Property rates set to soar 50% at 1/1 - Beazley

As 2022 comes to a close, Beazley’s group head of Treaty, Patrick Hartigan, has given his outlook for 2023. He anticiaptes rates will increase by approximately 15% for direct business and by around 50% for reinsurance in 2023.

The property market dislocation, with many reinsurers pulling back capacity - contributing to the ongoing market hardening - will prove challenging for commercial insurance and reinsurance buyers, he notes.

At such a time, reinsurers must demonstrate leadership, he says. And with rates increasing and terms and conditions tightening, Beazley is ready to increase its appetite for property catastrophe.

“Beazley expects a turnaround in the fortunes of the property insurance and reinsurance markets throughout 2023,” says Hartigan. “The 1/1 renewal has been the first staging post in this transformation, with late orders, tightening terms and conditions and sharp increases in rates.

“This dramatic change of direction comes after more than five years of significant pressure of excess capital driving down rates and eroding terms and conditions. 

“These two forces of falling rates and increasing risk have seen Beazley actively retreat over the last five years. As a specialist underwriter, we offer most value when market dynamics are complex, volatile, and where significant growth potential exists. These were not the conditions of the property market over the previous half decade.

Changing conditions

“As conditions now change, we are ready to step up and support insurers and commercial buyers find cover as many peers pull back in the face of investor disillusionment because of the poor returns of recent years.  

“We also believe these conditions are likely to persist. More insightful solutions and larger limits of cover are required to address the lack of sustained supply of investors. This will be further exacerbated as the demand continues to grow, driven by inflation pushing up property and replacement values.

“Our recent successful capital-raising exercise demonstrates our confidence in the sustainability of the change in direction of property rates. and in our ability to effectively underwrite the class of business given the groundwork we have done to understand the challenges of climate change.

“The keys to making the most of the opportunities and supporting our clients and broker partners will be the people and expertise that are at the heart of our business. With these aligned, we expect to offer leadership to the market and grow our presence in property throughout 2023.”