AXA XL sets sight on ILS growth

AXA XL, the property/casualty (P&C) and specialty risk division of the AXA group, is looking to grow the use of ILS to de-risk its portfolio in a strategy that should ultimately be expanded to include the whole group, Greg Hendrick, CEO of AXA XL, suggested during a Nov. 28 press conference.

The group plans to further reduce the natural catastrophe (nat cat) exposure at legacy XL Catlin in 2019. AXA and XL Group have already reduced potential catastrophe impacts by around 40 percent relative to 2017 ahead of the merger of the two entities.

Currently, AXA XL uses about $1.5 billion of cat bonds providing good protection at an economic price, Hendrick said. “It takes away the largest peak events and cedes it to the capital markets,” he explained.

In addition, AXA XL uses nearly $1 billion in collateralised reinsurance, reinsurance from third party ILS fund managers that offers protection particularly around catastrophe aggregate cover and some other areas, Hendrick noted.

Furthermore, AXA XL has recently taken full control of ILS manager New Ocean, Hendrick noted.

In November 2018, AXA XL's reinsurance operation has completed the acquisition of all third-party ownership interests in New Ocean Capital Management, its majority-owned asset management affiliate.

“We just bought it in the last few weeks and it is now aligned to work solely on AXA XL and ultimately AXA group risks, allowing us to access investors directly rather than through a third-party ILS manager,” Hendrick explained. He noted that New Ocean has now around $700 million of funds under management.

Hendrick said that he is a strong believer that the ILS market is here to stay and that it will be a strong component of both the property catastrophe marketplace and other short tail market businesses.

“I see New Ocean growing, I see us over time potentially issuing further cat bonds and I see us continuing to use collateralised aggregate as well,” Hendrick said.

AXA XL wants to grow its direct access to investors either via New Ocean or other vehicles. In a second step, this strategy should be applied more broadly to all the AXA group to help better matching the right capital with the right risk portfolios, Hendrick explained.

“We are very excited about the opportunity in the ILS space and look forward to seeing it build in the years ahead,” he said.

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