdings Limited
Hiscox Connect Limited
Hiscox Assure SAS
Direct Asia Insurance (Holdings) Pte Ltd
Direct Asia Insurance (Singapore) Pte Limited
Direct Asia Management Services Pte Ltd
*Held directly by Hiscox Ltd.
Holding company
General insurance
General insurance
Holding company
Insurance holding company
General insurance
Insurance intermediary
Underwriting agency
Insurance intermediary
General insurance
General insurance and reinsurance
Lloyd’s corporate Name
Investment manager
Lloyd’s service company
Insurance holding company
Lloyd’s managing agent
Insurance intermediary
Service company
Underwriting agent
General insurance
Underwriting agency
Insurance intermediary
Holding company
Service company
Insurance intermediary
Holding company
General Insurance
Service company
Country
Great Britain
Great Britain
Guernsey
USA (Delaware)
USA (Delaware)
USA (Illinois)
USA (Delaware)
USA (Delaware)
USA (Delaware)
USA (Illinois)
Bermuda
Great Britain
Bermuda
Bermuda
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Luxembourg
Guernsey
Great Britain
Great Britain
Great Britain
France
Singapore
Singapore
Singapore
All principal subsidiaries are wholly owned. The proportion of voting rights of subsidiaries held is the same as the proportion of
equity shares held.
244
Hiscox Ltd Report and Accounts 2023
Chapter 1
Performance
and purpose
6
Chapter 2
A closer look
22
Chapter 3
Governance
72
Chapter 4
Remuneration
106
Chapter 5
Shareholder
information
148
165
Chapter 6
Financial
summary
Notes to the
consolidated
financial statements
30 Related-party transactions
Details of the remuneration of the Group’s key personnel, presented in Sterling, are shown in the annual report on remuneration
2023 on pages 112 to 122. A number of the Group’s key personnel hold insurance contracts with the Group, all of which are on
normal commercial terms and are not material in nature.
The following transactions were conducted with related parties during the year.
(a) Syndicate 33 at Lloyd’s
Related-party balances between Group companies and Syndicate 33 reflect the 27.4% interest (2022: 27.4%) that the Group does
not own, and are as follows:
Hiscox Syndicates Limited
Hiscox Group insurance carriers
Hiscox Group insurance intermediaries
Other Hiscox Group companies
Transactions in
the income statement
for the year ended
Balances
outstanding
receivable/(payable) at
31 December
2023
$m
31 December
2022
(restated)
$m
31 December
2023
$m
31 December
2022
(restated)
$m
24.2
20.7
7.4
47.6
99.9
6.5
11.5
5.1
44.5
67.6
23.3
(75.1)
(4.2)
(0.3)
(56.3)
5.9
(83.5)
(4.6)
(1.6)
(83.8)
(b) Transactions with associates
Certain companies within the Group conduct insurance and other business with associates. These transactions arise in the
normal course of obtaining insurance business through brokerages, and are based on arm’s length arrangements.
Insurance revenue achieved through associates
Commission expense charged by associates
There were no material outstanding balance sheet amounts with associates.
Details of the Group’s associates are given in note 13.
2023
$m
10.9
2.9
2022
$m
14.0
3.5
(c) Internal reinsurance arrangements
During the current and prior year, there were a number of reinsurance arrangements entered into in the normal course of trade
between various Group companies. The related results of these transactions have been eliminated on consolidation.
31 Post balance sheet event
There are no material events that have occurred after the reporting date.
Hiscox Ltd Report and Accounts 2023
245
Additional performance measures (APMs)
The Group uses, throughout its financial publications,
additional performance measures (APMs) in addition to
the figures that are prepared in accordance with UK-adopted
International Accounting Standards. The Group believes
that these measures provide useful information to enhance
the understanding of its financial performance. These APMs
are: combined, claims and expense ratios, return on equity,
net asset value per share, insurance contract written premium,
net insurance contract written premium and net tangible
asset value per share and prior-year developments. These
are common measures used across the industry, and allow
the reader of our Annual Report and Accounts to compare
across peer companies. The APMs should be viewed as
complementary to, rather than a substitute for, the figures
prepared in accordance with accounting standards.
