The President and Chief Executive Officer (CEO) of AXIS Capital Holdings Limited, Albert Benchimol, has said that current earnings will be crucial in what is still not a hard market, but an underwriters’ market.
In light of more pronounced rate increases at the June and July renewals, insurance and reinsurance company second-quarter and H1 2019 results have featured market commentary on the level and sustainability of rate increases.
Speaking during the Bermudian re/insurer’s earnings call, Benchimol, like other industry executives, said that despite the rate increases witnessed in the last two years, many business lines are still inadequately priced.
He cautioned that this is “not a hard market” where most lines are priced adequately, but instead, this “is an underwriters’ market where selection and portfolio construction will be important differentiating factors.”
Benchimol said that the fact more recent loss trends are unlikely to dissipate in the near future is one of the reasons that AXIS believes that the price action will continue into 2020 and perhaps even longer.
However, current earnings is expected to be vital for market participants as a result of market dynamics, which suggests that firms will be less able to leverage reserves to bolster their returns in the same way they have in the past.
The erosion of reserve releases has been noted by industry analysts in recent times, and like Benchimol, analysts have warned that property and casualty (P&C) players will likely be less able to call on their reserves in the future, which in turn puts more attention on the underwriting performance.
This is happening at a time of increased market discipline, something that has been noted by the majority of company executives during the most recent earnings season, and which is believed to be in response to the prolonged soft market cycle which was underpinned by extremely low rates and intense competition.
It will be interesting to see just how sustainable rates are in the coming months and if market discipline persists in what Benchimol describes as an underwriters’ market. Of course, any expectation of what might happen at the January 2020 renewals can all change over the coming weeks and months should the 2019 Atlantic hurricane season be more active than expected.
