ICYMI: The Business of Risk

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1:19Because planning for the future isn't only about knowing what's next. It's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better. Find an independent agent at c-i-n-f-i-n dot com. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. In this environment of political, economic, social, and technological change, The nature of risk is in a constant state of evolution, and the need for specialty solutions to protect against that risk has never been greater.

2:03Those are the words of Vince Tizio, president and chief executive officer of Axis Capital Holdings. It's a publicly traded company, about$7 billion in market cap, and they work with businesses to cover specialty lines of insurances. So think property, casualty, accident and health, but also insuring about cyber, marine and terrorism related risks. Vince Tizio joins us right now in the Bloomberg Interactive Broker Studio. Thanks for joining us. How are you? Thanks for having me. Nice to be with you. So you guys pivoted away from catastrophe reinsurance a few years ago. And now you're more focused on these specialty risks.

2:43Just talk a little bit broadly about what the focus is now and the motivation behind that change. Sure. Sure. So Access in 2022 announced, as you mentioned, leaving the reinsurance property cap market. We rededicated ourselves to the insurance specialty products and you captured a number of the industries. Why did we do it? We felt we had a stronger value proposition to meet the needs of our clients globally in the provision of marine insurance, excess casualty, energy, to name a few industries that we have a keen focus, of course, cyber. And we have found the benefit of realizing being at the point of sale on the insurance side has proven to be more economically beneficial as well.

3:23What's the biggest area of growth for you right now? Well, our wholesale business is the largest segment of growth for us here in the United States. It's a rapidly growing channel of distribution and one where we have a keen knowledge base and expertise. But if you think about it, not from the perspective of how you're selling it, but of what you're actually insuring, which is the area of growth. Like are more and more companies calling you and saying we need cyber insurance? The construction industry utilizes wholesale distribution often as one keen focus. The entertainment industry, the hotel industry, transportation, clearly.

3:57And really we're bringing unbundled, so there are individual products to that channel that cover their exposures in a tailored way, really to be as specific to the exposures that they're trying to assure themselves. What is your exposure with a huge event? Let's say a catastrophic event that would actually affect multiple customers of yours. What's your financial exposure and how do you protect yourself? Yeah. So in part, the question that Emily asked at the outset was one of the driving considerations. Our ability to be more certain in the degree or order of magnitude that we could economically handle on an event that crosses multiple customers, multiple industries at the same time.

4:36So we have a number of models that drive what tolerance of risk that we have. It's one of our most improved areas from the vantage point of our volatility, which is measured each quarter on a catastrophe ratio basis. And I think it's aided our TSR improvement over the last two years, which has been over 100 percent. What kind of companies do you work with in terms of size? Is it typically larger companies? Is there like a certain market cap that you're working with? Yeah, thank you. So we've broadened the spectrum of our customer segmentation. We'll handle transactional customers, say companies with receipts or turnover as little as$10 million to the biggest companies in the world.

5:16And it obviously differs by each of our business focuses in the energy space. We handle the largest companies in the world. In our middle market space, we handle a number of transactional customers across a broad swath of products. How does climate change affect your business? Importantly, importantly, and it's a topic that we are speaking about regularly. but more specifically, it is a reminder of the provision of care that we bring to the commercial insured global marketplace. But which part of the business does it hit more so? Marine? Property, marine, and energy are the three areas where climate change has an impact.

5:50And never forget for the public company customer, the duties of a director that assures their companies that they're buying enough limits, that the terms and conditions are tailored to meet their exposures to loss. So broadly, it affects a number of our businesses. What about when it comes to cybersecurity? Just like these leaders of big businesses that you work with, your clients, how nervous are they about in an age of AI increasing use of like I get scared. I read news articles about AI and attacks and I get nervous. What are business leaders saying? It's a top five board conversation. It starts with the provision of care, the resilience of the company itself to make certain that they can protect themselves.

6:31The choice of the insurance company that they're partnering with. Remember, insurance companies that provide cyber insurance aren't only an asset that they can draw on when they have an event. It's the loss preventative services that strong specialty insurers like Axis deliver to customers. It's the continual feedback of making certain that we're both staying aware of the different threats and the different forms of threat actors. Can you just explain and kind of take a step back and explain the difference between for people listening or watching right now, the difference between specialty lines versus standard U.S.

7:02commercial lines of insurance and and sort of where you're leaning into when it comes to. Because correct me wrong, you're kind of moving away from the non-specialty lines, right? No, we're doubling down, Tim. So specialty, please think of specialty as providing through a distribution channel. We're an intermediated business, an individual product. We're not a package product. We don't sell combination or standard lines per se. We sell individual products that cover defined exposure. So we underwrite and provide to the market property insurance, cyber insurance, all forms of marine insurance. And we work through an intermediated channel that is specialized.

7:43What does that mean? That's the line of business that they represent only on behalf of their clients. Does that make sense? Yeah, that makes sense. I want to talk about the flood insurance market. One of our colleagues from BI, Bloomberg Intelligence, noted to us that most U.S. insurers do not write flood insurance. What do you think about this prospect of more private insurers getting into that market? And what is Axis' appetite specifically? Well, as part of our property offering, we do provide flood insurance. I think what was referenced in the article is really the public-private partnership.

8:17The order of magnitude that floods can create an economic harm may require a partnership between government and private. And so this is a longstanding policy that's been out there. But in the provision of Axis serving its clients, we provide a fulsome remit of offering. We provide this globally on a property basis. Vince, always good to see you. Nice to see you. Thanks for swinging by. Vince Tizio, he is the president and CEO of Axis Capital Holdings. It's a$7 billion market cap company that works with businesses to cover specialty lines of insurance, property, casualty, accident, and health. Thanks so much for joining us, Vince.

8:56Always good to see you.

9:00If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity. The next investment. The next move. But sometimes what matters most is being ready for what you never saw coming. For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. Because planning for the future isn't only about knowing what's next. It's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better. Find an independent agent at CINFIN.com. This dog salon, operational excellence.

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