Axis Re’s Haugh: Shift towards monoline cyber cover to continue as market expands

Cyber has increasingly evolved into a monoline product over the past year with cover stripped out of multi-peril liability policies, according to Axis Re CEO Ann Haugh.

In an interview with The Insurer TV, Haugh said this trend would likely continue as technological advances drive increased complexity.

But she remained bullish about Axis Re’s continued expansion into the sector.

“For us it's very much about risk selection and geographic diversification,” she said.

“We've seen very significant growth – albeit off a very small base – this year, and you will continue to see us advancing our expertise and advancing our position on the cyber side for reinsurance.“

She said primary rates had flattened for cyber business, but added that pricing was “holding a bit more strongly” on the reinsurance side.

“We still believe rates on the reinsurance side are price adequate,” she said.

Haugh attributed the discrepancy between reinsurance and insurance rates to the relative youth of the market, with understanding of cyber risks still developing.

She added that reinsurance had an important role to play in helping shape the cyber risk management ecosystem and in addressing the “longer-tail systemic risk” associated with the class.

Casualty caution

Having exited property treaty reinsurance business last year, Haugh said advancing the company’s position as a specialist reinsurer was a key component of the Axis strategy.

“We’ve made meaningful reductions in our cat exposures through this decision and we are pleased with how that has flowed through our results so far,” she said

Haugh added that the carrier’s build-out of its credit, accident and health, marine, agriculture and casualty lines had demonstrated its strong and deep relationships in those classes.

But she expressed some caution on casualty markets, highlighting headwinds such as social and economic inflation. Haugh said her biggest concerns were around two areas of the casualty market – commercial auto and public D&O.

“I think the casualty market is improving, but we still remain cautious. It's not a one size fits all. Casualty encompasses a number of lines including workers’ comp, cyber professional liability and general liability.

“We've seen some improvements in ceding commissions on the GL and PL side. We think that momentum will continue. The rate and terms and condition environment has improved but would need to hold or continue to improve to make that market attractive.”

Outlook for 1.1

Despite these challenges, Haugh said she was cautiously optimistic on casualty for the upcoming 1.1 renewals, with several specialty lines – including agriculture, mortgage and credit surety – looking favourable for growth.

She said the reinsurance market as a whole was in a more sustainable position than 12 months ago.

“I think the market is in a better place, but one year of market correction doesn't make up for five years of losses where reinsurers weren't covering the cost of capital,” she said.

“I consider 2023 a transition year where as well as the rates needing to hold or continue to improve, improvements in terms and conditions and structures also need to hold.

“Coming out of Monte Carlo, I'm optimistic on reinsurers’ sentiment that we need to continue to hold firm and set the new normal.”