UK based Insurance provider Beazley said it has had has continued to register improvements in marine rates but the profitability of the sector remains challenging.
Its 2019 results announced today are likely to be seen as a bell weather for the marine insurance sector as the firm is one of the larger suppliers of cover across the hull and machinery, war risk, cargo, kidnap and ransom and marine liability lines.
Its 2019 earnings report show that in the full year it recorded an 8% increase in marine premiums to $306.4m. However, its combined ratio was 107% indicating that claims costs and expenses exceeded premium income. That compares with a profitable underwriting performance in the previous year when it reported a combined ratio of 94%.
Aviation revenue, which accounts for around 10% of Beazley’s marine business income, accounted for most of the premium increase rising 27%.
Beazley chief underwriting officer Adrian Cox said: “Most of the lines of business underwritten by our marine division, led by Tim Turner, have seen price erosion over a number of years and recent rate rises have not yet proved sufficient to reverse the damage.
“The increase in premium was due to the division increasing its indemnity appetite, notably in lines such as aviation and marine cargo.” Marine cargo premiums rose by 12% in 2019.
Despite the profit set back Beazley's Cox applauded action taken by the Lloyd’s of London market to improve the profitability of its marine lines. “The authorities at Lloyd’s have been addressing the under performing classes of business, with the marine classes of business being a particular area of focus.
“We have seen rates rise faster than would likely have been the case had Lloyd’s not taken action, and the Lloyd’s business planning process has allowed us to increase our underwriting appetite swiftly when market conditions warrant it,” Cox said.
Beazley reported it is making progress on digitising its business with new processes now being trialed on its marine lines.
In February it joined another Lloyd’s insurer to establish a Lloyd’s marine cargo consortium which uses digital technology from the Lloyd’s Lab insurtech product Parsyl to track cargo accumulation and collect data to assist in risk management and claims.
It has also applied its “Faster Smarter Underwriting” project to the marine sector. Beazley has also launched its own marine cyber product this year.
“Historically, the slow pace of change in insurance markets has meant that insurers have not funded significant research and development budgets to implement new and promising technologies. This is now changing and at Beazley we have, through our targeted strategic initiatives, been investing more heavily and widely in research and development,” Cox explained.
Marine accounts for around just over 10% of Beazley’s total premium income. Things are looking better for the Beazley group as a whole. In 2019 it reported a pre-tax profit of $267.7m compared to $76.4m in the previous year. Gross premium increased by 15% to $3bn.
However, most of the profit was driven by high investment returns of $267.7m. In underwriting terms it broke even with a combined ratio of 100%.
