AXIS cedes over half its catastrophe book to third-party capital: Benchimol

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During the second-quarter, AXIS Capital, the Bermuda-based globally-active insurance and reinsurance company, ceded more than half of its catastrophe book to its third-party capital partners, according to the firms CEO Albert Benchimol.

AXIS Capital logoBenchimol was speaking during the AXIS Capital second-quarter earnings call yesterday, during which he explained how the way the re/insurer is ceding risk and using retrocessional reinsurance has changed.

As we reported yesterday, overall cessions to its so-called Strategic Capital partners had fallen during Q2, reflecting the shift in how AXIS retains and managers premiums in its insurance and reinsurance businesses.

At the same time, fee income from its third-party capital business rose a little year-on-year, suggesting more profitable portfolios of risk.

During the earnings call yesterday, AXIS’ CEO Benchimol revealed that the company ceded the largest proportion of its catastrophe book in its history to its third-party capital partners last quarter.

Benchimol explained some of the work undertaken to improve the profitability of AXIS’ book, particularly in relation to catastrophe exposures.

“The most important part, is that there’s been a huge amount of work made in the construction of the portfolio,” Benchimol said. Adding that, “I think that’s the greater efficiency of the portfolio. Getting rid of the bulky exposures is very important and I think we’re more balanced and geographically with regard to the portfolio, all of which helped in driving the PML’s down.”

“Of what we’re keeping in terms of the PML, it’s not just our cat that goes to retro,” he continued.

“So although we’ve reduced cessions, we’ve reduced retrocessions in other lines also.

“Where we are today, we’re ceding to our third-party capital partners over 50% of our cat book and that is the largest percentage we’ve ever shared with our third-party capital partners.”

This bodes well for a company that has recently rebranded its insurance-linked securities (ILS) focused segment of its business, as AXIS ILS, and also hired a new leader for that unit.

AXIS had also recently expressed a desire to grow the ILS side of its strategic capital partner activities, to make better use of third-party capital across its business and particularly to assist in managing catastrophe exposures.

Benchimol’s commented suggested this trend, of leveraging third-party capital and ILS structures to manage catastrophe PML’s is likely to continue and perhaps accelerate at AXIS.

He said that, “Our reinsurance team is leveraging current market conditions to further optimise their contribution to our consolidated portfolio and the team is delivering on its goals.

“We’re growing where it makes sense, holding the line where conditions are not as attractive as they should be and meaningfully reducing catastrophe PML’s, all of which are leading to a stronger, more profitable portfolio.”

He also explained that AXIS anticipates rates continuing to increase at levels above loss trends right into 2022, suggesting the opportunity for its capital partners is not going to dissipate anytime soon, while growth opportunities continue.

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