Beazley chief says company well-placed to cope with capacity influx

Andrew Horton, Beazley

Exclusive broker deals for Lloyd’s business, such as the one struck between Aon and Berkshire Hathaway in March, are adding to competitive pressures, says Beazley chief executive Andrew Horton.

However, he added that his company was well-placed to cope with the additional strain caused by new capacity entering the Lloyd’s and US (re)insurance markets.

Speaking to journalists following the release of Beazley’s first-half results, Horton said: “The broker-led initiatives increasing capacity in London – both Aon’s initiative with Berkshire and Willis 360 – are going to impact us in some way.

“However we have good trading relationships with those brokers and we are not expecting any material impact to us.”

Aon revealed in March that it had struck a deal giving US (re)insurance powerhouse Berkshire Hathaway a guaranteed 7.5% share of any business it placed with Lloyd’s underwriters.

Willis is reportedly working on a similar initiative, Willis 360, although it has yet to find a capacity provider.

The deals have sparked controversy because they are seen as siphoning away business from Lloyd’s underwriters.

Horton said it was too early to predict the exact impact of the broker deals. The Aon/Berkshire initiative came into force in May and Willis 360 is yet to take off.  

But he added: “We have seen other quota share agreements that have been in the market for two or three years and they haven’t stopped us from growing profitably. We are hopeful we can work around them. We have good trading relationships with the brokers and we hope to continue to grow with them.”

More headwinds

The broker deals are just one of the competitive headwinds. Another is new capacity entering the US excess and surplus lines (E&S) market. The most notable new entrant here is Berkshire Hathaway, which announced it was setting up a new US E&S division, called Berkshire Specialty, in June.

Horton said there had been a number of other new entrants in individual lines of business where Beazley plays over the past five years, such as architects and engineers and cyber liability.

Horton said: “We have managed competitive pressures before, and we feel relatively comfortable we can continue to manage competitive pressures.”