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Beazley’s Q1 Covid-19 losses hit $170m, premiums jump 13%

22nd April 2020 - Author: Luke Gallin

Beazley, the specialist Lloyd’s focused insurer and reinsurer, has estimated that the total claims from the ongoing COVID-19 pandemic on its first-party business stands at USD 170 million, net of reinsurance, the majority of which is across its marine, property and reinsurance divisions.

Beazley logoThe specialist re/insurer has released its trading statement for the first-quarter of 2020, revealing top line growth of 13% and encouraging rate changes, somewhat offset by a year-to-date investment loss and the impact of the COVID-19 coronavirus pandemic.

Gross written premiums increased from USD 743 million in Q1 2019 to USD 840 million in Q1 2020. Beazley notes that three of its divisions saw strong growth of 23%, with marine and speciality lines performing well in the quarter, while expansion across its cyber & executive risk unit was also evident.

The political, accident and contingency unit saw growth of 6%, with growth within the company’s personal accident direct business.

Somewhat offsetting the growth in these lines, Beazley’s property and reinsurance divisions saw premium declines of 11% and 15%, respectively, but overall, the firm expects the property portfolio to grow at year-end.

Beazley highlights particularly encouraging rate changes during the period, with an average rate increase of 8% and with three of its units (property, cyber & executive, and marine) achieving double digit increases.

In March, Beazley transitioned to remote working arrangements in light of the COVID-19 pandemic and lockdown measures implementing to try and stop the spread of the virus. In its Q1 2020 trading statement, the Lloyd’s of London focused re/insurer notes that it has been evaluating all areas of its underwriting portfolio to identify classes of business that will be impacted by the pandemic.

The firm explains that it underwrites a contingency book of event cancellation, and, within a defined risk appetite, provides communicable disease protection. Beazley adds that this is covered by reinsurance arrangements and that while this book of business has experienced some claims from the current crisis, the frequency of new notifications has been falling since the end of March.

Overall, Beazley estimates that the cost of the pandemic across the political, accident and contingency division, which includes event cancellation, personal accident and accident and health business, is roughly USD 70 million, net of reinsurance.

In addition, Beazley’s property division also experienced some claims, the majority of which are related to business interruption and mostly US-based firms. Importantly, Beazley notes that most of its business is written on an ISO form, which specifically excludes cover for virus outbreaks, but adds that it does offer cover on certain bespoke policies and its aim is to respond quickly to those claims.

Based on its analysis to date, Beazley expects that across its marine, property and reinsurance units, COVID-19 claims will be around USD 100 million, net of reinsurance.

The potential business interruption exposure for the insurance and reinsurance industry from COVID-19 has been a burning issue across the sector amid policyholder disappointment at a lack of coverage, and subsequent legislative efforts designed to force retroactive coverage.

It’s with the kind of bespoke coverages provided by Beazley where policy wordings will come into focus and there’s potential for this to be an area where some companies experience some pain.

The re/insurer continues to explain that it remains too early to estimate what the level of claims within its liability classes will be from the pandemic, as these will only emerge once the crisis is fully realised in the future.

As well as the hit to its underwriting in the quarter, Beazley has also reported a year-to-date investment loss of USD 55 million, or 1%, compared with a gain of USD 98 million, or 2% a year earlier. The company underlines the significant level of financial market volatility being driven by the pandemic.

In response, Beazley cut its exposure to various capital growth assets in the quarter, and also temporarily extended the duration of its fixed income investments in an effort to mitigate the impacts of the current volatile environment.

Additionally, the firm has announced some measures taken around its capital base since the end of last year. This includes the draw down of USD 140 million from its LOC facility to support growth and maintain capital strength during this unprecedented and uncertain time.

Furthermore, from April 1st the firm began ceding roughly 10% of its specialty lines and executive risk (excluding cyber) businesses to reinsurance partners, which is expected to reduce its capital requirements by roughly USD 50 million.

Andrew Horton, Beazley’s Chief Executive Officer (CEO), commented: “The events seen in the first quarter of 2020 have been unprecedented. Covid-19 has touched every corner of the globe and the impact of this pandemic is still being assessed. In mid-March we successfully moved to remote working arrangements for all our employees and from an operational perspective there has been no material disruption to our business.

“We continue to monitor closely all developments relating to the coronavirus outbreak and our priorities remain the wellbeing of our colleagues and delivering an excellent service to our clients.”

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