AXIS targets non-cat third-party capital expansion: Benchimol

AXIS Capital, the Bermuda-headquartered specialist insurance and reinsurance underwriter, aims to expand its non-catastrophe business with third-party financial partners, which is expected to replace an anticipated decline in commission income from catastrophe risk that he shared, the company’s CEO said. .

AXIS Capital has been working with its so-called strategic capital partners for a few years now, sharing sections of its insurance and reinsurance portfolios with them, in return for commission income.

It started out largely as a property disaster focused business, but with AXIS exiting the property reinsurance business, it was expected that there would be changes in the near future as this business declined. and would stop.

As previously explained, AXIS Capital intends to continue to develop its Insurance Securities (ILS) business, under the AXIS ILS brand.

This should involve an increasing focus on raising third-party capital, through a range of partnership structures and insurance-linked securities vehicles (ILS), but with less emphasis on securing capital for support a property reinsurance portfolio, given the exit from this space.

That’s not to say catastrophe exposure won’t exist in AXIS’ portfolios, the company is very active in property insurance and other specialty lines that bring it exposure to cats, but it does will write more property reinsurance for itself or for investors.

As a result, a shift to a non-catastrophic ILS approach was expected and CEO Albert Benchimol, along with CFO Pete Vogt, recently discussed this strategic shift during the company’s earnings call.

Vogt explained, “We’re seeing really good traction with our third-party finance partners on other businesses, outside of property and chat.

“We’ve had some very good business, when we think about long-tail business, and we’re also looking at other opportunities in this book in those particular lines of business.”

There will be some change in the source of third party capital fee income as a result of this change.

“I would say if you look at our fees, year-to-date, there’s about $12 million associated with the property year-to-date and so I think we’re going to see that come off,” Vogt said, but added, “I think we’ll see some fee revenue come back up because of some of our business in the long-tail lines.”

Albert Benchimol, CEO of AXIS Capital, confirmed the expansion of this third-party capital and ILS strategy at AXIS, with greater emphasis on long-term business lines and non-cat risks.

“We started our third-party capital, obviously, with a cat and a property. But as you know, we are very proud to have been able to expand our partnerships to a very large portfolio of risks, to the point that today more than 50% of our fees come from the longer tail lines”, said said Benchimol.

He added that, “As you look to the future, it’s very likely there will be a drop in 2023 as we lose the cat chunk.”

But confirmed the fundamental strategic relevance of this part of AXIS’ business, saying that “We are still working hard to continue to share other risks.

“So over time, we expect that fee to be replaced by new relationships, new fees, as we seek to expand non-cat lines with our third-party financial partners.”

This drop in fees started to be evident in the last quarter, as we reported.

So it will be interesting to see how this develops over time and if there is evidence of growth as non-catastrophic lines are increasingly shared with third-party investors.