Industry can’t afford fragility: AXA XL Re urges balance, discipline, resilience

Wildfires used to be treated as secondary peril. Not any more, says AXA XL’s Reinsurance chief executive Guidée. As insured values climb in exposed areas and fires become systemic, he argues the industry must put prevention and mitigation at the top of its agenda – or risk falling behind fast-changing realities.

Key Points:
Wildfire risk no longer a secondary peril
Reinsurers must earn cost of capital
Balanced portfolios drive robustness

For Guidée, wildfires illustrate a broader reality; losses are not driven by hazard alone, but by exposure and vulnerability. In regions such as the wildland urban interface or amenity rich but fragile areas such as Lake Tahoe geography and limited escape routes amplify the threat. “How we mitigate our vulnerability is a key feature on which the industry, public authorities and the broader community should work,” he said in an interview with Monte Carlo Today.

That focus on resilience runs through all Guidée’s thinking. Reinsurers, clients and regulators talk about it often, but he treats it as the industry’s ultimate test – the ability to withstand climate volatility, systemic shocks and new technological risks without leaving clients exposed.

AXA XL Reinsurance’s approach to systemic risks is rooted in vigilance and preparation. The group stays “constantly on alert”, Guidée explained, by investing in expertise both internally and through academic partnerships, including its collaboration with the Cambridge Centre for Risk Studies. Knowledge and people, he stressed, form the first pillar of resilience.

“You don’t want your ultimate backstop to be fragile. ”

The second is data. Decades of accumulated experience must be used wisely, balanced against new evidence. “You want to make sure that you can capture shifting patterns or emerging trends while not falling into the trap of recency bias,” he said.

AXA  XL Reinsurance leans on scenario planning. Structured stress-tests, he argued, provide a sturdy framework for preparing for systemic shocks and managing uncertainty.

That mindset also informs his market view ahead of the 1/1 renewals. Conditions are improving, he believes, but discipline must hold. “Reinsurers must earn their cost of capital,” he said, pointing out that for many years the sector failed to do so, leaving the ecosystem dangerously exposed.

“You don’t want your ultimate backstop to be fragile,” he added, reminding us that financial resilience underpins the industry’s social function, as well as its commercial one.

He said with four quarters of strong earnings and capacity rebuilding, the balance between supply and demand looks more stable. In the US, ceded premiums have been rising in high single-digit to low-teen percentages, reflecting both demand and rate movements.

For AXA XL Reinsurance, capital allocation is always tied to client needs, but robustness comes first. A balanced portfolio across geographies and product lines underpins resilience. That diversification, Guidée argued, ensures the ability to stand by clients when shocks hit.

Reinsurers also serve a social purpose by extending capacity to underserved regions, enabling insurance cover that which may otherwise not exist.

Technology is another area where Guidée sees opportunity but also limits. AI is already helping AXA XL Reinsurance process unstructured data and free up underwriters and claims handlers for higher-value tasks. But it is no silver bullet. “We are, and we will remain, a client-centric organisation,” he said. “AI is an enabler, not a replacement.” Human judgment, he insists, will remain central to the business.

As Monte Carlo turns its attention to resilience, capacity and innovation, Guidée’s message is that the industry cannot afford fragility. “You need robust reinsurers for the whole system to work,” he concluded.

Renaud Guidée is the chief executive officer at AXA XL Reinsurance. 

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