Bermuda-based insurer and reinsurer, AXIS Capital Holdings Limited, further reduced the volatility of its portfolio at the Jan 1, 2022, renewals, cutting its reinsurance property and property catastrophe premiums by 45%.
The company’s President and Chief Executive Officer (CEO), Albert Benchimol, confirmed on a recent earnings call that AXIS advanced its objective to reduce its exposure to property catastrophe business at 1/1.
This catastrophe pruning is part of a multi-year transformation at AXIS as the carrier looks to produce the most optimised portfolio for the current market.
In fact, the re/insurer has reduced its attritional ratio by nine percentage points since 2017 to 55.1% in 2021, lowered its ex-cat combined ratio by 10 points to 88.7%, while reducing its PML by 50% across the curve, explained Benchimol.
“The improvement in our performance is attributable to more proactive reshaping of the portfolio, reduction of limits and modification of attachment points, in addition to good growth in selected lines once they reached rate adequacy,” he said.
Despite global insured catastrophe losses running about 40% higher in 2021, Benchimol explained that AXIS’ cat loss ratio remained flat at roughly 9.5% – highlighting the reduced volatility already achieved.
And this trend continued at the key Jan 1 renewals, with the company continuing to reduce the size of its property and cat reinsurance book.
Benchimol noted that meaningful action taken to reshape the cat portfolio in order to lower the overall earnings volatility, was evidenced by “a 70% reduction in gross premiums for aggregate treaties, and a 75% reduction in gross premiums on low attaching treaties, among our various actions.”
This resulted in a 45% reduction in property and property cat reinsurance premiums at the 1/1 renewals, when compared to the prior year.
“This is consistent with our commitment to build a portfolio that we believe will drive the economic performance that we target,” said Benchimol.
Later in the call, Benchimol told listeners that as AXIS goes throughs the upcoming renewals in April and at the mid-year, it will take similar actions in terms of some reductions in the property and cat book.
Adding that “we hope that that’ll be offset by growth in other lines of business, which are proving more attractive, both internationally and in the U.S.
“So, overall, we expect modest growth in the portfolio for reinsurance, but we think it’s going to be a much more powerful book as we move forward.”
He also emphasised that even with significant reductions in the property and cat portfolios, the company is still anticipating improved technical ratios.
“So, net-net, the quality of the rest of the book, the rate increases, are such that even without modeled, lower loss ratio property cat business, we’re still expecting improved attritional loss ratios and technical ratios for the year.”
Overall, just over half of AXIS Re’s book renewed at 1/1, and the firm saw average increases of 9%. In property cat, Benchimol noted that pricing was not uniform across the books, with lower layers, and notably those affected by losses, showing the strongest increases.
“Our general view of the reinsurance market is that while it’s still running overall behind primary pricing, the market is heading in the right direction but must continue to do so to adequately compensate reinsurers for the risk and volatility they assume,” he said.
The earnings call followed the release of AXIS’ fourth quarter and full year 2021 results, where it reported a return to underwriting profit across its insurance and reinsurance operations.
