Beazley, the London headquartered specialist insurer and reinsurer, has confirmed that it foresees “strong growth trajectory” for its new Bermuda platform, with around $400 million in premium expected by 2030.
The new venture will be comprised of four main elements, being insurance and reinsurance captives, alternative risk transfer (ART), an insurance-linked securities (ILS) business focused on cyber insurance and reinsurance, and specialty insurance and reinsurance.
Beazley highlights the size of the captives client segment, noting around 6,000 captives worldwide with estimated captives re/insurance premium of $50-$60 billion.
The insurer feels that having a presence in Bermuda “complements our existing capability to place business with Captives across multiple platforms, including in Wholesale and Europe.”
Beazley’s cyber ILS fund is also expected to be launched next year, with the plan being to develop a fee earning business within the ILS market.
Of the total, roughly $400 million in premium expected by 2030, $200 million of this is expected to come from ART business, including ILS and captives, with property reinsurance forecasted to be the next biggest contributor, followed by specialty reinsurance (mortgage indemnity), and then other specialty insurance business. In fact, other specialty insurance business isn’t expected to deliver premium until year two of the plan.
Expanding on the four main elements earlier today, Chief Executive Officer, Adrian Cox, explained: “The first two, captives and ART, are fast growing markets in which we participate, but currently do not have teams focused on, and this will allow us to do just that. As we’ve discussed many times, we believe that a deep cyber catastrophe reinsurance market is essential for the health of the cyber insurance market, and we spent the last few years pioneering such. It is now beginning to blossom, and we are well positioned to build a franchise around this, and we’ll be launching a fund to do so next year.”
The CEO went on to note that having a base in Bermuda provides the firm with additional access to risk, especially in insurance and reinsurance that the carrier currently writes.
“We believe this is an exciting opportunity for us, and for business that is slightly off the mainstream, giving us that idiosyncratic growth in a way that allows us to maintain our underwriting margins,” said Cox.
Later in the earnings call with analysts, Cox was quizzed further on the Bermuda plans and what this means for growth.
“Thinking about future growth, what we’ve consistently said in the past is that we believe across all market conditions, we should be able to do mid-single digits. And as we look ahead over the next three to five years, we think the Bermuda venture will help us get back to that sort of growth levels,” said Cox.
He also provided some colour on how much of the $500 million group investment is likely to be for underwriting risk versus fee income.
“The capital, of course, is front loaded. The regulatory requirements are going to be a lot less than that going into the first couple of years. But if we’re going to be a credible market in Bermuda and make the security lists of the companies that we’re looking to do business with, that entity will need to have at least $500 million, so that is sort of table stakes for Bermuda, which is why we’ve allocated that much.
“The vast bulk of what we’ll be doing will be through underwriting. The plan is to develop a fee earning business within the ILS market… We do believe that the ILS market for cyber, and potentially cyber and property together, is going to be a blooming market over the next few years, and we want to be ready for that. To a certain extent, the size of that venture will be driven by how fast the demand for that product grows. So, I think it’s safe to say that the bulk will be underwriting at least for the first few years,” said Cox.
During the call, Cox confirmed that the Bermuda platform will focus on business the firm currently writes.
“So, we do some alternative risk transfer across a number of bits of our portfolio. So, we write parametric business, we reinsure captives, we do other forms of ART, so multi-line, multi-year, kind of structured insurance and reinsurance. So, it’s business that we’re already in, but we’re trying to focus it and have a team directly concentrating on that business.
“We like it because it’s slightly more complex. The distribution is a little bit different, particularly with captives. So, it’s slightly out of the mainstream. The underwriting is a little bit more technical, but the margins are what we seek. And I think the whole point of what we’re trying to do in Bermuda is to find avenues of growth in areas that do suit what we think we’re good at, and allow us to keep the margins that we currently have.
“So, we think we can ramp up relatively quickly. We’ve got some folk who are going to move over to Bermuda next year. We will be recruiting as well, and we’re building on a base that isn’t zero.”
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