A Combined, claims and expense ratios
The combined, claims and expense ratios are common
measures enabling comparability across the insurance
industry, that measure the relevant underwriting
profitability of the business by reference to its costs as
a proportion of the insurance revenue net of allocation
of reinsurance premiums. Claims are discounted under
IFRS 17 which can introduce volatility to the ratios if
interest rates move significantly during a period, therefore
ratios are also presented on an undiscounted basis.
The calculation is discussed further in note 4, operating
segments. The combined ratio is calculated as the sum
of the claims ratio and the expense ratio.
A Return on equity (ROE)
Use of return on equity is common within the financial
services industry, and the Group uses ROE as one of its
key performance metrics. While the measure enables
the Group to compare itself against other peer
companies in the immediate industry, it is also a key
measure internally where it is used to compare the
profitability of business segments, and underpins the
performance-related pay and pre-2018 share-based
payment structures. The ROE is shown in note 6, along
with an explanation of the calculation.
A Net asset value (NAV) per share and net tangible asset
value per share
The Group uses NAV per share as one of its key
performance metrics, including using the movement of
NAV per share in the calculation of the options vesting of
awards granted under Performance Share Plans (PSP)
from 2018 onwards. This is a widely used key measure
for management and also for users of the financial
statements to provide comparability across peers in the
market. Net tangible asset value comprises total equity
excluding intangible assets. NAV per share and net
tangible asset value per share are shown in note 5,
along with an explanation of the calculation.
A Insurance contract written premium and net insurance
contract written premium
Insurance contract written premium (ICWP) is the
Group’s top-line key performance indicator, comprising
premiums on business incepting in the financial year,
adjusted for estimates of premiums written in prior
246
accounting periods, reinstatement premium and
non-claim dependent commissions to ensure
consistency with insurance revenue under IFRS 17.
The definition of net insurance contract written premium
(NICWP) has been adjusted for certain items to ensure
consistency with insurance revenue under IFRS 17.
The adjustments primarily relate to reinstatement
premium and non-claim dependent commissions,
along with reinsurance commissions offset.
The tables below reconcile the insurance contract
written premium back to insurance revenue and net
insurance contract written premium back to net
insurance revenue.
Insurance contract
written premium
Change in unearned premium
included in the liability for
remaining coverage
Insurance revenue
Net insurance contract
written premium
Change in unearned premium
included in the liability for
remaining coverage
Change in reinsurance provision
for unearned premium included
in the asset for remaining coverage
Net insurance revenue (insurance
revenue less allocation of
reinsurance premiums)
2023
2022
4,598.2
4,355.4
(115.0)
4,483.2
(82.1)
4,273.3
2023
2022
3,555.8
3,225.5
(115.0)
(82.1)
(77.0)
(134.9)
3,363.8
3,008.5
A Prior-year developments
Prior-year developments are a measure of favourable
or adverse development on claims reserves, net of
reinsurance, that existed at the prior balance sheet
date. It enables the users of the financial statements to
compare and contrast the Group’s performance relative
to peer companies.
The prior-year development is calculated as the positive
or negative movement in ultimate losses on prior accident
years between the current and prior-year balance
sheet date on an undiscounted basis adjusted for LPT
premium and is disclosed in note 20. The LPT premium
reclassification captures the LPT reinsurance recoveries
due to changes in ultimate losses related to the covered
business which is recognised in the reinsurance
asset held for remaining coverage.
