Syndicate results 2020 #7 Beazley Furlonge Ltd 623

The Lloyd’s syndicates have now published their results for 2020 and, in some cases, added detail and an outlook for 2021. Some have stuck to the bare bones. As was the case last year, IMN is summarizing the results from all syndicates that have a marine interest, which have provided some information on the marine side.

This year IMN will be splitting the reports for Syndicates 623 and 2623. Beazley Furlonge’s several other syndicates do not have a marine interest.

The Active Underwriter’s comments apply to bot syndicates, so they will not be repeated tomorrow.

A P Cox Active underwriter, noted that this was now the third year that change had been the key theme to the Beazley Syndicate’s report. “However, what has shifted is the sheer scale of change that this year has brought.”

Covid-19 had a profound impact on society, industry and Beazley Furlonge as individuals. This year we have been put through our paces, with the pandemic itself proving to be a robust test of the design and operation of our risk management framework, which has responded well, helping us navigate the many challenges thrown our way. In particular, the framework remains effective despite the fundamental change to our ways of working – a transformation in practices not seen for generations.

All of the Beazley Furlonge managing agent employees moved to remote working in March 2020, described as “an operational shift the size and scale of which had never been imagined”.

Cox said that “during this time of uncertainty, and whilst managing this shift, the employees of the managing agent retained focus and momentum and the syndicate continued to function seamlessly”.

As the lockdown period extended the risk management framework began focusing on monitoring staff resilience and looking for ways to offer greater support to all, not just those in need.

Cox said that the managing agent’s mental wellbeing network, founded in 2019, continue not only to educate all Beazley staff on mental wellbeing issues and provide a support network for those who are suffering, but also to extend its reach and impact through the introduction of the Thrive app. Cox said that this helped with the early identification of and assistance with anxiety and depression, two of the most prevalent mental health illnesses in the workplace. Beazley Furlonge also has 30 volunteer trained mental health first aiders that offer support and guidance to staff across the globe.

Cox said that the resilience of the managing agent workforce has been particularly impressive given the challenges this year has thrown at us from a professional and personal perspective and there is much we should all be proud of.

The capacities of the syndicates managed by Beazley Furlonge Ltd are as follows:

Syndicate Number Capacity 2020 Capacity 2019
2623 1932.4 £1,624.0m
623 422.6 £366.2m
3623 71.9 £69.3m
6107 69.5 £67.6m
3622 25.9 £25.0m
5623 83.5 £63.1m

Syndicate 623:

The balanced portfolio of syndicate 623 underpinned its underwriting performance in recent years. However, for the year ended 31 December 2020 the syndicate made a loss of $28.5m, down from a gain of $28.0m the previous year, mainly due to the COVID-19 pandemic.

The syndicate’s combined ratio deteriorated in 2020 to 110%, from 99% in 2019, driven by the increase in the claims ratio. The calculation of the combined ratio for the syndicate includes all claims and other costs of the syndicate but excludes foreign exchange gains or losses.

The claims ratio deteriorated to 75% in 2020, from 61% in 2019, as the syndicate was heavily impacted by the volume of Covid-19 related claims in what the managing agents described as an “unprecedented year”.

The contingency book was the most severely impacted, with cancelled events the main driver of the syndicate losses.

The syndicate was also impacted by losses in employment practices liability (EPL) and the rise in ransomware claims in the cyber and executive risk division.

2020 also saw the syndicate experience a number of natural catastrophe losses as the active hurricane season in the US brought losses from Hurricanes Laura, Sally, Delta and Zeta. These claims, while large, were not outside the syndicate’s range for such types of natural catastrophes.

A combination of the above resulted in an increase in syndicate net claims in 2020 to $341.3m, from $247.9m in 2019.

Marine made up 12% of syndicate 623’s GWP in 2020, down from 13% in 2019.

Syndicate 623 has seen some benefit from the improved trading environment. Rate hardening had been particularly strong across the aviation and cargo portfolios, with average rate rises of 30% and 18% respectively. Both had previously activated strong cycle management plans and have weathered turbulence over the past two years, which had seen a number of competitors reducing capacity or withdrawing from the market altogether.

The marine war account saw considerable growth in 2020, largely due to increased claims activity in and around the Persian Gulf, which drove additional premium payments.

The exception to the growth across the portfolio was in the energy book, where reduced global oil prices and a benign claims environment in the upstream account meant rate increases were subdued.

Reserve releases up

During 2020 the syndicate released prior year reserves of $16.5m, up considerably from the $3.7m released in 2019.

Action taken in the marine division to remediate selected areas of the account, including the closing of the UK marine portfolio in January 2020, generated a release of $1.9m in the division.

Specialty Lines and cyber & executive risk had releases of $8.2m and $1.5m respectively. Both specialty lines and cyber & executive risk have been impacted over the past few years by the increased claims seen on their liability books resulting in decreased releases.

Both the property and reinsurance divisions benefited from releases on some of the 2019 natural catastrophe events, namely Storm Dorian in the US and Typhoons Hagibis and Faxai in Japan.

Syndicate 623, Marine

Marine (MAT) 2020 $m 2019 $m
GPW 70.5 65.3
NPW 64.5 46.8
Earned premiums, net of reinsurance 62.1 46.9
Claims incurred, net of reinsurance (33.1) (26.4)
Net operating expenses (22.2) (22.8)
Technical result 6.8 (2.3)
Claims ratio 53% 56%
Expense ratio 36% 49%
Combined ratio 89% 105%
Renewal rate change 16% 11%

The syndicate said that “hardening rates in marine have been a long time coming and have been assisted by Lloyd’s action to correct underperforming classes and a subsequent contraction of the market”.

Syndicate 623, Total

Total (MAT) 2020 $m
GPW 589.9
NPW 488.9
Earned premiums, net of reinsurance 455.9
Claims incurred, net of reinsurance (341.3)
Net operating expenses (161.6)
Technical result (47.0)
Claims ratio 75%
Expense ratio 35%
Combined ratio 110%

Staff costs syndicate 623

All staff are employed by Beazley Management Limited, with the majority of these costs incurred in sterling. The following amounts were recharged to the syndicate in respect of staff costs:

  2020 $m 2019 $m
Wages and salaries 12.0 11.0
Short-term incentive payments 2.4 4.6
Social security costs 2.6 2.8
Pension costs 2.3 2.5
Total 19.3 20.9

The aggregate amount of remuneration paid to and for the benefit of the active underwriter, which was recharged to syndicate 623,

was $0.1m (2019: $0.4m).

Syndicate 3623 underwrites personal accident and sports insurance and market facilities at Lloyd’s and reinsurance business ceded from Beazley’s US admitted insurance company, Beazley Insurance Company, Inc. The syndicate retained 10% of these risks in 2019 and 2020, while reinsuring 64.75% to syndicate 5623 through a quota share arrangement. The syndicate acts as the host syndicate for syndicate 5623. The remaining 25.25% was reinsured with external reinsurers. It has no marine interests.

Syndicate 5623 was established in 2018 as a special purpose arrangement syndicate to write market facility business via a quota share from syndicate 3623. It has no marine interest.

Syndicate 3622 underwrites life insurance and reinsurance. It has no marine interest.

Syndicate 6107 writes a share of the property reinsurance business and a share of certain cyber business written by syndicates 623 and 2623. It has no marine interest.