Axis Re’s Hottinger: Multi-year pricing correction required

The market cannot look at the current rate improvements as a temporary fix, the strategy must be much longer-term than that, according to Andy Hottinger, president EMEA and LatAm at AXIS Re.

“The current improvement that we expect in the market and what we have seen already I think is only the first step in a longer multiyear correction that will be required,” he told The ReInsurer.

Hottinger said during a video interview that the “case for change” is a global one that extends to Europe.

Looking at the broader context, he said: “The underperformance in the (re)insurance industry has been significant over the past couple of years and there have been profitability issues.”

He added: “For Europe specifically, while there has been the absence of severe major cat events, there’s considerable uncertainty in respect of the Covid-19 property losses that are impacting property programmes and that’s an exposure that has not been priced into the current treaties.”

Additionally, the global low yield environment is also a factor.

“The low yield environment will last longer than anticipated and this puts pressure on underwriting profitability, most notably on the longer tail lines,” he said.

A combination of these factors and others is creating a “general loss of patience” in the reinsurance industry, said Hottinger.

Specifically discussing the impact of Covid-19, Hottinger said that it is still too early to tell where the industry will end up.

“I think the impact will be broad and I think it will be different based on a variety of factors, but it’s quite early to tell because one thing is that there is a natural lag between what the primary insurers see and how it is felt through the rest of the chain,” he said.

“Meanwhile, we will remain engaged and present with our clients. We will continue to monitor carefully the situation and will pay claims fairly and be flexible on how events take shape.

“Covid-19 revealed many wording inconsistencies and we all need to address these as an industry. We need to ensure the language we apply corresponds to our underwriting intent of coverage,” he said.

In Hottinger’s role, he also oversees the Latin America operation which he believes is a very “resilient” region which will “bounce back rather quickly” in the future.

“There is a trained resilience because LatAm has frequently been beaten with all sorts of shocks - be they economic, political and/or cat events. I think they’re also, in certain ways, very advanced in digitising the service business and so I would expect the region to bounce back rather quickly and move into a much better 2021,” he said.

Looking forward, Hottinger said Axis Re is in a very good position because of its size and having enough capital to accelerate growth.

“But we can also easily pivot around if we needed to because we are agile and still small enough in order to remain flexible and I think that puts us in a good spot and our focus therefore is really to maintain our relationships.

“I like our chances against existing and new competitors,” he concluded.