French insurer AXA has reported a number of changes to its natural catastrophe reinsurance programme for 2023 when compared with last year, including higher retentions and a new quota share arrangement for the London Market as AXA XL Re targets further reductions in the catastrophe space.
After lowering the retention in 2022 when compared with the prior year programme, AXA has again seen the attachment points rise for its occurrence reinsurance protection for AXA XL Insurance for the year ahead.
At the same time, the carrier has expanded its quota share reinsurance agreements, increasing cessions in two while adding a new quota share for the London marketplace.
For the European windstorm peril, the retention has risen by €50 million to €550 million, after which reinsurance extends up to €2.8 billion of losses, which is up €300 million on the 2022 programme.
The European flood layer has seen its retention rise by €100 million to €450 million, but for 2023 reinsurance only covers losses above this and up to €1.75 billion, compared with €1.85 billion in 2022.
The European earthquake retention has grown from €350 million to €400 million, while this layer now only extends to €1.8 billion compared with €1.85 billion a year earlier.
For North America hurricane the retention has jumped significantly from €350 million to €600 million, while the amount of reinsurance above this is down from €1.15 billion to €1 billion for the 2023 programme.
It’s the same for North America earthquake; this layer now has a retention of €600 million versus €350 million and also extends up to €1 billion, compared with €1.15 billion in 2022.
The per-occurrence other perils layer, which includes Turkey earthquake, North America floods and a range of other secondary perils, has seen its retention move up by €50 million to €400 million. AXA explains that capacity varies by peril type.
In North America, the firm has increased cession to 31% for the AXA XL Insurance quota share, and increased cession to 28% in international, while adding a new 14% quota share for the London Market.
Below is AXA’s simplified group nat cat reinsurance programme for 2023.
AXA expects the higher retention in primary insurance to be more than offset by the uplift in the AXA XL Insurance property quota shares, and also by further reducing AXA XL Reinsurance catastrophe charges by an expected 35% in 2023.
In fact, despite the year-on-year changes made to its nat cat reinsurance protection for this year, AXA sees an expected stable catastrophe load for 2023. Pre-tax and net of reinsurance, the average group nat cat charge is expected to rise by 0.1 percentage points to 2% for 2023. This suggests that quota shares are expected to mean more losses will be shared with their reinsurance partners in the year ahead.
Of course, the catastrophe reinsurance space is experiencing significant rate hardening, which means higher reinsurance costs for buyers of protection. However, AXA expects the elevated cost of reinsurance for 2023 to be fully offset by pricing actions in primary property lines of business, and at AXA XL Reinsurance.
Earlier this week, the firm reported a 4% increase in underlying earnings for 2022, despite significant reductions in natural catastrophe exposure for AXA XL Reinsurance.