Beazley seeks 10% average rate hikes as reinsurers prop up pricing J-curve

Beazley is seeking a 10 percent uplift in pricing across its portfolio as an average and is prepared to walk away from business it deems unsustainable, Mark Vaughan, deputy head of treaty with responsibility for writing the US & International treaty account from London, told APCIA Today.

Vaughan said Beazley wants to work with long-term partners in a sustainable way and is willing to consolidate its book of business where necessary to achieve this.

“We have been on a long downward spiral as an industry and technical pricing is now at a level where we have to question if it is sustainable on some accounts,” he said.

“We lead most of the business we write; some 90 percent of our clients have been with us long-term and we are a respected brand. But the book is coming under more pressure every year.

“We will walk away if we do not get the rate we feel we need on some accounts.”

He stresses that there is great nuance in this thesis. Some loss-hit accounts will experience rate increases of a lot more than 10 percent, while it will be a lot less for other clients. But he the market should remember that it is a global industry buffeted by global forces—and that all clients should bear some of the burden.

Vaughan said what is happening in the retrocessional market crystallises this point. A tightening of capacity in this part of the market has resulted in significant rate increases, passed on to reinsurers globally.

“Retro is a worldwide cover: if rates go up in retro, reinsurance rates globally should go up. That is the game we are playing and it goes against the idea of very specific rate increases on loss-hit accounts or areas, which is what we have been seeing in some parts of the market.”

He said pricing in the risk transfer markets globally at the moment can be likened to a J-curve. Pricing in the primary markets has been increasing; pricing in the retro markets has been increasing more substantially; yet prices in reinsurance are not responding in kind.

“Yet we have seen yet more cat losses this year, loss creep is a problem, trapped capital remains a challenge. Rates have to move. The J-curve is becoming more elongated and reinsurers need to stand their ground and seek sustainable pricing across the board,” he concluded.