July 31, 2019 by Greg Meckbach
Commercial clients hoping for some relief from price increases could be in for a disappointment.
“Even with the increases that we have seen in the last two years, many lines of business are still not at acceptable pricing,” Albert Benmichol, chief executive officer of Axis Capital Holdings Ltd., said Wednesday during an earnings call, commenting both on his own company and on the industry worldwide.
“We believe that pricing action will continue into 2020 and perhaps longer.”
For Axis Capital’s Canadian specialty insurance lines, rates went up by nearly 5% during the three month ending June 30, Benmichol said during the call.
During the second quarter, 65% of Axis Capital’s book of business had price increases of 1% or more, compared to 45% in the first quarter.
Like other carriers, Axis has had both an acceleration of pace of rate increases and expansion into more lines and markets, said Benmichol.
Across Axis Capital’s primary insurance book, rates rose 7% in the three months ending June 30, compared to 4% in the first quarter of 2019, Benmichol said during the conference call.
“This period of price firming is now in its eight quarter, having started in the fourth quarter of 2017 and we are starting to get the benefit of compound rate increases,” Benmichol said, commenting on the P&C industry.
Axis has reduced its premiums in property and increased premiums in liability, professional lines and marine lines.
Axis writes both reinsurance and commercial primary insurance. In Canada, the firm’s net premiums written were $66 million in 2018, up from $24 million in 2017, according to Canadian Underwriter’s recently-released statistical guide.
Its Canadian branch placed 18th in the Canadian liability market, when ranked by direct premiums written.
Worldwide, Axis reported Tuesday it’s net premiums earned of US$1.12 billion in the latest quarter, down from US$1.186 billion in Q2 2019. Its combined ratio was 96.1%, up from 93.1% in Q2 2018.
In addition to raising rates, Axis is also offering insurance on less favourable terms and conditions. For example, it is adding sub-limits to some policies, and raising attachments points for excess policies, Benmichol suggested.
“With a firmer market, our discipline does not appear to be causing us any backlash,” said Benmichol. “We believe the industry is appropriately reacting to loss trends that have deteriorated over the past last few years and have exacerbated the negative impact of several years of price declines.”
Axis has been concerned about D&O liability for nearly six years. Benmichol said Wednesday. For one thing, $1 million to $2 million has been considered an “excess casualty” layer for about 20 years. But with many court awards exceeding $1 million, excess casualty insurance – for some – has become a “working layer.” This is why Axis has increased attachment points in its excess liability insurance.
“This is not a hard market where almost everything is priced adequately. This is an underwriter’s market, where selection and portfolio construction will be important,” said Benmichol.