A change in cat strategy drives specialty growth at AXA XL Reinsurance

In Bermuda, AXA XL Re’s strategy to grow its specialty lines business is closely entwined with its approach to writing property-catastrophe business, which it is using as leverage to work more closely with its clients across all parts of their portfolio.

That is how Mark Twite (pictured), chief executive officer of AXA XL Re, Bermuda, explains the company’s approach in this regard. Twite took the reins of the reinsurer’s Bermuda unit in October 2022 after previously serving as chief financial officer of the business. He has been based in Bermuda for almost 20 years.

“Our approach to specialty lines is nuanced but it is also closely linked to our cat strategy,” he says. “Our approach to cat business is changing as we seek more diversification. But we see that as being an opportunity to change our mix of business for the better and create a more balanced portfolio.”

Twite explains that the decision to reassess its cat book was taken after almost five years of losses in that segment for the industry generally, a trend that started in 2017. “extreme weather events are getting worse. We felt we needed to take a more long-term view on the product base.”

But instead of a straight retreat—a strategy some rivals adopted—AXA XL Re decided to go about things in a more nuanced way. It continues to offer solid cat capacity to its clients, as long as it can work with them in a meaningful way across multiple lines of business, thus opening the door to more specialty business.

“We wanted to add the ‘S’ to our P&C book,” Twite says. “The Bermuda platform in particular had been very focused on property on the reinsurance side. The insurance side was more casualty. There was an imbalance. We needed diversification, which would tie in with our global book.

“Just to stress: we still write cat business, but largely with clients that can offer us multiple lines.”

Specialty lines, however, is something of a catch-all for anything not obviously property or casualty business. Twite is clear that, in practical terms, there are some lines the re/insurer is more comfortable writing than others.

AXA XL Re has a strong global focus on, for example, marine and energy business, including onshore, offshore, marine hull and cargo business. That global platform, leverages expertise globally, including from Bermuda. Twite says he is very bullish about the opportunities he sees in that segment, and he highlights the need for diversity within this segment.

“The market has seen some deep changes in things such as structure and price and coverage due to the Russia-Ukraine war. It is cyclical, which means we need flexibility. I want to ensure we have a fair and balanced diversification across these lines, a good balance between the sub-lines within marine and energy and diversification on a geographical basis. Balance is key as is a profit every year across that book,” he says.

The second specialty line Twite flags as representing an opportunity is cyber. Currently, the re/insurer writes what he describes as a “modest” amount of cyber. He says the market has improved in recent years, but AXA XL Re remains cautious in its deployment of capital to this space.

The bottom line

Twite flags terrorism as a line of interest for the business which, he says, it is starting to view on a standalone basis instead of as part of a property line. He says AXA XL Re has a good start in this line, as it benefits from almost 30 years of experience and data and analytics. “We write some of the terrorism pools on a standalone basis and we feel that is where the right position is for this line of business,” he says.

He stresses that across all of this is profitability, because this brings security for our clients. Nothing makes sense without it being the basic driver of underwriting decisions. But the strategy to diversify is working quickly: in terms of the Bermuda book of business Twite is responsible for, he has already increased the percentage that is specialty business to 30 percent from 20 percent in 2022. By 2026, his aim is that it is closer to 45 percent.

Turning his attention to the business’s approach to emerging markets, Twite explains that AXA XL is split into three geographical regions: North America, International and Bermuda/Latin America—the part he is responsible for. Thus, his personal approach and strategy to emerging markets applies to Latin America only, where it has an office in Bogotá, Colombia.

He says the dynamic in Latin America is very client-specific, as opposed to approaching it by country. So where AXA XL Re works with a client, it tends to form a close relationship and offer capacity across multiple lines, often their whole book of business. This means diversification is inherent in the business—his team’s role is to develop and nurture deep client relationships.

“We can and do deploy capacity across multiple countries, while being aware of and complying with local regulations and capital requirements. But as we work by client, the diversification is already there. My message to my team is to select clients we can work with in the long term. It is a client-led strategy where we want to get to know the people and form deep relationships.”

Twite’s background in finance has helped shape and deliver some of these strategies. He has a close handle on the data and analytics available, and he says it has been a case of applying that theory to the real-time analysis and the specifics of clients’ requirements.

Underpinning all of this, however, in his approach to Latin America and in specialty lines, is the company’s ability to identify, develop and nurture talent. He says it is essential that the company develops people for this strategy to be successful.

“It all starts with talent, but you also need direction for that talent,” he says. “The development of people is key. You can instill a strategy around markets and products quite quickly, but the development of people gives you longevity.

“Without the people nothing happens. You need to give people opportunities. I am a prime example: people did that for me, and I want to give back now.”