Beazley confident North America business will grow more this year

By Michael Loney

April 25 - (The Insurer) - Beazley expects to grow more in North America this year while continuing to expand elsewhere despite “brittle” cyber market conditions, CEO Adrian Cox told Cyber Risk Insurer.

In an interview, Cox said that he 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 while it's been sorting itself out on wording 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.”

The executive said that the underpenetrated lower middle-market business will drive this growth, and that Europe has a lot of opportunities because it has less penetration than the U.S. and it is being targeted by threat actors more.

Growth in the cyber line has been a crucial plank of Beazley’s underwriting strategy in recent years.

According to London-headquartered Beazley’s latest annual results, cyber made up $1.27 billion of its $6.16 billion of insurance written premiums last year.

Cyber is also Beazley’s most profitable division, with a combined ratio of 64.4% in 2024, versus 74.3% for digital risks, 80.9% for MAP risks, 72.9% for property and 79.2% for specialty.

UK bank Peel Hunt said in a report in March that it expects Beazley's overall underwriting results in 2025 to drop from “the exceptional levels” of last year due to rate softening.

For cyber, the market has become “more competitive” with an influx of capacity, according to Peel Hunt.

Talking to this publication, Cox said that he views the increased cyber competition as coming more from existing players in the market looking to grow again.

“We do see increasing strain in the cyber market,” he said. “There are some liability issues that have been emerging over the last couple of years in the U.S., particularly with regards to tools that are used for selling data. That's causing some stress and cyber crime has been rising steadily since mid 2023, and so I think there's been a lot of margin compression across the industry as a whole.”

Cox said that the dispersion of loss ratios is “quite wide” between different carriers, with some big underperformers.

“There's a real variation in performance, and I think that will have an impact on the market at some point,” he said. “I do think profitability issues are emerging for the industry as a whole.”

Beazley is mostly a primary player in cyber. Cox said that his company has a good position in the mid-to-large risk market, which is more stable for primary players. Beazley has achieved a lot of growth outside North America “which is more greenfield”.

“We've been fortunate in that respect. If you're writing a lot of excess business in the mid market or the SME market, that's been quite rough and tumble,” he said.

Cox said pricing is lower in Europe than in the U.S., reflecting the lower liability issues and the fact that most cyber crime has historically been directed at U.S. companies.

He described market conditions as “a bit more brittle” than in other softening markets “because the claims environment is so tricky”. This contrasts to the benign loss environment in 2012 to 2016 when the market previously softened.

“Giving rates off is fairly easy when there's nothing going on, but that's not where we find ourselves today. I think that's where those strains are coming from,” he said.

ILS A USEFUL SOURCE OF CAPITAL

Beazley issued the market’s debut cyber catastrophe bond in 2023, the Cairney private placement.

It followed this with three 144A placements through its PoleStar Re cat bond series, with total coverage to $510 million.

Beazley also benefits from the market's largest and first cyber ILW, which provides $290 million of cover should industry losses exceed $9 billion.

Cox said that ILS is a useful source of capital for Beazley and helps to transfer tail risk.

“It’s demonstrated to reinsurers that we have optionality, and I think that's encouraged the reinsurers to be more forthcoming in offering a fuller suite of reinsurance products, and that's useful,” he said. “I think it’s helped the market.”

He added: “We definitely remain one of a few insurers that are using cyber cat bonds, but I would hope that it becomes a more commonly used tool. It's a great way for the industry to hedge one of its major risks.”

Looking forward to market growth over the longer term, Cox said “it’s always going to be a random walk”. He said demand growth is correlated to loss activity, which has increased over the past 18 months.

“The world's getting more complicated and more connected, so it is difficult to see why cyber demand wouldn't continue to grow,” he said.