AXA XL has almost right-sized property cat, estimates €200m hurricane Otis loss

AXA XL, the commercial insurance and reinsurance arm of the AXA Group, has almost completed the process to right-size its property catastrophe reinsurance exposure, which drove a slight decline in premiums for the business so far this year.

AXA XL has been pulling back on natural catastrophe risks, while also leveraging its third-party capital activities under the AXA XL ILS Capital Management business unit, as it looks to reduce volatility in its results while continuing to share risk with third-party investors.

After reporting the AXA Group results for the first nine months of the year, Alban de Mailly Nesle, Chief Financial Officer of AXA said that the adjustments to catastrophe risk appetite are almost complete for the business.

“The right-sizing of our non-prioritized businesses is now almost complete across Property Catastrophe Reinsurance, traditional G/A Savings, and some Group Health international contracts,” he explained.

In the year-to-date, Natural Catastrophe exposure reduction at AXA XL Reinsurance reduced gross written premiums slightly, the company reported.

Natural catastrophe activity continues to present some headwinds the company said, but there is evidence the reduction in property catastrophe reinsurance risk retained is having an effect.

Overall, AXA XL Reinsurance premiums dropped by 3% to €2.1 billion, AXA said, driven by lower premiums in Property Catastrophe reflecting the reduced exposure there, which is in line with the Group’s strategy.

Despite elevated natural catastrophe experience in the third quarter, AXA said that the group result is still on-track to be within its budgeted combined ratio.

The company also disclosed an estimate for its losses in Mexico after recent major Hurricane Otis came ashore in October in the Acapulco region.

At this time, AXA said that it estimates the loss from Hurricane Otis to be around €200 million before tax and net of reinsurance.

The right-sizing of property catastrophe reinsurance within the AXA XL business has been an ongoing task for a number of years now and the AXA XL ILS unit has played a key role as the company identifies areas of risk to retain, share and relinquish, as it constructs what it deems to be a better performing book with less volatility to go forward with.