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AXIS Capital takes advantage of pricing to hedge reinsurance portfolio


Bermuda based global specialty insurance and reinsurance firm, AXIS Capital Holdings, has taken advantage of recent reductions in pricing of reinsurance and retrocessional protection with selected, largely non-traditional, opportunities which help it to hedge its own reinsurance portfolio.

One of those opportunities is the just completed Northshore Re Limited (Series 2013-1) catastrophe bond, which is the first cat bond AXIS Capital has sponsored. The cat bond will provide it with a source of annual aggregate excess of loss retro reinsurance for U.S. hurricane and earthquake risks.

The firm is also progressing its own initiatives in ILS and managing investors capital according to comments made by President and CEO Albert Benchimol on the firms Q” earnings call yesterday.

When discussing recent initiatives of note at AXIS Capital, Benchimol said; “We are also progressing our third-party capital management efforts and have begun executing on opportunities to hedge our reinsurance portfolio at attractive prices.”

The Northshore cat bond is just one of those opportunities that AXIS Capital has progressed in Q2. The firm has also found other ways to access non-traditional reinsurance and retrocession capacity, likely from capital markets backed sources of capacity.

Benchimol commented; “We have actually started to hedge our reinsurance portfolio using ILWs and other transactions of that type. And in addition, we have acquired protection on our aggregate book on an annual aggregate excess of loss basis through a cat bond that we priced just yesterday.”

AXIS Capital has looked to the ILS markets for additional reinsurance and retro protection for itself in Q2, the results of which will become more apparent in Q3 when the premiums associated with these transactions will likely be included in results. At the same time it is working on its own third-party capital management activities, with recent hire Ben Rubin, now Executive Vice President, Capital Markets at AXIS and previously of Bank of America Merrill Lynch, leading the way.

The Northshore Re cat bond has now closed with very attractive pricing secured for AXIS Capital helping it to further reduce its retrocessional reinsurance costs.

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