Beazley flags up scale of political risk loss threat
The industry's potential exposure to political risk/trade credit losses emanating from the global economic downturn in 2008-09 was hinted at by Beazley today.
In what was an otherwise stout trading performance for the first nine months, the UK-quoted specialty (re)insurer echoed its comments at the half-year stage by describing the business environment for political risks as "challenging".
"We have continued to see an increased number of notifications on the political risks portfolio", explained the insurer, while estimating that the "impact on profit of these losses is estimated to be approximately £33mn".
Despite the losses, the (re)insurer said it had seen rates on its political risk/contingency book fall by an average of 1 percent against this time last year. Specialty/casualty lines also remained under pressure, added the firm.
In contrast, Beazley said it had seen average rates on its marine book grew by 10 percent against this time last year, and by 9 percent on reinsurance and 7 percent on property.
Notwithstanding a significant increase in gross written premium (GWP) - up from £595mn at the first nine months of 2008 to £862mn this year - the (re)insurer said it is "on track" to achieve a 90 percent combined ratio, assisted by the dearth of catastrophe losses.
Beazley CEO Andrew Horton explained: "2009 has been a year of growth for Beazley at a time of improving premium rates. We have successfully deployed capital raised at the start of the year, supporting a 45 percent increase in our premiums written to the end of September. The global economic crisis has continued to impact our business lines, particularly in the political risk account, however our recession planning has proved robust and we are well placed to capitalise on growth opportunities."
Hiscox, the Lloyd's (re)insurer that gave birth to Beazley in 1986, gave a similar picture today of strong growth combined with profitable underwriting. GWP was up 31.7 percent from £920mn to £1212mn for the first nine months, or 10.5 percent without the currency impact of the weak sterling.
"Rates are stable and still very healthy in most areas, particularly reinsurance, which accounts for over a third of our business. Our mix of business is designed for these market conditions," concluded chairman Robert Hiscox.