Beazley hungry for more cyber cover as market pulls past wording glitch

Specialist re/insurer  Beazley is hungry for more cyber exposure as the group pulls past a glitch in sales triggered by uneven adoption of new war exclusions, where Beazley is even preparing a new stand-alone cyber war offer to plug the gap.

“We are looking to put more exposure on the books this year which we have been doing and we will continue to do,” Cox said, citing enduring rate adequacy and a combined ratio somewhat below the group’s long-term target.

Current pricing, called “flattish” against end-2022 levels, looks fine. “We think pricing is adequate.”

Beazley had previously warned that its own early move to clarify war exclusions and related exclusions on state-sponsored cyber events could interrupt its growth trajectory in 2022. But that glitch is now passing, together with a move by Lloyd’s to enforce new wordings.

“We are beginning to see that dampening effect dissipate now and so our expectations for the full year are unchanged,” Beazley CEO Adrian Cox (pictured) told his company’s Q1 earnings call. Moves by clients to shift towards carriers with old-school loose wordings are “now beginning to dissipate.”

Beazley saw its biggest upward kick in demand in early April, just after Lloyd’s carriers met the March 31 deadline for including new wordings. Non-Lloyd’s carriers have moved more gradually into new wordings across the period.

“I think the majority of the market is moving to update their wordings and the momentum is continuing to build,” Cox said. He cites variously “one or two carriers” or “a minority” still willing to write on the old war exclusions and drawing in business from an unspecified spectrum of clients. But placing meaningfully-sized business on the old wordings is now “quite difficult.”

The balance of pressure has been and remains on the side of change: reinsurers are continually increasing scrutiny ahead of treaty coverage, regulators sound hawkish on systemic risk, and carriers have done some individual soul searching about risk aggregation and communicating the necessary boundaries to clients. Reinsurers seem to have been “fairly disappointed” that the market hadn’t moved on the matter already by the 1/1 renewals, Cox said.

Beazley will also come back with a stand-alone cyber war product to plug the gap made evident by the new wordings. “We are hoping to come out with something during the summer,” Cox said.

“We have the appetite to write war business,” Cox said, citing an offer in his political risks division plus some aviation and marine hull. “Why wouldn’t we be willing to write that for our cyber clients as well?”

Cyber premium growth in Q1 came in at a heady 24%, second strongest amongst Beazley lines behind property. That 24% annual growth rate was, however, boosted by adjustments made to previously written business that got written into the Q1 2023 tally, he noted.

Demand growth “remains strong” with regions outside the US “very strong, particularly in Europe and Australia,” and the US still showing “lots of demand growth” for SME’s and a “chunk” of opportunity in mid-market ahead of a more saturated large-cap corporate field, Cox said.

The supply side of the cyber market shows increased capacity, but chiefly as a result of increased appetite from existing players within the market as opposed to any notable new entrants, Cox said. Reinsurers, in turn, are “more and more interested” in the line, but “remain very aware of the risk” and selective at treaty time.

As Beazley grows into cyber, the group will likely allow its own risk retention to rise as the group continues to trim the proportional reinsurance coverage that backs its cyber book amongst other lines, Cox said. He declined to give specifics on any change in net to gross dynamics for the first quarter alone which he claims is can be a “funny” period for the metric.

A reported uptick in ransomware activity after a long period of quiet has drawn close scrutiny from Beazley, but the group has yet to suffer directly on its own book from the evolution in the risk.

“Within our own book, we haven’t seen that yet,” Cox claimed.

But Beazley will not avoid impact if the trend is confirmed. “I don’t think we can say we are immune to changes in the claims environment at all,” Cox said. Beazley’s own cyber council is warning on the increased activity and Beazley is studying up to work with clients on prevention. “We have to be vigilant.”

In the Beazley take, the Russian-Ukrainian war focused cybercriminal attention on the conflict, but “we have to expect that at some time this is going to revert back to the mean.”

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