There are no secondary perils: AXA XL CEO

“All perils are perils, and the secondary ones are just as important as the ones we’ve traditionally labelled as primary,” according to Bertrand Romagne, chief executive officer, International, AXA XL Reinsurance, who wants the industry to reconsider how it categorises and addresses perils.

This bold statement comes as the industry faces a world marked by unprecedented volatility and unpredictability, Romagne noted. “In the last few years, we’ve seen some unusual losses coming,” he said. 

“Since 2017, we’ve encountered perils that have not been usual for us.”

For decades, the industry’s primary focus has been on catastrophic events, such as hurricanes and earthquakes—events that, while devastating, are somewhat predictable through established models. 

However, the rise in frequency and severity of what were once deemed “secondary” perils, such as wildfires, floods, and social unrest, is forcing a re-evaluation. 

“Wildfires have become extremely important—not just in the US, but globally,” Romagne said. 

“We’ve seen major events in Greece, Spain, Portugal, and Australia: it’s a risk that is becoming widespread.”

Romagne’s concerns are not merely theoretical—he highlighted specific instances as evidence of growing unpredictability. 

“There was some flooding in Germany in 2021, and again this year, plus there’s been severe flooding in Dubai—estimated at $3 billion losses for a country of three million inhabitants.

“That’s a staggering loss ratio when you compare it to larger nations such as the US or France,” Romagne continued.

“When Dubai, which rarely sees rain, experiences a year’s worth of rainfall in just 12 hours, it’s clear that nowhere in the world is safe from these so-called secondary perils.”

New exposures bring new risk

The implications for the reinsurance market are profound. As Romagne explained, traditional approaches no longer suffice. “In the old days, when we had a cat treaty, we would price the hurricane, or the earthquake, and that was about it.

“Nowadays, we have to consider all kinds of exposures,” he observed.

The rise of increasingly impactful perils such as wildfire, flooding and severe storms means re/insurers must expand their risk assessments to include a broader range of threats, and Romagne wants the industry’s terminology to evolve to reflect the current reality. 

“As we’ve seen with Dubai, almost nowhere in the world is now ‘not exposed’ to flooding, and the term ‘secondary peril’ is misleading,” he stated.

“Flooding used to be more related to rivers overflowing, but now it’s more about flash floods, and torrential rainfall and nearly everywhere has exposure 

“The term ‘secondary’ perils implies these risks are less important, but for some clients they are more impactful than the ones we consider primary.”

Despite the challenges, Romagne is optimistic about the industry’s ability to adapt. “We are good at providing solutions for emerging risks,” he stated, while acknowledging some hurdles to overcome, particularly in assessing the level of exposure for certain other risks. 

“Social unrest and riots, for example, can be difficult to predict. The estimated losses after ongoing riots in New Caledonia surprised us by their size—a $1.2 billion loss for a population of 300,000.

“If a similar magnitude loss were to happen in a larger country, the impact would be far greater than anything we’ve seen before,” Romagne said.

“I would hope we can raise the level of conversation beyond how much things will cost.” Bertrand Romagne

Clearer conversations with clients

AXA XL Reinsurance is leveraging its technical resources to address these emerging challenges.

“We have in-house experts who produce models, underwriters with strong technical experience, and we invest in studies from universities such as Cambridge that have shown us we need to widen the scope of risks we study for our clients,” Romagne explained.

His hopes for Monte Carlo are very precise. “My wish is to have very open discussions with clients about their risks, their data, and how we can help them do their business by providing capacity,” Romagne said. 

“I would hope we can raise the level of conversation beyond how much things will cost or how the market will go—whether it will be soft or hard—but more about what clients need and how we can meet those needs.”

In a world where unpredictability is the new norm, Romagne’s message is clear: the industry must evolve, and the time to start is now. 

“Our business is very important for this world,” he said. 

“But the protection gap is still very large, so we have a lot to do to close it. Our focus should now be on developing solutions that meet the demands of a changing world,” Romagne concluded.

Bertrand Romagne is the chief executive officer, International at AXA XL Reinsurance. He can be contacted at: bertrand.romagne@axaxl.com 

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