Specialist Lloyd’s focused insurance and reinsurance firm Beazley is the latest company to reveal a significant upsizing of its property and reinsurance underwriting portfolio, as it took advantage of the recalibration of pricing following the 2017 catastrophe events.
Beazley’s ability to secure better pricing in the wake of catastrophes will have a lot to do with its position as one of the leading underwriters in the Lloyd’s market, which will also bode well for the third-party and private capital providers the company works with.
Across the business Beazley has grown its gross written premiums by 10%, but that growth was helped by a 29% increase in property lines and 7% in reinsurance, the areas the firms third-party capital partners will largely be interested in.
It’s also a clear reflection of the improvements in pricing seen in the Lloyd’s and London insurance and reinsurance market, as Beazley being a leader there has managed to secure rate increases that seem higher than some of the global players achieved across their books.
Andrew Horton, Chief Executive Officer, commented on the firms results, “Beazley made a strong start to 2018 with premium growth of 10% on average across the portfolio. We have also seen rate increases across many lines of business as the market recalibrates its pricing in the wake of the high catastrophe activity seen in late 2017.”
In terms of rates, Beazley said that its property underwriting team benefited from “improved underwriting conditions seen in the wake of the high catastrophe frequency experienced at the end of 2017.”
These improved conditions led the firm to underwrite 29% more property premiums, with an average rate increase of 8% across that book of business.
In reinsurance, Beazley also saw improved underwriting conditions, leading to the 7% growth in the size of the book, while rates increased by 7% in Q1 2018.
Interestingly though, the firm noted that specialty lines remained flat in terms of pricing, although Beazley wrote 6% more business here. In political risks and contingency the firm wrote a much larger book, a 14% increase, but rates here declined by -3%. While in marine Beazley wrote 3% more premiums at a 2% average rate increase.
Overall, Beazley reported 10% growth in terms of underwritten premiums and an average rate increase across the portfolio of 3%.
The re/insurers experience in property and reinsurance lines is indicative of why Lloyd’s and London market business can be so attractive to ILS funds and third-party investors.
The market, after taking major losses, has clearly recalibrated its rate expectations and Beazley, being a lead player, has been able to capitalise on this.
By working as capital providers for syndicates or SPA’s run by players like Beazley, third-party investors can access attractive insurance-linked returns. Or by underwriting for themselves, as a number of ILS players now do, they can benefit from the rate increases fully.
Of course, Beazley has a special purpose arrangement (SPA), Syndicate 5623, which takes a quota share of the broker facilities business the firm underwrites through Syndicate 3623 and is backed by a range of third-party investors, including some capital from the ILS market.
Those backers will be hoping to benefit from the rate increases Beazley has seen in the first-quarter.
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