Property underwriting a “moving feast” because of climate change: Beazley CEO

While Beazley’s CEO Adrian Cox implied recently that property insurance is more adequately priced than reinsurance, he also noted that underwriting it is a “moving feast”, as climate change is increasing the exposure re/insurers take on.

Speaking recently during Beazley’s second-quarter 2023 earnings call, Adrian Cox, CEO explained that his firm is choosing to focus more on the insurance, than the reinsurance side of property risks.

“We do think that the property insurance market is making a real shift to align to the fact that, for property insurance, particularly stuff that has catastrophe exposure, it is more complicated and more changeable than it had previously been given credit for,” Cox explained.

“We think that that demands a real shift in how it’s underwritten, there is evidence that that is happening.

“So yes, some of our confidence for 2024 is driven by the fact that we see that property primary insurance opportunity as being a long-term one,” he continued.

He went on to say that, “On the reinsurance side, one of the things the reinsurance market has done, by adjusting the attachment point at which treaties can come in, is to get away from some of that noise.

“So, we’re underwriting through that and we’re able to, because it’s E&S business on the insurance side and we along with the rest of the reinsurance market haave moved away from that noise on the property cat side.

“If you judge us by our actions, we’ve not not grown our reinsurance exposure, we’ve grown our insurance exposure, which kind of gives you a clue as to where we think prices are more adequate.”

He moved on to explain that this requires a continuous approach to updating underwriting, while not relying on rates alone to maintain price adequacy.

“It’s a moving feast, isn’t it? Climate change, in our view, will continue to make things more volatile and more active over time and inflation builds year-on-year.

“So, if prices stay flat, next year, relatively speaking, they’ll be less adequate next year, because you’ve got to factor in new, increasing impact of climate change and increasing year-on-year inflation,” the CEO of Beazley said.

Adding that, “We think broadly speaking, they’re okay for cat and and attractive for insurance, but they will continue to need to adjust to reflect the ongoing exposure changes that we don’t think are going to stop.”