Bermuda domiciled specialty insurer and global reinsurer, AXIS Capital Holdings, is proud of its ability to raise new capital and bring in new investors in what’s been a challenging year for third-party capital raises, says President and Chief Executive Officer (CEO), Albert Benchimol.
Despite the challenging reinsurance market conditions that continue to stress the profitability of the sector, AXIS has managed to increase its third-party capital assets under management (AuM) to a new high of $2.1 billion.
In light of the expansion, Artemis spoke with President and CEO Benchimol at the annual meeting of the reinsurance industry in Monte Carlo.
“We feel proud that in 2019, which was a difficult year for the markets, AXIS was still able to bring in two new vehicles, raise new capital and bring in new investors. And I think that speaks well to our efforts and to our reputation as a responsible manager of third-party capital,” said Benchimol.
In the second-quarter of 2019, the re/insurer’s fee income earned from what it calls Strategic Capital Partners increased to almost $19.2 million, and, at the same time, the amount of premiums AXIS is ceding to third-party capital also rose, to almost $559 million for the first-half of 2019.
The company’s third-party capital management business has continued to steadily build, with the firm using an increasing amount of quota share capacity from third-party institutional investors, as well as capital accessed through other private ILS deals.
Benchimol explained that the re/insurer’s relationships with the investors, or as AXIS sees them, its Strategic Capital Partners, are very important.
“We call them Strategic Capital Partners for a reason. And, our approach is also different in that what we do with our Strategic Capital Partners is that we share with them on an equal footing with the risk that we write, it is only on a quota share basis. We don’t say, ‘we’ll keep this risk for ourselves and we’ll give you that risk.’
“What we are basically saying is that we are building the best gross portfolio that we can, and at that point we are giving you an opportunity to share in that portfolio. So, different investors have different appetites. There are some that only want to write one line of business, multiple lines of business, geographies and so, and we give them the opportunity to build the portfolio that is the most attractive to them and meets their needs. But there is zero agency risk because we are completely aligned with our Strategic Capital Partners,” he said.
For insurers and reinsurers managing third-party capital, alignment of interest with their investor base is important and can be a challenge.
Benchimol told Artemis that alignment is a risk, but stressed that at AXIS, “we want to make sure that there is never any agency risk in what we do, and it is always going to be like that.”
The expansion of the firm’s third-party capital operations is clearly benefiting the firm, and as at the half-way point of the year, AXIS reported total fees earned from strategic capital partners of nearly $39 million, which is up significantly on the $24.4 million recorded in the first-half of 2018.