AXIS expands third-party capital to $1.9bn, fee income grows in 2017

Bermuda domiciled insurer and reinsurer, AXIS Capital Holdings Limited, now has access to $1.9 billion of third-party capital, and saw an increase in both ceded premiums and collected fees in 2017, according to its fourth-quarter and full-year 2017 earnings call.

Albert Benchimol, AXIS Capital’s President and Chief Executive Officer (CEO), said late last year that the firm was preparing to increase its use of third-party, or alternative reinsurance capital as it sees higher rates.

During the firm’s Q4 and full-year 2017 earnings call, Benchimol said the re/insurer now has access to about $1.9 billion of third-party capital, of which around 55% (or $1.05 billion) is dedicated to the property catastrophe reinsurance space, with the remaining 45% spread across numerous over lines of business.

“In 2017, we ceded almost $500 million of premium and collected $36 million in fees. This represents growth of over 60% in 2017. And given our greater capacity available in 2018, we would expect further growth in both these important metrics,” said Benchimol.

In recent years, AXIS has been building out a number of third-party reinsurance capital activities, including its total-return reinsurance joint-venture, Harrington Re, and its AXIS Re Ventures unit, where its insurance-linked securities (ILS) fund management type activities take place.

Furthermore, the re/insurer recently took over the management and oversight of the special purpose Lloyd’s of London syndicate 6129 joint venture, which is backed by Securis Investment Partners, following its acquisition of Novae Group.

Via the acquisition, AXIS will benefit from a new capital partner in Securis and its ILS investors, which, is likely to improve efficiency to its U.S. excess and surplus offering, while Securis could benefit from improved access to business.

AXIS clearly understands the benefits of working with alternative reinsurance capital, and will likely continues to earn higher fees from its ILS operations as it expands access to third-party capital, which now sits at just under $2 billion.

“With our strong balance sheet and access to substantial third-party capital, we’re very well placed to take advantage of improved market conditions and leverage our enhanced market position to make the most of available market opportunities,” said Benchimol.

The re/insurer also explained during its recent earnings call that it’s reducing its overall catastrophe exposure within its reinsurance operations, which could be down to the losses experienced in 2017 and, which could also be something they’ve leveraged greater third-party capital for.

At the same time, the firm feels it will be able to improve the underwriting result of its insurance property book, and feels it is in a solid position to utilise and apply “new tools and approach the pricing and construction to the rest of the book.”

“Let’s be honest. Where the world is right now with the alternative markets driving the price for cat, cat is no longer offering insurers strong double-digit returns. And so, we have to make sure that we allocate our capital appropriately for the risk and returns that are provided by the cat business,” said Benchimol.

In order to position itself for a more efficient future, AXIS announced recently that it would merge its ceded reinsurance and third-party capital operation, as part on an ongoing strategy.