Company: AXS-PE
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001214816-25-000056
Chunk: 333

Company: AXIS CAPITAL HOLDINGS LTD
Filing Date: 2025-02-26
Form: 10-K
Item: Item 7
Chunk 333
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 to an insured, to be subrogated to, or otherwise have an interest in, the insured’s rights of recovery under an insured loan or facility agreement. These estimated recoveries are recorded as an offset to credit and political risk gross loss reserves. The lag between the date of a claim payment and the ultimate recovery from the corresponding security can result in negative case reserves at a point in time. Significant gross claims associated with certain credit and political risk contracts were paid in advance of recoveries being received from the corresponding security that resulted in negative gross case reserves of $(54) million at December 31, 2024 (2023: $(60) million) and related negative reinsurance recoverable on unpaid losses and loss expenses of $(27) million at December 31, 2024 (2023: $(29) million). Refer to 'Critical Accounting Estimates – Reinsurance Recoverable on Unpaid Losses and Loss Expenses' for further details. 

The nature of the underlying collateral is specific to each transaction. Therefore, we estimate the value of this collateral on a contract-by-contract basis. This valuation process is inherently subjective and involves the application of management’s judgment because active markets for the collateral often do not exist. Estimates of values are based on numerous inputs, including information provided by our insureds, as well as third-party sources including rating agencies, asset valuation specialists and other publicly available information. We also assess any post-event circumstances, including restructurings, liquidations and possession of asset proposals/agreements.

In some instances, on becoming aware of a loss event related to credit and political risk business, we negotiate a final settlement of all of our policy liabilities for a fixed amount. In most circumstances, this occurs when the insured moves to realize the benefit of the collateral that underlies the insured loan or facility and presents us with a net settlement proposal that represents a full and final payment by us under the terms of the policy. In consideration for this payment, we secure a cancellation of the policy, or a release of all claims, and waive our right to pursue a recovery of these settlement payments against the collateral that may have been available to us under the insured loan or facility agreement. In certain circumstances, cancellation by way of net settlement or full payment can result in an adjustment to the premium associated with the policy.

Additionally, when we consider prior year reserve development for the credit and political risk line of business, it is important to note that the multi-year nature of this business distorts loss ratios when a single accident year is considered in isolation