Well-priced reinsurance market keeps insurers honest: Beazley CEO

As specialist insurer Beazley works through its April 1st reinsurance renewal, Chief Executive Officer (CEO) Adrian Cox has said that availability of coverage isn’t the issue, it’s really about what the rate is, reiterating that a well-priced reinsurance market is good for the company.

This morning, Beazley posted a strong set of results for 2024 including record profit of $1.423 billion and a combined ratio of 74.8% despite an active second half of the year for catastrophe activity.

Following the release, executives at the London headquartered carrier talked through the 2024 performance and answered questions from analysts, one of which focused on the firm’s upcoming reinsurance renewal.

CEO Cox explained that Beazley’s main catastrophe reinsurance treaties renew at April 1st, confirming that the company is going through its renewal process right now.

“We’re going to be buying a little bit more on the property insurance programme, and I think it’s all coming in within the plan that we put together. So, no issues with the renewal of either the retro or the reinsurance programme,” said Cox.

He went on to stress that the issue with reinsurance or retrocession is not one of availability, but it’s really about what the price is.

“And, as we’ve said a few times now, a well-priced reinsurance market is good for us. It’s good for us because we write a bit of reinsurance, but it’s also good for us because it keeps insurers honest. If reinsurance starts subsidising insurance, it encourages unhealthy behaviour from the insurance market,” noted Cox.

“So, a properly functioning and well paid reinsurance market is a good thing as a whole, I think,” he added.

When compared with the January 1st, 2024, reinsurance renewals, overall, risk-adjusted rates came down at the 1.1 2025 renewals, and it remains to be seen exactly what impact the extremely costly California wildfires have on rates at the future 2025 renewals.

2023 and 2024 were profitable years for reinsurers amid higher rates and structural changes to programmes, notably higher attachment points, as sellers looked to move away from frequency risks and focus on providing protection for large events, such as hurricanes, after some very challenging years when the industry consistently failed to meet its cost of capital.

At the least, it’s been suggested that the January 2025 Los Angeles wildfires will mitigate any downward pressure on property cat reinsurance rates at the upcoming renewals, but only time will tell.

As highlighted by the CEO, Beazley buys but also writes reinsurance, and a couple of years ago the firm opted to bring together its insurance and reinsurance businesses in order to better understand and manage accumulations live.

“And we do move, actually, capital allocation between the teams, where we see the risk reward is better. So, we’re actually quite adept now at moving it between the business that we write in London or the business we write in the E&S market in the US, or the reinsurance business, or indeed our binding authority business. So, it enables that to be done pretty well,” he explained.

Cox continued to state that Beazley’s reinsurance business has grown in premium over the last three years, although the exposure hasn’t really grown that much.

“The exposure growth has been all on the insurance side, pretty much, because that’s where we believe the long term opportunity is better. So, the book itself is bigger, but it’s not particularly different.

“The strategy of the team has been to reinsure companies that we believe perform better in a catastrophe and are here for the long term. So, it’s a mixture of nationwide and regional, but it tends to be companies that we’ve had on the books for a long, long time,” said Cox.

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