INTERVIEW: NANCY BEWLAY, AXA XL REINSURANCE
Why smart cycle management is key to ‘tricky’ nat cat line
An exodus of capacity from the property cat market has resulted in the best pricing in that sector since 2006—and this means a clear opportunity for reinsurers, says Nancy Bewlay.
Nancy Bewlay, chief executive officer of AXA XL Reinsurance, is crystal clear on her remit: to add value to parent AXA Group. This also means smart cycle management and knowing when an opportunity presents itself, such as in the capacity-short property cat space right now.
An exodus of capacity from the property cat market has resulted in the best pricing in that sector since 2006—and this means a clear opportunity for reinsurers able and willing to operate in that space, Bewlay told Monte Carlo Today.
Bewlay, who took the reins of the reinsurance unit of AXA XL in March, replacing Charles Cooper, admits that property cat can be “a tricky space” and stresses the business will not accept too much volatility. But she is clear that competent and experienced players in this space, such as AXA XL Reinsurance, can reap the rewards of the cycle.
“We are still a big provider of nat cat capacity; there has been a big loss of capacity in that market, so we do see growth potential,” she said. “We manage our cat book carefully and strategically deploy our capital with a view on controlling our nat cat volatility.
“A capacity drain has meant there isn’t enough capacity for the primary market. Markets that would have had 150 percent on a placement last year are struggling to get 100 percent. In places such as Florida, it is even worse.
“It’s a tricky space but for those of us who have remained there is certainly opportunity to look at the risks in the market and charge an adequate price that reflects the exposure.”
On one level, Bewlay regards writing property cat business as part of the industry’s responsibility as the world grapples with climate change. The company has invested heavily in recent years in data and applying science to the way global warming will affect risk. She sees opportunity in reinsuring the climate-related products and services being developed.
“As primary insurers move into that space, that also means an opportunity for reinsurers,” she said.
Capacity needed
In addition to these potential growth areas, Bewlay perceives opportunities in other areas where capacity is needed: the manmade cat space and in lines impacted by the Ukraine-Russia war including marine, energy and aviation.
Ultimately, in all lines of business, she argues it is a question of knowing where you are in the cycle, something which is sometimes possible at an industry level only with hindsight. But individual businesses must establish their views based on their own portfolios, she believes.
“There is certainly opportunity to look at the risks in the market.”
Nancy Bewlay, AXA XL Re
“Cycle management is always knowing where you are in the cycle and defining it for yourself. My property team will tell you this is the best cat market they’ve seen since 2006. In US professional lines, it is different.
“After a two-year incline in rates, we are now seeing a flattening. So, it depends on where you are in each line of business based on your own benchmarks.”
Bewlay has an extraordinary CV. Few other executives can have worked for a list of mentors/bosses that includes Warren Buffett, Hank Greenberg, Bill Berkley, and Mike McGavick. Through her 30-year career, she has worked for General Re, which was acquired by Buffett’s Berkshire Hathaway, Greenberg’s CV Starr, WR Berkley E&S unit Admiral and XL Catlin. She served as head of underwriting for casualty, North America at Swiss Re and also did a stint at Marsh.
Despite this experience, this is Bewlay’s first Monte Carlo Rendez-Vous. She says she is looking forward to rekindling relationships as well as meeting some clients in person for the first time. She notes that the face-to-face element will be unique and so important to some younger attendees who are used to a virtual working environment. In a relationship business and at a time of uncertainty on so many levels, that contact is vital, she believes.
“This is an industry based on relationships and there is much to discuss,” she said. “Our clients will want to talk a lot about cyber, climate change and, of course, about the need for additional cat capacity.
“That will certainly be top of mind. From our perspective, we know how much capacity we want to put into that market and who our best clients are. We’re always open to new clients as well. But that will be a big discussion in the context of the capacity constraints we are seeing.”
Such caution, she notes, is understandable, given the events of recent years. The industry has endured not one but two Black Swan events in recent years: the COVID-19 pandemic and a frequency of catastrophe events that was beyond anything the risk models predicted.
“We had Australian floods, French hailstorms, more wildfires—the uncertainty continues. People ask: ‘Is this the new normal?’. The industry has remained disciplined because we have had these two Black Swans,” she said.
“If, five years ago, you were doing your scenario modelling, you would never have predicted that. So, the industry has been surprised.”
“Our job is to bring consistent results to AXA that diversify the portfolio.”
Bewlay explains how she sees her job as head of AXA XL Reinsurance: to add value to the AXA Group by offering diversification and stable results.
“Our job is to bring consistent results to AXA that diversify the portfolio. The question for me and the larger AXA XL Reinsurance leadership team is what clients do we serve and how does that mix help us create the ideal AXA XL global reinsurance portfolio?
“This thinking will guide my conversations at Monte Carlo,” she said.
Global reach
Her remit, Bewlay argues, is made easier in some ways by having AXA as a parent. She describes AXA XL Reinsurance as a solid tier 2 reinsurer. While it is dwarfed by the likes of Swiss Re and Munich Re, with its parent’s support it can match them in terms of the overall balance sheet, financial strength, expertise and reach into different markets around the world.
“My job is to translate that brand and strong financials into opportunity in reinsurance,” she said. “We have expertise in property, property cat, all the long tail lines and we also have a nice portfolio of credit and surety business, marine and aviation.
“We have expertise in all those areas. Our clients matter: we invest in long-term relationships. We have worked with some clients for 30-plus years. We still pay claims 30 years later. In addition, we're very committed to data and analytics, which are some of the best I have seen in my career.
“Finally, we are a completely global company. We combine local knowledge and global expertise when allocating our reinsurance capital.
“The world is different everywhere. There are issues in certain parts of the world that are non-existent in others. Each market operates differently. The protection gap is wider in some places than others. That local knowledge gives us an edge,” she concluded.
Nancy Bewlay is the chief executive officer of AXA XL Reinsurance. She can be contacted at: nancy.bewlay@axaxl.com
Main image: Shutterstock / chuangz
