Rating agency Fitch has revised its outlook on the ratings of Bermudian insurance and reinsurance firm AXIS Capital Holdings Ltd. to negative, in the wake of recent catastrophe losses.
Citing declining capital adequacy, adverse earnings trends, the reinsurers sensitivity to changes in loss estimates and the $578 million of net after-tax losses, Fitch Ratings said that the recent loss events magnify a “general negative trend in underlying earnings” for AXIS Capital, putting pressure on its ratings.
Fitch explained that AXIS Capital scored ‘strong’ on its capital model test, compared to having scored ‘very strong’ historically.
The results from its Prism capital model test reflect AXIS’ lost equity due to the recent catastrophe loss events, as well as adjustments for its recent acquisition of Novae.
However, Fitch noted that AXIS’ hurricane losses were below its 1-in-50 catastrophe loss expectations and noted that the firm has made plans to replenish its capital by suspending share repurchases.
AXIS won’t be the only re/insurer to find its ratings under a little more pressure, based on an eroded capital and equity base following the major loss events.
Fitch affirmed AXIS’ ratings but placed them on a negative outlook, reflecting the worsened financial position following this year’s hurricanes. However the re/insurer will be hoping to make up any shortfall in capital adequacy over the coming months, through suspension of its capital return policy and likely some higher rates at the renewals in January.
