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Reinsurance pricing “approaching adequacy,” says AXIS CEO Benchimol

5th November 2020 - Author: Matt Sheehan

Albert Benchimol, President and CEO of Bermudian re/insurer AXIS Capital, has said he believes reinsurance pricing is “approaching adequacy” but that more rate action is needed beyond 2021 in some areas.

albert-benchimol-axisSpeaking in an earnings call alongside the release of AXIS’ Q3 results, Benchimol offered his perspective on the current reinsurance pricing environment and his predictions going forward.

AXIS reported net loss of $73 million and a combined ratio of 114.5% for the third-quarter of 2020, as pre-tax catastrophe and weather-related losses reached $240 million in the period.

The firm’s reinsurance segment turned an underwriting loss of $54 million, with gross premiums written falling 5% to $1.3 billion in Q3, driven by a 23% decline in reinsurance business.

But Benchimol says that the company saw “encouraging acceleration” in reinsurance pricing at the mid-year renewals, putting the year-to-date average increase for reinsurance at around 8%.

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“We’re seeing encouraging signs of firming, although not quite as high as insurance, with the understanding, of course, that there are meaningful variances by market,” said the AXIS CEO.

AXIS experienced the strongest rate increases in the US and global specialty markets, Benchimol said, with EMEA and Asia lagging behind somewhat.

But while pricing and conditions are starting to respond to loss trends in reinsurance, AXIS does not yet believe that they are making up for much lower interest rates, which is leading to less attractive total returns in some lines.

“We responded appropriately by reducing our participation in certain treaties and markets, although we’re optimistic that conditions going into 2021 will provide opportunities to grow across a number of lines in markets,” Benchimol noted. “Overall, across both insurance and reinsurance markets, we are seeing some impressive numbers in terms of rate change.

He continued: “That said, I caution that with a significant increase in the frequency and severity of weather related events, social inflation, the uncertainties stemming from the current pandemic and significantly lower interest rates, current pricing is approaching adequacy but does not yet translate into stellar release for the industry.”

“We remain optimistic that we will continue to see progress with the understanding that more rate action is needed and very likely it will take increases beyond 2021 in some lines to get to rate adequacy.”

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