Reinsurers have a bigger role to play in disaster recovery and resilience

Reinsurers must focus more on mitigation and restoration, says AXA XL Re Bermuda CEO Mark Twite. 

Reinsurers can and should do more than simply protect the claims-paying ability of primary insurance companies, according to AXA XL Re’s Bermuda chief executive officer. 

Mark Twite said in an interview for Bermuda Risk Review that reinsurers need to do more to help cedants be more resilient in the face of the increasing frequency of natural catastrophes. 

He was speaking in the wake of January’s wildfires in California which caused up to $40 billion worth of insured damage.

While noting AXA XL Re does not discuss specific losses, he said the reinsurance segment’s exposure to the wildfires was more limited than would have been the case several years ago after the company moved to reduce its exposure to natural catastrophes. 

“We've reduced the element of natural catastrophe protection we provide, and although it is still meaningful, we've definitely looked at it and made sure the exposures fit within our risk appetite,” he said. 

Despite that, he added, the lesson of the wildfires was clear. “Whilst it is a tragic loss and  not something you want to happen,” he said. “It has shown there are significant risks out there and they don't have to be wind events.”

He said he suspected most US nationwide carriers’ reinsurance programmes covered wind events and earthquakes, but this event showed wildfires were also significant perils. “It demonstrated there is a propensity for these losses to occur,’ he said, adding that the reinsurers needed to apply “the three Rs” – resilience, recovery and restoration.

He said emphasising resilience would reduce the impact of natural catastrophes, while recovery was essential to enable communities to rebuild. Restoration meant enabling people to return to normal life. 

“In 2025, there are challenges from a pricing perspective. It really is competitive out there; there’s no doubt about that.”

“As reinsurers, we offer the protection of claims. When a claim event comes, we help to pay for that loss,” he said. “But there's much more that we can, and should, offer. 

“We have worked alongside The Cambridge Centre for Risk Studies over the last two years to look at  resilience and pre-loss mitigation. The study effectively said that if you spend money up front on mitigation, resilience and prevention, the loss will be lower.”

Noting that many national insurers had reduced their exposure to California in recent years, he said mitigation, resilience and prevention programmes could reduce losses and ensure insurance would be there in the future. 

Twite agreed that the losses in California might shore up reinsurance rates, which had seen some softening in the January 1 renewals. “It's the biggest wildfire event in the history of insured events and will be a significant loss to the market as well as to the  US economy,” he said.

“I would expect some reflection that the price needs to meet the risk that is there, and certainly the wildfires haven't diminished that risk,” he said, while noting it could vary from cedent to cedent.

The introduction of the Bermuda corporate income tax would not have a major impact on AXA XL Reinsurance, he believes, and he doesn’t think it likely to have a serious effect on the Bermuda market. 

Bermuda had already been working closely with the Organisation for Economic Cooperation and Development (OECD) before the tax was implemented on January 1, he said. “We recognise this is a reasonable reaction to the Pillar Two actions,” he said. And added “I think the transition rules are helpful” .

“We are a significant jurisdiction in the reinsurance and insurance industry, and having a corporate income tax just gives us a robustness. 

“We're favourable because of the people, the talent, the ease and speed of doing business and the pragmatism of the regulator.” 

As for the broader health of the re/insurance sector, he said: “Every year has its own set of challenges. In 2025, there are challenges from a pricing perspective. It really is competitive out there; there’s no doubt about that.”

Bermuda companies are already significant players in reinsurance, he said, but added: “Innovation is massively strong on this island, not just monetary capacity, but also knowledge and experience. What really excites me is that challenges are there, but they create opportunities. Regulatory change is a challenge, as are significant early natural catastrophe events, particularly in the US. 

“Inflation is a challenge,as well, but all these challenges create opportunities and enable people to show their worth and add value to the insurance and reinsurance chain.”

Asked how he balanced ESG with financial performance, he said: “TThey're completely inter-connected. The idea of creating a sustainable future, an ability to look at a long-term balance between environmental and socio-economic concerns and understanding that environment is why we're here. 

He added: “Improving  sustainability, in the long term, works well for insurance, reinsurance and, ultimately, for the financial benefit of all, whether that is the policyholder, insurance company or the reinsurance company.

“It's almost like having a jigsaw puzzle you were never able to finish it because there was that one piece that was not in the box. ESG is that one piece that if you don't have it in your puzzle now, you're not providing the service we should be to our people, our clients and our partners.”

Looking ahead, Twite said the great challenge for reinsurers and insurers was to find policies and products that would help to bridge the protection gap. “Bermuda is absolutely in position to move to a more sustainable level where we can provide insurance protection to those who do not have it,” he said. 

He said such a move could be a straightforward insurance product with reinsurance enabling an insurance company to take a greater risk.

Regardless of what the product was, Twite said, something had to be developed, because of the size of the protection gap. “We've got to provide more information, provide more data, have more conversations to inform people and ultimately, come with a product that is more affordable,” he said.

For more news on Bermuda Risk Review 2025, click here.

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