Benchimol highlights third party capital benefits

16-02-2018

AXIS Capital chief executive officer Albert Benchimol has hailed the business opportunities that can be created with third party capital.

Speaking at a presentation at the Bank of America Merrill Lynch Insurance Conference, Benchimol said that third party capital is here to stay, as it has an appetite for risk and wants to participate in the risk transfer universe.

According to Benchimol AXIS Capital thinks that there is a real opportunity for it to make that capacity available to its customers at the returns that that capacity wants.

He pointed out that third party capacity is available in abundance through various structures allowing coverage to be offered at a lower return than traditional reinsurance, adding that AXIS Capital aims to make that capacity and those prices available to its customers but wrapped with the service and customisation that reinsurance requires, adding that the strategy has worked very well for the company.

AXIS currently has $1.9 billion worth of third-party capacity in terms of capital at its disposal, 55 percent of which is targeted towards cat risk and the rest to more diversified non-cat lines.

In 2017 the re/insurer ceded to its third-party partners $489 million of business and generated $36 million of fees in the process. This business has grown from $105 million premium ceded to strategic capital partners in 2015, generating $8.5 million in fee income.

“Our customers get the capacity they want at the best rate available,” Benchimol said. “Our partners and third-party capital get a great portfolio at the market price that they want and we generate fees in the process.”

Benchimol said that he does not believe that current price pressure is caused by overcapacity, suggesting instead that a lack of underwriting discipline more generally is the culprit.

He pointed to rising loss trends in casualty and higher amounts of class action suits in professional liability. Some of these volatile lines have seen aggregate price cuts in excess of 50 percent. “I think everybody knows that the level of profitability in this industry is simply not acceptable,” Benchimol said.

However, price increases in the range of 15 percent, 20 percent or even 25 percent as seen in the past will not happen anymore, Benchimol believes. They are more likely to remain in a similar range as seen in the January 2018 renewals in lines of business where they are required while others might not see them at all.

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Bermuda Re