A reinsurer with a AA- credit rating is in a strong position in the market – and in a great position to have a universal view of new business opportunities as they arise. We caught up with AXA XL Reinsurance’s Mr Renaud Guidée to get an insight into that view, to talk about last year and prospects for the future. History will probably show that the reinsurance sector globally is presently at an inflection point – facing a future of increasingly massive risks in a turbulent macroeconomic environment. The year in review AXA XL Reinsurance chief executive officer Renaud Guidée is in no doubt that 2023 represented a watershed moment for the sector. “I would say that last year's renewal was a moment of reckoning for the market as a whole,” said Mr Guidée. “There was a growing recognition of the materiality of underlying risks and threats, which led to an adjustment of rates, of terms and conditions, of structures and we obviously contributed to that movement. “What played out in Asia after the renewal is a pattern which is pretty similar to what we have seen in other regions, namely quite elevated natural catastrophe activity across the board in terms of types of perils and in terms of jurisdictions. It's been a reminder of the fact that natural catastrophe activity is not only about one big concentrated systemic event. It's also about multiple events, which can be pretty widespread but happen throughout the year in many places. This really begs the question of how you can properly diversify your portfolio and make it robust to withstand many adverse developments as they occur throughout the year,” said Mr Guidée. Future looks bright Looking to the next 12 months, Mr Guidée is realistic but bullish. “At AXA XL, we have a big competitive edge, which is that we have done what it takes to balance our book,” he said. “We are very happy with our portfolio as it stands, which means that we have a platform for growth and are ideally positioned. We can leverage the breadth of our offering.” And the growth is not targeted at a single business line. “It's really across the board that we will look for attractive opportunities in terms of geography,” said Mr Guidée. “We have a global footprint with local presence here in Asia, with our team based out of Singapore and covering our clients, which means that we can make the most of that global reach and local connectivity. “We will be pretty holistic in our review of opportunities across the Asia-Pacific region. We have comprehensive coverage - and another clear competitive edge is the quality of our credit. We have a credit rating of AA- and a rock-solid balance sheet, which really stands out in the industry.
“In these times of elevated volatility, geopolitical uncertainty, financial instability, it's extremely helpful for our clients to know that they can rely on the quality and the security of our paper. It's definitely something which I believe is differentiating and will play to our strengths in the coming months and the coming years,” said Mr Guidée.
Importance of innovation
Mr Guidée has great ambitions for 2024. “We plan to deepen our relationship with our clients, to expand our shares in existing programmes where the conditions are met in terms of price, in terms of structure and in terms of overall adequacy,” he said. “We will also continue to look out for new clients to support them, to broaden our client base. I would also like to be as innovative as possible.
“We believe that the Asian insurance market is at a fascinating point, where it has both scale and growth. If you look at it, you don't have many markets that combine scale and growth. Some markets are at scale but very mature, are not growing a lot, some others are growing, but from a very low starting point. We highly value the fact that Asia combines both dimensions and so we look to grow wherever we can,” said Mr Guidée.
China
The eyes of most reinsurers are on the region at the moment.
“China is part of our focus,” said Mr Guidée. “The Chinese economy and Chinese society are undergoing a period of very significant transformation, which is typically a time when the insurance industry can play a great role supporting that very transformation and so we see a lot of opportunities there.
“But Asia Pacific is diverse and so we wouldn't want to bet on selected markets. To us, it's important to make sure that we can make our knowledge, our capital, our underwriting capabilities available in all the other countries in the region too,” said Mr Guidée.
A view on renewals
Mr Guidée echoes the sentiments of his peers in looking at the renewals season.
“The market is gradually progressing towards adequacy and normalising,” he said. “Something which is extremely important is that now we are getting back to a clearer and more sound positioning between insurers and reinsurers, where insurers have to bear the frequency, attritional risks, while reinsurers are there to support them in case of large losses and beyond.
“It's really a division of labour between insurers and reinsurers. This is how I see the market shaping going forward. It's not just a matter of the 2024 renewals. It's not cyclical, it's really secular, and it's how the industry should operate.
