The retrocession market has helped Bermudian re/insurer AXIS Capital to reduce its losses from third-quarter catastrophe events, including hurricanes Harvey, Irma and Maria, as well as the Mexico earthquakes, to $578 million, with the firm set to claim $136 million back from retrocessionaires.
AXIS Capital said that the $578 million hit is across both its insurance and reinsurance segment, after tax, estimated recoveries from reinsurance and retrocession, and the impact of estimated reinstatement premiums.
Interestingly the company has seen its retrocession pay out much more than its reinsurance, as the per event impact was not significant enough in the company’s insurance business.
AXIS has suffered $321 million of gross catastrophe losses from its insurance lines and $458 million in its reinsurance business, but the retrocessional protection has been triggered much more meaningfully than the firms reinsurance, meaning the net impact after recoveries only dropped $6 million to $315 million in its insurance unit, compared to the $136 million recovery in reinsurance taking the net loss down to $302 million.
AXIS said that its insurance segments property catastrophe reinsurance treaty triggers in excess of $200 million per event, net of recoveries from applicable property per risk treaty and facultative reinsurance. In this case none of the events has triggered this piece of the firms program.
Additionally, AXIS said that Novae, which the firm acquired recently, has suffered a $60 million loss from recent events, after reinsurance and the impact of estimated reinstatement premiums. AXIS expects Novae to receive reinsurance recoveries from all of the recent loss events, adding that it has significant aggregate reinsurance cover still in force.
Albert Benchimol, CEO and President of AXIS Capital, commented on the losses; “Our foremost thoughts are with the people whose lives have been impacted by this unprecedented series of catastrophic events. Our mission is to help people, businesses and communities recover from calamities such as these, and we are fully committed to supporting and serving the communities that have been affected by the devastation.
“We have commenced paying claims for our insureds, and our team will continue to work tirelessly with our clients and partners so that we can assist in the rebuilding efforts. While we dedicate our energies and resources to support our clients and partners in managing through the challenges presented by these events, we stand ready to provide the protection and services our clients and partners in distribution need so they can deliver on their promises to their customers.”
AXIS will have benefitted from third-party capital support in the retrocession it has tapped into to help pay these claims, with some of it likely to have been collateralized.
AXIS also has its own third-party capital management unit, under its Ventures unit, as well as its total-return style reinsurance vehicle Harrington Re. Investors in both of these businesses will likely share in some of AXIS’ ultimate losses from these catastrophes, particularly on the Ventures side where property catastrophe risks are understood to be largely the focus.
The company also has the $350 million Northshore Re II Ltd. (Series 2017-1) catastrophe bond in force still, but this is a per-occurrence structure and it seems none of the individual hurricane loss events have come close to the trigger, in terms of AXIS’ ultimate net loss.
AXIS has increased its work with so-called strategic capital partners in the last few years, ceding an increasing amount of risk to them, and these partnerships with institutional and third-party investors, through ILS vehicles under the Ventures unit and with Harrington Re, will have helped the firm manage recent loss events and the overall impact to the firm.