AXIS Capital is anticipating ongoing insurance and reinsurance pricing increases into the 2019 renewals and beyond, according to its Chief Executive Officer (CEO), Albert Benchimol.
Speaking during the firm’s third quarter earnings call, Benchimol explained that rates remain inadequate in many lines, and should be spurred on by the further “pain” that has afflicted the market throughout 2019.
AXIS reported net income of just $28 million and an operating loss of $33 million earlier this week following a “disappointing quarter” that pushed the company’s combined ratio to 109.4%.
This result included pre-tax weather-related losses of $160 million, mostly driven by Hurricane Dorian and the typhoons in Japan, amongst other events.
Compared to the same period in 2018, AXIS’ catastrophe and weather-related losses ratio increased by almost 7 percentage points to 14.1%, while the current accident year loss ratio increased to 75.8%.
However, Benchimol explained that AXIS had also seen an acceleration in the pace of improvements to pricing and terms and conditions for a third consecutive year.
Similarly, the average rate increase on renewed business across the company’s insurance portfolio was 8% in the third quarter of 2019, compared to 7% in the second and 4% in the first.
“The markets that have suffered the most are the ones exhibiting the largest dislocations and pricing increases,” he noted. “There’s no denying that many of our lines of business have been under intense pressure over the past few years, but now we also have the opportunity to take advantage of the recovery, especially with our stronger relevance and leadership in many attractive markets.”
Looking at reinsurance in particular, AXIS does not consider the market to be as dislocated as the primary or retro markets, but it does still expect to see ongoing rate improvements at the upcoming renewals.
For proportional business, Benchimol asserted that reinsurance will benefit from strong underlying primary rate increases, combined with pressure on reducing ceding commissions.
Excess of loss treaties should similarly respond to recent loss experience, and AXIS foresees pricing corrections in many lines, including aviation, marine, credit, engineering, casualty, and professional lines.
For catastrophe covers, AXIS expects to see ongoing rate increases in North America and Caribbean markets at the 1/1 renewals, driven by increased demand for reinsurance, combined with another year of unsatisfactory results for reinsurers.
In contrast, the European and Latin America markets are likely to be flat or up low single digits given the absence of large losses in recent years.
Later in 2020, AXIS believes the Japanese and US mid-year renewals will shows rate increases in the double-digit range, including significant increases in loss-impacted layers.
“This was a tough quarter,” Benchimol concluded, “but we’ve also seen very encouraging indicators that we’re making tangible progress and are on the right path. The markets are improving.
“Notwithstanding the challenges we face this quarter, we’re confident that AXIS will do very well in this environment,” he added.
“We’re seeing great opportunities, growing where we want to and making ongoing investments necessary to become a stronger company that is well positioned to deliver long-term profitable growth.”
