Beazley flags $50mn potential COVID claims increase and higher cyber reserves

In a nine months trading statement released this morning, London-listed carrier Beazley warned that losses as a result of COVID-19 could increase by a further $50mn net of reinsurance to $390mn.

In September Beazley had surprised the market by announcing that it was now expecting losses as a result of COVID-19 to double in size, climbing from its previous estimate of $170 million to $340 million, net of reinsurance.

At the time it said the loss estimate was almost entirely attributable to event cancellation losses.

In its latest trading statement, Beazley said that the September figure “assumes a resumption to some form of normality in the second half of 2021. Were this not to be the case, we estimate that there is potential for a further $50m of claims net of reinsurance to the end of 2021”.

Cyber was another area flagged in the trading update in what is proving to be a turbulent year for many lines written by the specialty insurer:

“We have chosen to open our cyber reserves higher in response to the current claims trends discussed in the business update. Our prudent and consistent approach to reserving continues and taking all the above into account we are expecting a full year combined ratio of around 110% assuming normalised claims levels for the remainder of the year.”

Elsewhere, Beazley said it has also considered the recent FCA judgement on business interruption wording and does not expect this outcome to have a material impact on its insurance business.

Regarding natural catastrophe exposures, the carrier said its initial estimate of the costs of the third quarter catastrophe events including hurricanes Laura and Sally and the wildfires in California is approximately $80m net of reinsurance and reinstatement premiums.

Providing a broader business update, Beazley stressed that it continues to actively engage in cycle management, ensuring it maintains a balanced portfolio while fully capitalising on the opportunities.

As such, it added, rates are increasing in most of our classes and in many areas are now at levels where the risk reward ratio warrants writing materially more business:

“This is particularly true in directors’ and officers’ liability, despite the heightened risk environment, and most marine classes of business where the teams are significantly growing market share.”

“Off-setting this, we continue to restrict appetite where there is particular exposure to the impacts of social inflation, pandemic claims or a recession. The main areas impacted by this are employment practices liability and some professional and healthcare liability classes.”

It added that ransomware attacks have continued to rise in 2020 and are now the dominant cyber exposure faced by our clients.

The trading statement said: “Malicious attacks are, unfortunately, not new but have been increasingly prevalent in the last 18 months and we have been adjusting our underwriting and risk management services accordingly. The investments we made in using technology for threat detection are now being implemented and this enables us, amongst other things, to scan our clients for vulnerabilities and actively underwrite and help our clients remediate them. The market is currently repricing and restricting coverage in response to these issues.”

Beazley added that its 2021 business plan for our syndicates has been approved by Lloyd’s, together with the accompanying capital requirements:

“We are planning for mid-teens percentage growth in 2021. We also plan to use reinsurance to manage growth in some of the more volatile lines, and so expect growth of around 10% net of reinsurance next year.”

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