Albert Benchimol, President and CEO of AXIS Capital Holdings, has asserted that it is “absolutely crucial” that insurers continue to sustain pricing discipline in order to deliver an adequate return on capital and fulfil its role as “a safety net for the free markets.”
Speaking during a Q1 earnings call, Benchimol discussed the overall market conditions experienced by AXIS, and in particular the pricing environment and the April renewal period.
AXIS reported an improved combined ratio of 91.4% for the first quarter of 2022, as both its insurance and reinsurance segments recorded a better underwriting result in the period.
Commenting on the rate increases seen across the market, Benchimol acknowledged that, while prices may have dipped from the highs of 2021, they continue to extend across almost every line for AXIS, and remain “well ahead of loss cost trends.”
But he also told that AXIS anticipated disciplined pricing to persist in both insurance and reinsurance into 2023.
“Given the quantum of pressures and uncertainties on loss cost and profitability, the industry needs to maintain a rational approach to pricing,” Benchimol argued.
He noted that the average rate increase across the AXIS insurance book was close to 12% in Q1, representing the 18th consecutive quarter of rate increases and the 8th consecutive quarter of double-digit increases for the company.
By class of business, professional lines once again saw the strongest pricing actions with average rate increases of 24%, although this was largely due to the large rate hikes in cyber, which averaged around 70% but were in some cases higher than 100%, Benchimol revealed.
For reinsurance business, AXIS average rate increases of close to 9%.
In catastrophe lines, the company significantly reduced its participation in lower layers of towers and aggregate treaties, focusing instead on higher layers of towers where there was more appetite and capacity.
According to Benchimol, this resulted in average rate increases on catastrophe business around 6%.
Turning to the April 1 renewal season, the CEO explained that AXIS had “continued our practice of reducing catastrophe business while looking for growth or conditions that are profitability thresholds. Our property and catastrophe volume was cut in half while we grew in casualty and professional lines.”
AXIS achieved increases of about 5% on catastrophe lines and averaged 10% on casualty and liability lines as well as A&H, although this period only represented around 12% of the company’s reinsurance book. Professional lines were up in the single-digit range.
“We did see pressure for more ceding commissions on certain quota share treaties,” Benchimol added. “In those cases, we generally reduced or even exited our participation where we thought the ask was just too much.”
“With the reduction in property and catastrophe exposure, these two lines represented about 16% of our year-to-date reinsurance gross written premiums, down from 27% through April 1 of last year,” he explained.
“While the mix shift has put some pressure on the reinsurance portfolios ex-cat combined ratio, we’re convinced that the business will ultimately benefit from a lower all-in combined ratio and less volatility.”