With an expected turnaround in the fortunes of the property re/insurance markets throughout 2023, Beazley’s Group Head of Treaty, Patrick Hartigan, suggests the firm is ready to step up and support insurers and commercial buyers to find cover as peers pull back in the face of investor disillusionment due to poor returns in recent years.
According to Hartigan, the 1/1 renewal has been the first staging post in this transformation, with late orders, tightening terms and conditions, and sharp increases in rates. He notes that this dramatic change of direction comes after more than five years of significant pressure of excess capital driving down rates and eroding terms and conditions.
During this time, property catastrophe underwriting has become more commoditised with ubiquitous but fallible catastrophe models driving less differentiation and learning, Hartigan explains.
Meanwhile, as abundant capacity reduced rates, the growing impact of climate change on physical assets was making the property market fundamentally riskier.
Hartigan adds, “These two forces of falling rates and increasing risk have seen Beazley actively retreat over the last five years. As a specialist underwriter, we offer the most value when market dynamics are complex, volatile, and where significant growth potential exists.
“These were not the conditions of the property market over the previous half-decade. Instead, during that time we increased investment in climate expertise, enhanced modelling tools and took steps to embed the learnings into our underwriting processes and improve our risk selection.
“As conditions now change, we are ready to step up and support insurers and commercial buyers to find cover as many peers pull back in the face of investor disillusionment because of the poor returns of recent years. We believe that this ongoing hard market environment will see rates increase by approximately 15% for direct business and by around 50% for reinsurance in 2023.”
Furthermore, the firm believes that these conditions are likely to persist. Hartigan states that more insightful solutions and larger limits of cover are required to address the lack of sustained supply of investors.
He adds that this will be further exacerbated as the demand continues to grow, driven by inflation pushing up property and replacement values.
Though, Hartigan states that the firm’s recent successful capital-raising exercise demonstrates Beazley’s confidence in the sustainability of the change in direction of property rates, and in its ability to effectively underwrite the class of business given the groundwork we have done to understand the challenges of climate change.
Hartigan concludes, “The keys to making the most of the opportunities and supporting our clients and broker partners will be the people and expertise that are at the heart of our business.
“With these aligned, we expect to offer leadership to the market and grow our presence in property throughout 2023.”