Beazley revealed a winning start to the year at the 2017 mid-way point, reporting an overall 6% pre-tax profit increase due to pockets of growth in specialty lines despite market conditions for traditional large-scale risks becoming more competitive.
The insurer’s pre-tax profits rose by over $8 million to $159 million on gross premiums that, at $1,149 million, were 2% higher than they were at this point last year; strong underwriting performance and investment return results maintained a combined ratio of 90%.
Despite this continued success, conditions for underwriters remains exceptionally difficult with premium rates for Beazley business as a whole decreasing by 2%, and particularly steep losses for war 8%, energy 9% and terrorism 11%.
“Rates for these lines of business have been falling steadily for several years.
“Our underwriters continue to succeed in writing profitable business against the backdrop of ever more challenging conditions, particularly in the marine market, but they are having to walk away from underpriced business with increasing frequency,” Beazley said.
The insurer boasts a highly diversified specialty lines book, with professional liability, management liability, environmental business and cyber insurance – and these portfolios have brought the biggest growth opportunity.
The market showed high demand in particular for quality cyber insurance and Beazley is hopeful that with tightening data breach regulations set to come into force, coupled with increasing awareness among firms for the need for cyber cover, this line of business will grow exponentially in coming years.
In addition to cyber, Beazley recognises strong growth potential in healthcare, environmental, and financial institutions business risks; “Healthcare expenditures account for nearly 18% of the US economy and the market is constantly evolving, generating new risks for healthcare providers.
“Earlier this year, our US healthcare team launched Beazley Virtual Care, a pioneering insurance policy to cover organisations involved in the provision of telemedicine, a fast growing sector of the healthcare market.”
“Outside the US, financial institutions business is another market that we see as offering strong growth potential for our specialty lines underwriters. In May we launched a new package product in London for financial institutions, combining crime and professional indemnity cover with Beazley’s data breach capability.”
With most of Beazley’s speciality lines located in the U.S., locally underwritten U.S. premiums grew by 9% in the first half of the year, however the reinsurer is lining itself up for global specialty growth, expanding its presence with new entities in Europe and Canada, and new underwriter hires in regional hubs for Asian and Latin American business, Singapore and Miami.
Beazley’s specialty lines growth is much in line with trends reported by other reinsurers, who are moving increasingly away from traditional lines of large-scale catastrophe exposed business, which is becoming less profitable, and developing tailor-made specialty lines.
Cyber and environmental cover are some of the growing classes of risk creating more room in an otherwise tightly squeezed market and driving innovation as firms role out microinsurance partnerships and bespoke tailor-made specialist products.
