AXIS Capital’s third-party capital fee income grows again, as cessions to investors rise

AXIS Capital, the Bermuda based specialty insurance and reinsurance company, has continued to recognise higher fee income from its work with third-party investors in the second-quarter of 2024, with more fees earned through risk-sharing relationships with so-called strategic capital partners.

At the same time, it is evident that AXIS Capital is ceding out increasing volumes of premiums, with the third-party capital investor relationships likely one driver of this.

Part of this continues to be driven by AXIS’ launch of the Monarch Point Re casualty ILS vehicle during the third-quarter of last year.

Monarch Point Re is a collateralized reinsurer, capitalised with a more than $400 million raise, operating as a kind of third-party capitalised casualty reinsurance sidecar structure for AXIS and the investor and the initiative had been helping to drive premiums ceded to strategic capital partner investors higher.

As the Monarch Re casualty ILS gets up to scale, AXIS is passing on premiums to the structure, helping it shape its own book while working with investors that appreciate the returns of the business.

For the second-quarter of 2024, AXIS reported that in its reinsurance segment, “Net premiums written decreased by $46 million, or 11% ($44 million, or 10%, on a constant currency basis), reflecting an increase in premiums ceded to our strategic capital partners, partially offset by the increase in gross premiums written in the quarter.”

AXIS ceded more than $246 million in written reinsurance premiums in Q2 2024, up from almost $174.9 million in the prior year period.

AXIS has also reported “an increase in fees related to arrangements with strategic capital partners” for the second-quarter of 2024, which in its reinsurance segment was the main driver of a 2.1 point reduction in the firms underwriting-related general and administrative expense ratio.

Fee income rose to $14 million for Q2 2024, up from $9 million a year earlier, and $26 million for the first-half, up from $17 million for H1 2023.

AXIS reported other insurance related income of $9 million for Q2 2024, compared to other insurance related income of $5 million for Q2 2023, which it said is primarily sourced from fee agreements with so-called strategic capital partners.

For the first-half of 2024 this other insurance related income reached $17 million, up from $6 million in the prior year and again primarily related to the strategic capital partners activity.

So third-party capital activity continues to drive increasing fee levels for AXIS Capital, as the company shares more underwriting business with investors and generates efficiencies and earnings from these activities.

We had also reported back in March that AXIS had registered another collateralized insurer class of company in Bermuda to support the continued expansion of its Monarch Point Re casualty insurance-linked securities (ILS) platform.