7 March 2024 Insurance

Beazley: climate drives US property to hard-market E&S path long-term

Beazley will enjoy long-term growth in property, not only as hard market conditions hold into 2024, but as an increasingly complex North American market drives business Beazley's way long-term, top company officials have claimed. 

 “We expect this opportunity in property to continue for some time,” CEO Adrian Cox told his company's fourth quarter earnings call after having laid out how Beazley  had increased exposure throughout 2023 to take advantage of “excellent market conditions.” 

Property growth in 2023, benefitting from a capital increase late 2022, proved large scale. Written premium rose 64% on 22% rate gain, including 85% premium growth in North America and 44% in global wholesale. The "vast majority" of the growth was in the primary book, not reinsurance. Beazley took 28 points off its undiscounted combined ratio to 67%, in large part on the drop-off in cat activity.  

It's not just a continuing opportunity, but an opportunity expanding in Beazley's direction, CFO Bob Quane added. 

To Quane's eye, while rate gains in 2024 “will not be of the same magnitude” as seen in 2023, an array of lurking climate risks will “keep property more disciplined” than in prior hard markets and push more business into the non-admitted market E&S channels where Beazley has set itself up to do all of its North American property business. 

“Climate risk makes property more complicated to underwrite and makes it less commoditised and more specialised, which plays to our strength,” Quane said. Investments in modelling and underwriting made during soft market years have “paid off.”

Brokers have become increasingly accustomed to pushing more clients towards E&S channels, Quane said. Admitted market players continue to struggle to handle anything but the most standardized risks and properties with little sign they could turn a new corner on the challenge, Cox suggested. 

“We are building our relevance in the market, accessing new clients that previously would have been unavailable to us,” Qyane said. “We expect this to persist throughout 2024 and beyond.”

CEO Cox claims “no signs” that flows into the US E&S market are slowing, just continual indication that the mix of E&S flows is expanding. 

“We see a long term opportunity to grow our market share in the US,” Quane concluded.

The growth will come without any upward revision on the amount of risk or volatility Beazley is assuming, Quane claimed. The 1:250 PML as a portion of capital and the 1:10 as a portion of earnings have both come down. Growth has come “without increasing the volatility to our firm” and Beazley will maintain the new lower PML metrics going forward, Quane indicated.

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