Axis Capital has reported that 97 percent of its total insurance business renewed “flat to up”, and prices for renewed business for the reinsurance side were up about 12 percent overall, as it reported its second quarter results for 2020.
The news on its latest renewal pricing came as the firm reported a dip in profits in Q2 2020, despite describing its performance as “solid”.
Company president and chief executive officer Albert Benchimol said there was “no impact of COVID-19 on Q2 underwriting results” but added that the pandemic had affected investment income “due to the one quarter lag in reporting performance of some alternative investments”.
The CEO remained bullish on the firm’s resilience to COVID-19, saying the re/insurer had “taken charge” of the $235 million losses in the first quarter of the year. “So far, we’ve seen no surprises,” he added.
Commenting on market conditions more broadly, Benchimol said the re/insurer had continued to record “accelerated improvement in pricing” throughout its business.
“For our insurance segment, we’re now into 11 consecutive quarters of rate increases. For reinsurance, the pricing actions have increased recently, but we’re seeing positive momentum picking up now,” Benchimol said.
Average rate increases in insurance were up almost 15 percent in the second quarter of 2020, which is up from increases of about 10 percent in the first quarter of this year and 7 percent in the second quarter of 2019.
“Through the first six months, the average rate increase is a little over 12 percent. Our US division, once again, delivered the strongest pricing increases this quarter with average rate change of almost 17 percent,” he explained.
Benchimol said hard market conditions had been particularly highlighted in excess casualty, which reported average rate increases of more than 30 percent. E&S property rates were up 19 percent and primary casualty increased by 11 percent.
“We reduced our Florida book as part of our strategy to manage risk.”
Axis Capital’s commercial management solutions unit was described as being “in hard market territory”, reporting average rate increases of more than 30 percent in Q2 2020. Benchimol highlighted public D&O where, he said, Axis Capital was essentially an excess writer, for its “impressive rate change at 60 percent”.
Strong double-digit rate increases were also seen in the firm’s Canadian specialty businesses, Bermuda excess, and in financial institutions.
“Even cyber and tech, long laggards on pricing, are starting to show rate increases,” he added.
Aviation was up 16 percent and the marine political risks and property books had average price rises of about 10 percent. Within that, several sublines “outperformed”, with marine cargo up more than 25 percent and global property up 20 percent.
“Overall in the quarter, 97 percent of our total insurance business renewed flat to up. More than 60 percent of premiums renewed, experienced rate increases in excess of 10 percent.
“And within that, fully 35 percent of the book had rate increases in excess of 20 percent,” Benchimol said.
Price estimates for renewed reinsurance business increased by around 12 percent overall in Q2 2020, with the catastrophe business up close to 20 percent and the non-cat business up nearly 10 percent.
Benchimol revisited the previously reported Japanese April 1 renewals which showed that earthquake pricing was flat, but wind was up more than 50 percent.
For the June 1, 2020, renewals, he said the company has seen “the best market conditions for more than 10 years with tightening terms and conditions in addition to higher pricing”.
“The effects of COVID-19 and its economic repercussions will be felt over a number of years.”
Albert Benchimol, Axis Capital
Commenting specifically on his firm’s reinsurance book, Benchimol said average prices had increased by about 20 percent at the June 1, 2020, renewals.
“Nevertheless, we reduced our Florida book as part of our strategy to manage risk, optimise the portfolio and better position ourselves for the upcoming January 1, 2021, renewals. For the July 1, 2020, renewals, we saw positive momentum across almost every line of business that renewed, although it did vary by line and region.
“Overall, reinsurance is clearly participating in the rebound, sharing in the underlying rate increases on subject business and also benefiting from improvements in reinsurance terms and conditions.”
The CEO said the company has used these recent renewals to continue upgrading the quality of the Axis Capital portfolio.
“We think we’re well positioned to capitalise on the improving market. Importantly, we’re seeing improvements in wordings in terms and conditions in both insurance and reinsurance, and that will help loss ratios beyond the impact of rate.”
He believed the favourable conditions currently being witnessed “will very likely last well into 2021, and there’s growing consensus that they will extend even beyond that”.
The reasons behind this sustained improvement are an underlying social inflationary period that is putting pressure on prior year reserves making outlooks uncertain, combined with very low interest rates that are creating substantial headwinds for investment income, he explained.
“It’s our expectation that the effects of COVID-19 and its economic repercussions will be felt over a number of years. These are not Axis-only issues,” he concluded.
Images: Shutterstock / Everett Collection