Beazley’s Cox ‘sensing more competition’ but confident of healthy margins in 2025

By Michael Loney

April 9 - (The Insurer) - Beazley CEO Adrian Cox has told The Insurer that he expects the company to produce “healthy” margins this year despite increased competition and wildfire losses, while also stating that the industry needs to price quickly for the impact of the U.S. tariffs.

Discussing the U.S. tariffs in an interview with The Insurer, Cox said they would have an impact on loss costs as well as on asset prices.

“There'll be a short-term hit whilst that rolls through, but we should be able to price for it fairly quickly,” said Cox, who was talking to The Insurer last Thursday.

He continued: “The tariffs are focused on goods rather than services, so it doesn't have an impact on insurance directly. We just need to make sure that we rate for it quickly so that we can get the premium for the extra risk.”

More broadly, Cox said that the current uncertain geopolitical environment “does change the nature of some risks that we underwrite”, highlighting his company’s political risk, political violence, war and cyber books as examples.

“We’re adjusting our underwriting according to where we think the risks are increasing and decreasing,” he said.

Over the medium term, Cox said that it demonstrates the world is getting more complicated and that the insurance that the specialty market provides has increasing utility.

“I think there's risk and opportunity in all that. From a Beazley perspective, by the end of next year all the business that we write in the U.S. will be on the U.S. balance sheet. I think it's a positive thing.”

CARRIERS ‘JOSTLING FOR GROWTH’

Cox said Beazley’s specialty insurance lines had experienced a good couple of years as the market adjusted to years of underpricing and growing risk.

“I think we're sensing more competition now,” he said. “It really started to take off in the second half of last year, and I think that's simply because insurers have done well in our field and they're all looking to grow.”

He continued: “It's just a bit of jostling for growth. We're not seeing anything terribly illogical or irrational or reckless going on in the U.S., but I think we're all trying to make the most of a decent marketplace.”

Cox said the increased competition is “pretty much everywhere”, but he added that the elevated risk environment “should help to keep underwriting more honest” than in previous markets.

London-headquartered specialty carrier Beazley increased its insurance written premiums (IWP) by 10% to $6.16 billion in 2024 while its undiscounted combined ratio was 79%, compared with 74% in 2023.

Its guidance for this year is for mid-single digit IWP growth and a mid-80s undiscounted combined ratio.

Cox said the combined ratio is expected to worsen in 2025 as a result of the increased competition as well as the impact of the California wildfires. But this will still provide “healthy margins” for the carrier, he said.

Beazley’s initial estimate of California wildfires losses is around $80 million.

Group chief financial officer Barbara Plucnar Jensen told The Insurer that Beazley had relatively lower losses from this year’s wildfires than in 2017 and 2018, despite the business almost tripling its premium volume since then.

“So from that point of view, the strategy we have had around where and how to grow, and where to be positioned in the property market has been good,” she said.

Cox expects growth in all of Beazley’s major divisions except for specialty risk, where it is bearish about some U.S. liability business because of social inflation and legal system abuse.

The executive said Beazley is bullish in its marine, aviation and political risk business.

It also sees more opportunity in property both in North America and increasingly around the world.

“We're seeing the role of private insurance increase in, say, Europe, where state pools have played a large part in the past, and they're proving to be not perfect in the same way that some of the state-backed solutions (in the U.S.) haven't proven to be fit for purpose terribly,” he said.

Cox also expects growth in the cyber market, in which Beazley is a leading player.

“The market hasn't been growing as much in the last couple of years, whilst it's been sorting itself out on wordings issues and the like,” he said. “We've been growing nicely outside North America, and I think we'll be growing more in North America this year. We're sensing our distribution partners increasing their efforts to sell new business again, which is encouraging.”

E&S PLATFORM ‘A BETTER MOUSETRAP’

Beazley in 2023 created an onshore E&S platform called Beazley Excess & Surplus Insurance Inc, with the intention of transferring U.S. business written on Lloyd’s paper to the new carrier over three years.

Cox said Beazley thought shifting its E&S business to a U.S. balance sheet would “be a better mousetrap”.

“We thought there'd be a marginal preference for locally regulated paper, and I think that's proven to be true,” he said, noting support from broker partners and clients. “It makes things simpler for us. I think it makes things simpler for our clients.”

CFO Jensen added that “it also signals a commitment to the local market”.

The U.S. balance sheet business is dominated by property and cyber, with more of the liability classes and some of the MAP classes to be transferred over the next 18 months.

Cox said the E&S growth has been driven by the admitted market “becoming increasingly less fit for purpose” as risks continue to change.

“Admitted insurers haven't been able to respond quickly enough within the confines of that framework, but that framework hasn't shifted to compensate for that,” he said.

Cox continued: “There’s a very big conversation to be had with the regulators about the balance between allowing insurers flexibility to keep business in the admitted market, which they regulate, and protecting and being very stable for buyers of insurance. And that's under quite a lot of strain.”

The executive said that it is a sensible construct for the admitted market to write the vast bulk of business and the E&S market to act as a relief valve.

“But the relief valve shouldn't be 30% of the business. Evidently something's gone out of kilter somewhere and that, I think, ultimately needs addressing,” he said.