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration Five-year summary
Results
Profit/(loss) before tax
Insurance revenue
Profit/(loss) for the year after tax
Assets employed
Goodwill and intangible assets
Financial assets carried at fair value
Cash and cash equivalents
Insurance liabilities and reinsurance assets
Other net assets
Net assets
Net asset value per share (¢)
Key statistics
Basic earnings/(loss) per share (¢)
Diluted earnings/(loss) per share (¢)
Combined ratio (%)
Return on equity (%)
Dividends per share (¢)
Share price – high† (p)
Share price – low† (p)
*Represent balances reported under IFRS 4 and IAS 39.
†Closing mid-market prices.
‡Represents combined ratio on a discounted basis.
The five-year summary is unaudited.
2023
$m
2022
$m
2021
$m
2020
$m
2019
$m
4,483.2
625.9
712.0
323.9
6,574.4
1,437.0
(4,505.7)
(532.9)
3,296.7
951.5
206.1
201.5
85.5‡
27.6
37.5
275.6
4,273.3
253.9
320.4
5,812.1
1,350.9
(4,177.1)
(671.3)
2,635.0
764.5
73.8
72.7
88.7‡
10.1
36.0
190.8*
–
189.5*
(268.5)*
–
(293.7)*
53.1*
–
48.9*
313.1
6,041.3
1,300.7
(4,690.4)*
(155.4)
2,539.3
298.9
6,116.8
1,577.2
(5,468.8)*
(170.2)
2,353.9
278.0
5,539.0
1,115.9
(4,707.6)*
(35.6)
2,189.7
739.8
689.0
768.2
55.3*
54.7*
93.2*
8.1*
34.5
(91.6)*
(90.6)*
114.5*
(11.8)*
17.2*
16.9*
106.8*
2.2*
–
13.8
1,193.0
938.0
1,106.5
827.2
1,004.0
770.0
1,431.0
666.4
1,777.0
1,213.0
247
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration Glossary of terms
ABI stands for Association of
British Insurers.
FVOCI stands for fair value through
other comprehensive income.
LMA stands for Lloyd’s
Market Association.
ABIR stands for Association of
Bermuda Insurers and Reinsurers.
FVPL stands for fair value through
profit or loss.
LPT stands for legacy
portfolio transaction.
ACA stands for Associate
Chartered Accountant.
GBP stands for Great British
Pounds (Sterling).
LRC stands for liability for
remaining coverage.
AGM stands for Annual General Meeting.
GEC stands for Group
Executive Committee.
LTIP stands for long-term
incentive plan.
BIBA stands for British Insurance
Brokers’ Association.
GHG stands for greenhouse gas.
BMA stands for Bermuda
Monetary Authority.
GIST stands for general insurance
stress test.
MSCI stands for Morgan Stanley
Capital International.
NAV stands for net asset value.
BSCR stands for Bermuda Solvency
Capital Requirement.
GMM stands for General
Measurement Model.
NAVPS stands for net asset value
per share.
CBES stands for Climate Biennial
Exploratory Scenario.
GRCC stands for Group Risk
and Capital Committee.
NICWP stands for net insurance
contract written premium.
CGU stands for cash-generating unit.
GRI stands for Global Reporting Initiative.
CIAB stands for Council of Insurance
Agents and Brokers.
GUR stands for Group
Underwriting Review.
COR stands for combined ratio.
H1 stands for first half of the year.
OCI stands for other
comprehensive income.
OECD stands for Organisation
for Economic Co-operation
and Development.
CSRD stands for Corporate
Sustainability Reporting Directive.
H2 stands for second half of
the year.
ORSA stands for own risk and
solvency assessment.
CVaR stands for Climate Value-at-Risk.
IAS stands for International
Accounting Standards.
PAA stands for premium
allocation approach.
DEI stands for diversity, equity
and inclusion.
D&O stands for directors and
officers’ insurance.
DPD stands for direct and
partnership division.
DTA stands for deferred tax asset.
EAD stands for exposure at default.
ECL stands for expected credit loss.
EPS stands for earnings per share.
