AXA cuts catastrophe exposure in AXA XL reinsurance portfolio by 40% in Q1

Global insurance and reinsurance group AXA has taken significant action to reduce its exposure to natural catastrophe loss events, cutting the catastrophe reinsurance exposure held by its AXA XL division by some 40% through renewals so far this year.

It’s all part of the plan to reduce volatility in its results for AXA, as the company continues to reshape its commercial insurance and reinsurance underwriting arm AXA XL, with a particular focus on AXA XL Re and catastrophe risks.

AXA reported a -12% decline in revenues for its AXA XL property and casualty division, but grew in commercial insurance lines, while cutting back its natural catastrophe exposure at AXA XL Reinsurance during the quarter.

“AXA XL Re revenues decreased by 12% to Euro 1.5 billion as a result of a strong reduction in Nat Cat exposure, in line with our strategy,” the company explained.

With Alban de Mailly Nesle, Chief Financial Officer of AXA, adding, “We have been repositioning our Reinsurance portfolio with Nat Cat exposure already trimmed by 40% across first quarter’s renewals.”

This repositioning has been ongoing for a while at AXA XL and one of the drivers has been the firms ability to leverage third-party capital through its AXA XL ILS Capital Management unit.

With reinsurance pricing rising by +8% for its reinsurance book, AXA XL will still have had ample opportunity to underwrite risks on behalf of the investors backing its range of insurance-linked securities (ILS) funds and structures, as it leverages third-party capital within its strategy of reducing its catastrophe PML.

Which means that, while revenues decline as premiums are written and assumed, if some are ceded on to third-party capital vehicles and funds under the management of AXA XL ILS, the company can still benefit from fee income through this activity over the life of the portfolios while continuing to prune and reduce its catastrophe exposure.

Overall, AXA XL reported a 4% increase in revenues to EUR 6.231 billion, despite the cutting-back in natural catastrophe risks.