AXIS sees up to $150m net California wildfire loss, $20bn industry loss

Bermuda headquartered insurance and reinsurance firm AXIS Capital has estimated that its losses from the recent California wildfires could be as much as $150 million net and the firm added that it has based its estimate on an industry loss of up to $20 billion.

It suggests that AXIS Capital is expecting the industry impact to rise from the current estimates that suggest an up to $15 billion impact from the Camp and Woolsey wildfires. Clearly AXIS expects something a little higher, with $20 billion in sight.

The company gave a pre-tax loss estimate for the California wildfires of between $125 million to $150 million, after taking into account any estimates for reinsurance and retrocessional recoveries and factoring in the impact of estimated reinstatement premiums.

AXIS said that its estimate includes losses under certain aggregate excess of loss reinsurance treaties that had also been impacted by losses from other 2018 catastrophe and severe weather events.

But it could be the $20 billion industry loss estimate that is most relevant for ILS fund and collateralized reinsurance interests, as if insurers and reinsurers are making their loss reserves based on a figure that high it could suggest loss creep further down the line for insurance-linked securities (ILS) strategies, unless they too are expecting an industry impact around that amount.

AXIS Capital also said that its loss estimate for hurricane Michael now sits towards the upper end of the range it previously announced, of around $120 million.

For that loss event too, AXIS had given a higher than anticipated (at the time) industry loss estimation for a $10 billion impact, which given its own estimate is now at the top-end of its range suggests the industry figure could prove accurate, aligning with other industry sources.

It’s likely AXIS will claim some of its losses back from ILS investors, as the firm has been utilising an increasing amount of third-party capital within its reinsurance underwriting business, with some large quota shares and private insurance-linked securities (ILS) arrangements with major ILS investors in place.

As we explained before, in the third-quarter of 2018 AXIS ceded roughly $136.5 million of premiums to its strategic capital partners, up from $108.7 million in the prior year period.

An increasing amount of these cessions flow to third-party capital and ILS investors, resulting in a share of the impacts of major losses flowing through some of these arrangements.