As of today, the underwriter will no longer underwrite UK regional cargo, freight liability and commercial hull risks
Beazley’s UK marine operation has been placed into run off - another victim to tough market conditions and the Lloyd’s campaign to jettison poorly performing business.
The underwriter, which has a significant marine book, has ceased to underwrite UK risks but has assured existing clients that their policies will be honoured.
The firm’s UK marine operations had been based in its Birmingham offices and as yet there has been no comment in whether the decision will see job losses.
This development will place UK marine classes into further turmoil after a series of high profile withdrawals and capacity reductions in recent years.
Market under pressure
In the group’s results for the first nine months of 2019, Beazley’s marine insurance operations saw a 5% year-on-year increase in premium income to £231m, with an 8% rate hike in the third quarter of the year. However, Beazley has a sizable international bluewater marine underwriting operation which accounts for the majority of this figure.
A Beazley spokesperson said: “The UK regional marine insurance market has been under pressure for some years with low margins posing a challenge for insurers, including Beazley.
”Following a strategic review of our UK regional marine portfolio, we have taken the difficult decision to stop underwriting UK regional cargo, freight liability and commercial hull. This applies to both new and renewal business with immediate effect. All new and renewal business quoted will be honoured, if incepted or renewed, for the duration of the policy.
”This decision does not affect our London market marine book and we continue to underwrite pleasure craft business via our online broker portal.”
Beazley’s announcement has left brokers scrambling for cover and clients fearing they will be faced with significantly higher rates and tighter terms at renewal.
Gerry Sheehy, chief executive at speciality MGA Fiducia, said some brokers’ demands for hefty commissions had played a major role in the decision by underwriters to reconsider their participation in the UK marine classes.
”It’s the clients rather than the broker that one needs sympathy for,” he said. “The brokers’ demands for excessive levels of commission has certainly contributed to the demise of a number of these carriers, with instances of brokerage nearer 40% representing the norm rather than the exception.
”I am aware that some national deals with a number of carriers where earnings which are in the form of commission, overriders [or] service agreements [have] payments to brokers approaching 50%. We’ve been harping on about the fact that these levels of payments to brokers are unsustainable.
“There needs to be a massive degree of responsibility here, in particular with those underwriters who have not stood up to the brokers’ excessive demands. Capacity is scarce these days and in a hard market if you don’t stand your corner, you’re asking for trouble. Brokers generally need to consider the underwriter’s position or they will have no access to capacity.”
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