AXIS Capital, the Bermuda based specialty insurance and reinsurance company, ceded more premiums to third-party investors in the third-quarter of 2023, as its new Monarch Point Re casualty ILS vehicle started its build-out.
AXIS Capital partnered with investor Stone Point to launch Monarch Point Re during the third-quarter of this year.
Monarch Point Re is a collateralized reinsurer that has been capitalised by a more than $400 million raise, and will operate as a kind of third-party capitalised casualty reinsurance sidecar structure for AXIS and the investor.
Now, in the firm’s Q3 results statements, there is evidence of Monarch Point Re building out, as well as some visibility of the types of casualty risks being ceded to this innovative insurance-linked securities (ILS) vehicle.
AXIS’ premiums ceded to its so-called strategic capital partners, specifically the “Other Strategic Capital Partners” where ILS style investor relationships are accounted for, had ben shrinking as the company pulled-back away from property catastrophe reinsurance underwriting.
But, having promised that it would pivot its AXIS ILS business to focus on longer-tailed lines and other opportunities, AXIS Capital made good on that with the launch of Monarch Point Re and its results show the company quickly scaling that opportunity.
On a prospective basis, AXIS Capital said that it ceded $244 million in premiums to Monarch Point Re during the third-quarter of the year, through the quota share retrocessional reinsurance agreement it entered into with the new vehicle.
That quota share retro agreement was effective from January 1st this year, so there was a loss expense of $7 million to also account for this quarter.
AXIS explained that it saw an increase in premiums ceded across its liability, professional lines, credit and surety, accident and health, and motor lines business segments, which were all associated with the quota share retrocession agreement with Monarch Point Re.
So we can see that this is a pure and diversified casualty ILS investment strategy, offering investor Stone Point access to a broad cross-section of the AXIS casualty book.
During the third-quarter, AXIS Capital reported a decrease in fees related to arrangements with strategic capital partners.
During the third-quarter, AXIS Capital has reported fee income related to strategic capital partners of almost $20 million, up on the previous year figure of just over $11 million.
That takes strategic capital partner fee income for the first nine months of 2023 to $42.5 million, so slightly up on the previous year’s $40.5 million.
Part of the fees earned in Q3 2023 were almost $10.4 million accounted for as other insurance related income, much higher than the $519k reported in the prior year and possibly down to some initial expenses earned back related to Monarch Point Re.
Fee income earned as an offset to general and administrative expenses fell slightly to $9.6 million, down from the previous year total of almost $10.6 million.
But, the most evident change, is in the premiums ceded, with AXIS Capital reporting over $304 million of premiums ceded to its other strategic capital partners, significantly higher than the $86 million reported in the prior year quarter.
It means year-to-date premiums ceded to other strategic capital partners, which is where ILS investor relationships and structures like Monarch Point Re sit, reached almost $509 million, up again on 2022’s almost $402 million.
As Monarch Point Re comes on-line we should see the premiums ceded remaining elevated against the prior year, while fee income earned by AXIS Capital should also begin to flow through, as long as the performance of the underlying casualty business is attractive.