Beazley likes cyber despite softening; can hit low-penetration areas

Beazley will continue to grow its cyber book, building on new momentum into under-penetrated market segments and geographies, with little concerns that a softening of rates in 2023 could result in rate inadequacy, CEO Adrian Cox (pictured) has said.

Cyber rates are “slightly down, but they remain adequate and we continue to add exposure,” Cox told his company’s second quarter earnings call. His group claimed a 3% decline in rate YTD.

“We are expecting cyber rates for the year to be down single digits,” Cox said. “We are comfortable with that.”

Gross written premium for cyber rose 14% in the first half of 2023 to nearly $540 million despite the slippage on rate. H1 growth is a slowdown from 24% annual growth in the first quarter, a slowdown Beazley had warned on, citing market turbulence as it moved ahead of the market to include new wordings for exclusions on war and state-sponsored cyber.

That “noise” following the uneven industry implementation of war wordings is “diminishing” and “the second half should be easier to navigate,” Cox said. Retention in the segment had bottomed out at end-March and early-April “and has improved steadily since then” as more and more insurers joined the bandwagon of war exclusions.

“It will continue to reverberate for a bit, but we are getting increasingly confident that we should be able to put this behind us relatively soon,” Cox told analysts.

Overall, the underlying Beazley outlook for the cyber market has held steady through the bumps from wording and the rate softening. “Our expectations haven’t changed, but our uncertainty around our expectations have subsided.”

Some of the Beazley growth and confidence is coming from geographic changes in the company’s cyber growth. “A lot of our growth has come outside the US” and prior years of investment in the European platform is paying off, Cox said. A pick-up of growth in the under-penetrated European market “moves the needle in terms of the overall size and shape of our cyber book.”

Beazley sees “much less crowded marketplace” in Europe with less penetration and larger opportunity still lingering in the large-cap segments that deliver higher premium per client. Beazley may see “a bit more opportunity” in the US where true saturation is never really achieved, but that is more focused on a foray into under-penetrated SME via digital platforms.

“We are very confident about the long-term opportunities we have been talking for some time,” Cox said.

Talk of a rise in ransomware has yet to hit the Beazley books, Cox claimed. “We are prepared for that and we are ready for that,” Cox said. But “we haven’t really seen evidence of that in our portfolio as of yet.”

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