ESG stands for environmental, social
and governance.
ETR stands for effective tax rate.
FCA stands for Financial
Conduct Authority.
FRC stands for Financial
Reporting Council.
248
IBNR stands for incurred but
not reported.
ICWP stands for insurance
contract written premium.
IFRS stands for the International
Financial Reporting Standards.
ILS stands for insurance-linked
securities.
IPCC stands for Intergovernmental
Panel on Climate Change.
ISSB stands for International
Sustainability Standards Board.
KPI stands for key
performance indicator.
LGD stands for loss given default.
LIC stands for liability for incurred claims.
LOC stands for Letter of Credit.
PBT stands for profit before tax.
PD stands for probability of default.
PRA stands for Prudential
Regulation Authority.
PSP stands for performance share plan.
Re stands for reinsurance.
ROE stands for return on equity.
RIMS stands for Risk and Insurance
Management Society.
SME stands for small- and
medium-sized enterprises.
SPPI stands for solely payments of
principal and interest.
USD stands for United States Dollars.
WACC stands for weighted average
cost of capital.
Hiscox Ltd Report and Accounts 2023Chapter 6 165Financial summaryChapter 3 72GovernanceChapter 5 148Shareholder informationChapter 2 22A closer lookChapter 1 6Performance and purposeChapter 4 106Remuneration Designed by Em-Project Limited
www.em-project.com
Printed by Pureprint
www.pureprint.com
Photography by
Simon Warren
(cover image, IBC)
(reportage images p9, p13, p16, p22,
p36, p47, p49, p62, p82, p84, p96,
p99, p106)
(editorial images p3, p5, p19, p21,
p33, p35, p43, p45, p69, p71, p79,
p81, p103, p105, p145, p147),
(Hiscox community portrait images
p1, p153 to p164)
Suki Dhanda
(Board images p72 to p74,
GEC images p76 to p77)
Printed in the UK by Pureprint using
vegetable inks and their Pureprint
environmental printing technology.
Pureprint is a CarbonNeutral®
company. Both the manufacturing
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Disclaimer
This document contains
forward-looking statements
regarding plans, goals and
expectations relating to the
Group’s future financial condition,
performance, results, strategy
or objectives, which by their very
nature involve risk and uncertainty.
Statements that are not historical
facts are based on Hiscox’s beliefs
and expectations. These include
but are not limited to statements
containing the words ‘may’,
‘will’, ‘should’, ‘continue’, ‘aims’,
‘estimates’, ‘projects’, ‘believes’,
‘intends’, ‘expects’, ‘plans’, ‘seeks’
and words of similar meaning.
These statements are based on
current plans, estimates and
projections as at the time they are
made and therefore undue reliance
should not be placed on them.
A number of factors could cause
Hiscox’s actual future financial
condition, performance or other
key performance indicators to differ
materially from those discussed
in any forward-looking statement.
These factors include but are not
limited to future market conditions;
the policies and actions of regulatory
authorities; the impact of competition,
economic growth, inflation, and
deflation; the impact and other
uncertainties of future acquisitions
or combinations within the insurance
sector; the impact of changes in
capital, solvency standards or
accounting standards or relevant
regulatory frameworks, and tax and
other legislation and regulations
in the jurisdictions in which Hiscox
operates; and the impact of legal
actions and disputes. These and
other important factors could result
in changes to assumptions used for
determining Hiscox results and other
key performance indicators.
Hiscox therefore expressly
disclaims any obligation to update
any forward-looking statements
contained in this document, except
as required pursuant to the Bermuda
Companies Act, the UK Listing
Rules, the UK Disclosure Guidance
and Transparency Rules or other
applicable laws and regulations.
Hiscox Ltd
Chesney House
96 Pitts Bay Road
Pembroke HM 08
Bermuda
T +1 441 278 8300
E enquiry@hiscox.com
www.hiscoxgroup.com
22599 03/24