Beazley, the specialist Lloyd’s focused insurance and reinsurance underwriting business, has increased its estimate of the cost of Covid-19 claims for its first party business by 100% to $340 million, net of reinsurance, in light of the evolving status of the pandemic crisis.
Back in April, Beazley revealed an expected Covid-19 claims burden of $170 million, net of reinsurance, across its first party business – contingency, accident and health, marine, property and reinsurance.
The insurer and reinsurer said at the time that in order to reach this figure, it had made a number of assumptions including that events would resume in September 2020, which would ultimately lead to a normalisation in the levels of contingency claims.
However, in light of the evolving status of the coronavirus outbreak, Beazley no longer expects this to be the case and has subsequently raised its total estimate for first party Covid-19 claims from $170 million to $340 million, net of reinsurance.
The company’s book of business is heavily weighted towards the US and the UK, with the largest segment being conferences. Those conferences that were postponed earlier in 2020 are now being cancelled as are the events scheduled for later in the year, which has resulted in Beazley’s Covid-19 loss estimate jumping by 100%.
“In addition, we anticipate further claims based on our exposure for events in 2021,” explains Beazley.
According to Beazley, almost all of the additional $170 million of estimated costs is driven by further event cancellation losses. The re/insurer adds that this revised total assumes a resumption to some form of normality in H2 2021. However, if this fails to materialise, Beazley estimates that it would have a further $50 million of claims, net of reinsurance.
Alongside its Covid-19 update, Beazley has also noted that it does not expect the outcome of the recent FCA business interruption judgement to have a material impact on the firm.
Despite the higher Covid-19 claim costs, Beazley continues to see improving growth prospects across its portfolio. The main driver of this is continued rate hardening, with the firm reporting an overall rate change of 13% at the end of August, 2020. For the full-year, the re/insurer is estimating overall growth in the mid-teens.
“Looking towards next year we expect these rate improvements to continue, and are again planning for double digit growth in 2021. We have contemplated this growth within our capital planning and, following the equity raise and LOC extension earlier this year, are able to take full advantage of the opportunity that lies ahead of us,” says Beazley.
In May, Beazley successfully raised approximately $300 million through an equity placement designed to fund growth, enable it to capitalise on rates, and help it respond to Covid-19.
On investments, Beazley notes recent improvements in investment markets, but adds that it remains cautious on taking on investment risk owing to the ongoing uncertainty surrounding the global economy. As at the end of August, Beazley’s investments returned $136 million, or 2.2%.