Available capacity does not settle the frequency-loss debate, says Axa XL’s Romagne

Competition is putting retentions and pricing back into focus, but better data and prevention must also shape renewal discussions, says Axa XL’s Bertrand Romagne.

Key points:
Risk transfer alone is not the answer
Mitigation belongs in renewal talks
Flood, hail, wildfire are primary perils

A more competitive reinsurance market is reopening discussions about who bears frequent weather losses, but shifting those claims back to reinsurers comes at a cost, says Bertrand Romagne, chief executive of international reinsurance at Axa XL.

Speaking to Baden-Baden Today, Romagne said retentions and attachment points will feature in January renewal negotiations. 

“There is a tendency for the market and for clients to say, ‘Oh, we have more frequent losses and we should share those with reinsurers’,” he said. “Maybe, but the problem is there is a cost to that.”

Those losses shifted towards insurers because the previous situation was “unsustainable”, he said. The discussion, therefore, needs to consider whether the reinsurance market can sustainably provide protection for more frequent losses, alongside deciding how claims should be shared.

Axa XL, he added, remains ready to offer capacity, but its approach is guided by a sustainable balance between risk and return. “We’ll look at the data and make sure we remain relevant for our clients and we will be disciplined and think long term rather than just short term.”

No longer ‘secondary’

Assessing that balance requires better information on the perils driving claims. Romagne said the industry needs to apply the same discipline to flood, hail and wildfire that it has developed over decades for windstorm and earthquake.

“We have to stop calling them ‘secondary perils’ because they’re not secondary any more,” he said. “In terms of losses experienced, they are probably first.”

Cedants’ data is well organised for wind and earthquake, but information on flood and wildfire still needs improvement. More granular exposure information would help reinsurers understand accumulations and determine appropriate pricing and terms.

Changing hazards and growing exposures mean historical loss records alone are insufficient to assess future risk. “You can’t say what happened 10 years ago is a reflection of what will happen in the next 10 years,” Romagne said.

Axa has engaged with the Cambridge Centre for Risk Studies on wildfire research. Scientific work and better exposure information, he said, can support more forward-looking underwriting judgements.

“Doing insurance and reinsurance as we used to, just looking backwards and relying on historical statistics, is not going to work any more,” he said.

“We’ll look at the data and make sure we remain relevant for our clients and we will be disciplined and think long term.”

Data and resilience

The information gaps extend beyond physical damage. Romagne highlighted that business interruption is becoming a larger component of losses, alongside disruption to transport, utilities, internet connectivity and supply chains, where increasingly interconnected businesses can face consequences that are difficult to evaluate from existing data.

Insurers need to collect more information from their own clients to understand those dependencies and improve the assessment of potential losses.

Romagne acknowledges that improving resilience requires work over a longer period but argues that prevention and mitigation should complement risk transfer, and must be discussed proactively during the forthcoming renewals.

“We offer risk transfer, and will continue to support our clients on that,” he said. “But it should not be the only response.”

Insurers and reinsurers need to help build resilience through better protection and construction, drawing on reinsurers’ experience across markets, he said. Brokers and researchers also have a role in developing practical action plans.

“The best insurance is actually not to have any loss,” he said.

Longer view

For buyers, financial strength, reliable capacity and risk-reflective pricing remain key requirements. Romagne also stressed the importance of technical expertise and support through the cycle. Axa XL, he said, will continue to focus on clients that demonstrate sound underwriting, claims and risk management, alongside transparency in their data.

“For us, it’s not just about providing the lowest price,” he said. “It’s also about being the more valuable partner through the cycle, through changing market conditions and trends.”

He cautioned against judging the relationship solely on price competition and urged buyers to consider broader, long-term partnerships with reinsurers. 

“Cat is not the only product. It’s important for our clients to write cat, but we also write other business with them,” he said, pointing to casualty, aviation, marine, credit and other businesses it writes.

“For this renewal, I think our expectation is obviously to talk about the immediate concern of our client, but also to go beyond that.”

Overall, he said European reinsurance needs a broader perspective covering climate, technology, interconnected risks and collaboration with cedants, brokers, regulators and researchers.

Bertrand Romagne is the CEO of international reinsurance at Axa XL. He can be contacted at bertrand.romagne@axaxl.com.

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