Cox: Beazley has ‘opened the door’ for alternative capital to access cyber risk

By Ryan Hewlett

March 4 - (The Insurer) - CEO Adrian Cox said Beazley’s transfer of cyber risk to alternative capital markets has opened the door for different pools of capital to access cyber reinsurance business.

Speaking to The Insurer following the release of Beazley's annual results on Tuesday, Cox said the company is likely to add to its existing cyber catastrophe bonds and industry loss warranties at future renewals.

He said Beazley had been working to “open up” the capital markets for cyber because it believes the risk needs to be hedged in a similar way to its property portfolio, which utilises both the reinsurance market and capital markets.

“The good thing about that is that when the alternative capital is ready to come in and do more cyber business, that market is enormous and access to capital is huge, if you can open that door. I think we well and truly have opened that door.”

Beazley launched the market's first cyber catastrophe bond in 2023. This was followed by three further tranches during 2024 and another bond at the start of 2025. Combined, the bonds provide $510 million of cover. Beazley also benefits from the market's largest and first cyber ILW, which provides $290 million of cover should industry losses exceed $9 billion.

Together with traditional reinsurance, Beazley now has $1 billion of cyber catastrophe reinsurance in place, Cox said.

“The last bonds that we sponsored and the ILW were well oversubscribed, so I think we will be going back for more because it's such a huge market.”

SWITCH FROM PROPORTIONAL

Cox said Beazley has been working to “persuade” its reinsurers to give the carrier “more optionality” on the program it buys. This has included a switch from proportional reinsurance to cat treaties, as well as wider set of solutions which more closely mirror those available in traditional property covers.

“The reinsurance market has responded. It's grown, it's offered more capacity, and it's being more creative with the reinsurance solutions that it's prepared to offer now,” he said. “We've now got more optionality on our cyber reinsurance than we've ever had and as we continue to grow, we will use that. But I think there is more.”

Cox was speaking to The Insurer shortly after the Lloyd’s carrier reported a record pre-tax profit of $1.4 billion for 2024, a 13% increase from the previous year, with GWP rising 10% year on year to $6.2 billion.

Equity analysts welcomed the results, which largely beat consensus expectations across the board. They also hailed the insurer’s disclosure of a lower-than-expected estimated loss from the California wildfires of $80 million.

Beazley’s estimate for the wildfires, which affected large parts of Los Angeles in January, is significantly below that of its peers, which have largely disclosed net estimates within a $100 million to $170 million range.

Cox said the bulk of the $80 million loss falls on the reinsurance side of the business, noting that the carrier has extensively underwritten exposures in the area following heavy insured losses in 2017 and 2018.

“We don't write California homeowners business and we're very careful with the aggregates that we deploy in insurance and reinsurance for wildfire,” he said.

“We learnt a relatively painful lesson in 2017 and 2018 about what wildfire can do and so we've been making sure that we control our aggregates and price properly since then, and I think that's shown in the loss that we've had.”

The specialist insurer also announced a $500 million share buyback programme alongside a 76% rise in its ordinary dividend to 25 pence per share. Both figures were welcomed by analysts and helped push Beazley’s London-listed shares higher in morning trading on Tuesday.

But Cox downplayed the notion that the buyback is a sign that Beazley views the market as less attractive to deploy capital in or that the increased return would temper the levels of available capital which could later be deployed.

“After the buyback, our solvency ratio is 264%, which is plenty. We've got plenty of dry powder in store for us to use. Although our central assumption is that the markets are softening a bit this year, the market feels very unstable.

“There's so much risk out there, and there have been so many shocks, it wouldn't surprise us if there were more things to come out this year that could generate opportunity for us. We want to make sure we had enough dry powder to do so.”