Finding balance when competition is ‘fierce’
Competition for treaty business in Bermuda is “fierce”, according to Richard Gray, head of third-party capital and general manager of Beazley Bermuda.
“The treaty market, like any other part of the insurance and reinsurance world, is cyclical,” Gray told Bermuda:Re+ILS ahead of ILS Bermuda Convergence on 12-14 October. “It’s obviously driven by access to capital and underlying profitability of that business, so in that way Bermuda is no different.”
“There is fierce competition for business in Bermuda,” he continued. “We are able to take advantage of the reputation that Beazley already enjoys in the treaty market, predominantly because of what we do off the Lloyd’s platform, so a lot of the reinsureds are well known to us, and we’re well known to them.”
“Having an entirely separate balance sheet is obviously a good diversifier for those reinsureds, and we’ve had very strong support from the local community, not least of all the broker community here in Bermuda.”
Against that backdrop, Gray said Beazley remains focused on the technical adequacy of the business it writes. “We’re already on record talking about the need for underwriting discipline. So that doesn’t change,” he said.
“We’re not going to write business for business’ sake. It has to be what we believe to be pricing adequate on a technical basis.”
Building a balanced book
Alongside pricing, Beazley is considering how individual exposures fit within the overall composition of its Bermuda treaty portfolio. “Ultimately, what we’re looking to do is to build a balanced book,” Gray said. “And by balance, that needs to be balanced across both geographies and perils and sub-perils.”
Modelling and actuarial expertise will support that approach as the company considers the diversification of the risks it assumes.
Asked how Beazley is managing that diversification as risks become more interconnected, Gray pointed to “the technical expertise that we have in the space in terms of our modelling and actuarial capabilities”.
Its challenge is to build that balance while operating within a cycle Gray says is shaped by both the availability of capital and the underlying profitability of the business.
That leaves the Bermuda team weighing opportunities, not only on their individual economics, but on how they contribute to the mix of exposures already on the book.
For Gray, those considerations remain part of the same underwriting process, regardless of the level of competition around individual opportunities. “It’s all about the pricing and the adequacy of that pricing.”
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