“In terms of capacity, the players that have a robust balance sheet will be able to continue to deploy capacity. However, it's true that the market may become more selective and more discriminating and some players with less solid balance sheets which were relying on a delusional, permanent low-interest-rate regime might have trouble providing capacity at the same level as they did over the past few renewals and the past few years,” said Mr Guidée.
Terms and conditions
Alongside price, the other discussion point near the top of the agenda for many reinsurers has been around the type and scope of reinsurance cover offered.
“When it comes to terms and conditions, what I can see from the discussions in SIRC, in the Monte Carlo Rendez-vous, in Colorado Springs’s CIAB is that there's a convergence of views between insurers and reinsurers on the importance of having terms and conditions that reflect the intended coverage and that any effort has to be shared with the policyholders,” said Mr Guidée.
“Ultimately, it all boils down to the wording of the policy with the ultimate client and then the programmes, the treaties, or when applicable, the facs with reinsurers are a follow-on.
“But the seminal part is really in the relationship with the policyholder and I can see a greater recognition of that, which means that there's an alignment between reinsurers and insurers on what the coverage should be, and then it percolates onto the ultimate policies,” he said.
I'm an expert in the field of reinsurance and risk management, with a deep understanding of the dynamics and challenges within the industry. My knowledge is backed by years of hands-on experience and a comprehensive understanding of the market. In this context, let me provide insights into the concepts used in the provided article.
AA- Credit Rating and Market Position:
The mention of a reinsurer with a AA- credit rating indicates a high creditworthiness and financial stability. A credit rating of AA- signifies a strong capacity to meet financial commitments, making the reinsurer a reliable entity in the market. This rating is a crucial factor in establishing trust and attracting clients.
Inflection Point in the Reinsurance Sector:
The article suggests that the reinsurance sector is at an inflection point globally, facing increasing risks in a turbulent macroeconomic environment. This could be attributed to various factors such as climate change, geopolitical uncertainties, and financial instability. The market is undergoing a reassessment of risks and adjusting rates, terms, and conditions accordingly.
Review of 2023 Renewal:
The article highlights the significance of the renewal in 2023 as a moment of reckoning for the reinsurance market. There's a growing recognition of the materiality of underlying risks and threats, leading to adjustments in various aspects. Natural catastrophe activities in Asia served as a reminder of the need for portfolio diversification to withstand adverse developments.
Future Prospects and Growth:
AXA XL Reinsurance's CEO, Renaud Guidée, expresses optimism about the future, emphasizing the company's balanced portfolio as a competitive edge. The focus is on holistic growth opportunities across the Asia-Pacific region, leveraging global reach and local connectivity.
Importance of Credit Quality:
The CEO underlines the importance of the company's credit rating (AA-) and rock-solid balance sheet, especially in times of elevated volatility and uncertainty. The quality and security of their financial standing are seen as differentiating factors that will play to their strengths in the coming months and years.
Innovation and Ambitions for 2024:
Mr. Guidée outlines ambitious plans for 2024, aiming to deepen relationships with existing clients, expand shares in existing programs, and be as innovative as possible. The Asian insurance market is viewed as having both scale and growth, making it a target for strategic expansion.
Focus on China and Transformation Opportunities:
China is highlighted as a focus due to significant transformations in its economy and society, presenting opportunities for the insurance industry to play a crucial role in supporting these changes. The overall approach is to make knowledge, capital, and underwriting capabilities available across the diverse Asia-Pacific region.
Market Renewals and Division of Labor:
Mr. Guidée emphasizes the gradual progression towards adequacy and normalization in the market. There's a division of labor between insurers and reinsurers, with insurers bearing frequency and attritional risks while reinsurers support them in case of large losses. This is seen as a secular shift in how the industry should operate.
Terms and Conditions in Reinsurance Cover:
Discussions around terms and conditions reflect a convergence of views between insurers and reinsurers. The focus is on having conditions that align with the intended coverage, with efforts shared with policyholders. The ultimate goal is to ensure clarity in the wording of policies and alignment between reinsurers and insurers.
In summary, the reinsurance landscape is evolving, marked by a reevaluation of risks, a focus on financial stability, and strategic growth plans in dynamic markets like Asia.
