NEWS
Market better positioned to listen to the client
The drama of last year’s 1/1 is expected to give way to fruitful 2023/24 renewals.
Dramatic or late decisions on structure made in the melée of last year’s late 1/1 renewals should now be reviewed by reinsurers and clients alike, according to Bertrand Romagne, chief executive officer, international, reinsurance at AXA XL.
“Last year it was difficult. Everybody took very dramatic action,” he told Monte Carlo Today.
“Reinsurers took decisive action, but we expect this year’s discussions to focus on reviewing those decisions in today’s context. We certainly expect cedants to review their structures, but we anticipate discussions will be fruitful. That is what we want; we’re here to write business.”
He said AXA XL wants to work alongside clients to find solutions that work for both parties—as opposed to last year when there was some dissatisfaction.
Romagne acknowledges that the industry faced some large losses in the first half of the year, largely driven by so-called secondary perils. But even with the uncertainty of hurricane season still with the industry, he believes the industry is in a very different situation compared to last year. He believes reinsurers and cedants can ensure a more settled renewal.
“Last year, we saw big movement in terms and conditions in general, not just rates. Retention levels increased. The market was not organised during the last renewal. But that has changed this year. Now, I think that the market is much better positioned, and we look forward to really engaging with our clients to understand their needs.”
He adds that these discussions also need to place in the context of inflation, which remains a challenge. “Inflation has not gone away; we need to factor for that.”
“Inflation has not gone away; we need to factor for that.”
Bertrand Romagne, AXA XL
Change was needed
Marcus Gonzales, head of casualty global and international markets, head of London, reinsurance at AXA XL, agrees with Romagne that the market has settled. He says retentions are not a bone of contention as they were last year. The market understands a change was necessary.
“Reinsurance is there to address volatility, not as an earnings protection or some sort hedge on inflation,” Gonzales says. “Those lower layers in the industry were basically dollar swapping.
“They have now been dispensed with. Retentions went up to allow the excess of loss reinsurance to be what is intended to be: which is volatility protection. I think that’s largely been addressed now. It wasn’t across the board because not all clients are buying on that basis, but where there were low working layers, those retentions were raised.”
For AXA XL, Gonzales says he wants to use this next renewal to better understand what is important to clients and how rate changes are calculated in the context of market conditions now.
“What is happening, especially in the D&O space, but not only, is that the primary rates our clients anticipated in their own business plans for 2023, have come in below that. It is because of a bit of softening in the primary market. And that creates a bit of a pricing disconnect.”
Another discussion point AXA XL will have with clients this year will be around wage and economic inflation but also social inflation in the context of rates, he said.
Main image: Shutterstock / Shchus
