Our property team, led by Jonathan Gray, is a major insurer of large property risks on a global basis in the Lloyd’s market, leading 77% of the business we underwrote in 2010. In the US, we have a substantial and growing book of surplus lines commercial property business underwritten by the highly experienced team that joined Beazley through our acquisition of First State in 2009; we also insure US high value homeowners. In 2010, we began writing construction business locally in the US. Despite losses in Chile, this diverse book of business still generated a profit of $24.2m and a combined ratio of 97% in 2010, down from 103% in 2009.
Competition continues in our markets, with premium rates overall falling by 4%. While we cannot buck market trends, the high proportion of business that we lead does give us more flexibility in setting rates and terms at a time of deteriorating market conditions. High quality claims service also reduces the price sensitivity of clients who have insured with Beazley for many years. At 73%, the retention rate on our large risks London market business is high.
A large proportion of the property business that comes into Lloyd’s is small scale risks underwritten under delegated authorities granted to intermediaries – known as Lloyd’s coverholders – in the US and elsewhere. Paul Bromley handles this aspect of our business, which performed well in 2010.
In the US, 2010 was the year in which we completed the integration of First State. The acquisition has proven very successful. We have retained the skilled underwriters who had won for First State a deserved reputation as one of the most professional insurers in the market; and we have integrated the First State and Beazley offices and the systems that support them. In 2010 we underwrote $110.0m in surplus lines commercial property premiums, up from $102.8 million in 2009.
Our construction and engineering business had a more challenging year with competition both in London and in Singapore, where since 2006 we have been underwriting construction risks that would not normally be shown to London market insurers. Global demand for cover has been lower than in the early years of the decade due to the recession, although activity is stronger in South East Asia than elsewhere. In 2010 we also began to write construction business – known as builders’ risk – locally in the US, a market in which we were previously underweight. Our US team, based in Chicago, is building good relationships in the US broking community.
Our UK homeowners business, which wrote $16.9m in 2010, is now smaller than it used to be, and more profitable. We have concentrated on our core account – binder facilities with well known producers that generate high retention rates – and cancelled a number of unprofitable binders. In the US, we underwrite a book of high value homeowners on a surplus lines basis through a small number of trusted wholesale brokers who are able to access this business efficiently.