Axis will not grow cat exposure no matter the price: Benchimol
Axis Capital president and CEO Albert Benchimol has said the carrier will not increase the amount of cat exposure it takes on, “no matter what the price is”, as it continues to rebalance its portfolio.
The executive told analysts on a Q3 results call that the goal was to deliver “strong and steady and less volatile” earnings.
“We will not be increasing our cat exposure no matter what the price is,” he noted. “We want to bring our book down to a specialty lines book that has an appropriate amount of property and property cat, but not too much.”
He concluded by saying: “We've suffered from being overweight property and property cat in the last three, four years. We're working our way down.”
For Axis Re business, rates climbed 9% in the quarter, below the 11% average year-to-date increase but slightly ahead of the 8% jump registered in Q3 2020.
Benchimol reminded investors and analysts that Q3 is a relatively small renewal period for Axis, impacting less than 15% of its reinsurance business.
“Heading into the January 1 renewals, we expect to see reinsurance rate increases, but the quantum remains uncertain at the moment,” Benchimol noted.
“We anticipate that this year's cats will continue to drive market momentum,” he said, adding that recent events, coupled with five years of poor performance and concerns about the immediate impact of climate change, “have most reinsurance carriers signaling stable to reduced capacity”.
The executive said there was a strong case for meaningful rate increases in reinsurance, at least on par with insurance pricing, but the absolute amount of reinsurance capital that is currently available continues to be the main offsetting driver to a more meaningful correction in reinsurance.
Speaking more broadly on Axis’ book, Benchimol said the carrier remained ahead of loss-cost trends after posting a 14% rate increase during the third quarter of the year.
Q3 marked the 16th consecutive quarter of insurance rate increases and the sixth with double-digit rises for the Bermudian carrier, although at 14%, the magnitude of rate increase remained close to flat compared with Q2 2021.
“It is understandable that after four years of rate increases that have now aggregated to more than 40%, pricing action is slowing modestly in certain lines,” Benchimol said during the third-quarter earnings call with analysts.
“But overall, conditions remain very strong, and most importantly, we're staying meaningfully ahead of loss costs,” he added.
Insurance rate increases in North America grew 13% and went up 15% in the London market during Q3, as 97% of the carrier’s insurance portfolio renewed flat from the previous quarter.
The professional lines business reported the strongest rate increases with 21%, as rapid pricing escalation in cyber remained a key factor.
Cyber rates jumped 52% following a 32% increase in Q2, while the rest of the professional liability segments averaged a 12% rise during Q3 of 2021.
Property, liability, primary and excess casualty averaged increases of close to 10% during the quarter, while specialty lines posted rate rises in the low-to-mid double digits.
In the renewable energy segment, one of the most relevant specialty lines for Axis, rates went up close to 15%.
“Looking broadly from an industry view, insurance rate increases are not as high as they were in the third quarter of last year,” Benchimol said.
“But putting things in perspective within Axis, for the first nine months of this year, we achieved average rate increases of 13% that are on par with a 13% increase we saw in the first nine months of 2020,” he added.
The executive reported the firm’s rate increases after Axis grew gross written premiums by 24% in the third quarter – the most in recent memory – and lowered its underwriting loss to $59mn from $135mn last year.
The company trimmed its Q3 underlying loss despite being hit by $250mn in cat losses during the period. According to the Axis CEO, this year ranked in the top five for cat losses for the industry.