December 4, 2023

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AXA weighs offloading $2 billion reinsurance arm to chop catastrophe threat

2 min read

New York/London: One of many world’s prime insurers is mulling offloading its property reinsurance enterprise in a bid to chop its publicity to pure disasters like hurricanes, in accordance with three folks conversant in the matter.

French insurer AXA SA has been discussing strategic choices for its XL Re unit, together with a attainable non-public sale or inventory market itemizing, mentioned the folks, who spoke on situation of anonymity.

The discussions, described by the sources as preliminary in nature and which can not in the end result in a transaction, come two years after the enterprise was reported to have attracted curiosity from French mutual insurer Covea.

Reinsurers tackle a few of the dangers that major insurers underwrite in trade for compensation. The rewards for offering cowl for pure catastrophes will be excessive, however so can the losses.

Occasions resembling Hurricane Ian final yr – the third costliest storm in US historical past – have prompted some reinsurers to cease this line of enterprise, significantly as local weather change makes it more durable to guage dangers.

However these nonetheless open for enterprise have been capable of dramatically improve the charges they cost for his or her providers.

Costs for US property disaster reinsurance rose by as a lot as 50 per cent at a key July 1 renewal date, dealer Gallagher Re mentioned in a latest report.

AXA has been making an attempt to cut back the publicity of its AXA XL property and casualty (P&C) division – which homes XL Re – in an effort to make earnings extra predictable.

This has precipitated the reinsurance enterprise to shrink, with revenues dropping by practically a 3rd final yr to $3.2 billion, in accordance with AXA’s 2022 accounts. The Bermuda-based unit had a guide worth of round $2 billion on the finish of December.

The excessive pricing atmosphere, together with a latest bout of offers within the sector, may present the required tailwinds for AXA to exit the enterprise altogether.

In Could, American Worldwide Group agreed the sale of its reinsurance arm Validus Re for roughly $3 billion, or about 1.4 occasions the unit’s guide worth.

In the meantime, each Skyward Specialty and Fidelis Insurance coverage Holdings have accomplished preliminary public choices (IPOs) in New York for the reason that begin of the yr.

Sources informed Reuters final month that Hamilton Insurance coverage Group was additionally contemplating strategic choices.

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