Reinsurance market needs more capacity, says AXA XL Re Bermuda chief

The hard market in the property casualty and property catastrophe market is likely to continue for some time, and that’s not a bad thing if it brings more capacity, says Mark Twite.

The chief executive officer of AXA XL Re in Bermuda told Bermuda:Re+ILS in a video interview that investors have seen the reinsurance industry under-deliver for six years and that needed  to change.

Although the January 2023 renewal season was a ”difficult start”, the market needed it, he said.

"We had to see, and we did a see, a significant shift in the dynamics, pricing increased, particularly in the property catastrophe sector. We saw retentions move up; we certainly saw some conditions change in the policy wordings.

"We did see change and we had to see change because we have seen in the reinsurance industry many losses over the last six years."

He added: " What we moved to in June and July is that it became more orderly. But if you think about the industry, it's very much a supply and demand focused industry, so anything that can impact supply, anything that will impact demand will have a justifiable change to the dynamics.

“My view is, yes, it will remain robust, it needs to remain robust, the industry must show a return on capital to not only current investors but also to potential new investors in the market.

“I think there is some capital waiting in the wings."

Twite said the market still needed more capacity, if only because of inflation, which was not even thought about two years ago.

He said: “Now every time I go into a renewal meeting, every time I see a client, if I speak to a broker, inflation is the hot topic. So even if the change of risk does not change, inflationary impact on premium volumes, on asset values will require to need a greater amount of capacity.

"What extra capacity also provides is as you bring in new capital you bring in new ideas, you bring in new people, you bring in new companies. That all has a snowball effect.

“You have that element where you say ‘OK, how can we become a more innovative industry, how can we attract more talent, how can we create a more diverse thought process? Well, bringing in more capital allows that. It generates a capability to encourage new thought, diverse thought."