Patrick Hartigan
Head of reinsurance

Our well diversified portfolio mitigated the impact of earthquakes in Chile and New Zealand and we achieved a combined ratio of 90%.

$174.4m Gross premiums written

Our reinsurance division, led by Patrick Hartigan, saw strong growth in 2010, writing $174.4m in gross premiums, an increase of 23% on 2009. Our well diversified portfolio mitigated the impact of earthquakes in Chile and New Zealand and we achieved a combined ratio of 90%. Our main focus is on property reinsurance, more than two thirds of which is catastrophe protection for clients that, in many cases, have reinsured with Beazley for much of the company’s 25 year history.

In 2010 we increased our premium capacity through the establishment of a new special purpose syndicate, 6107, supported by additional capital supplied by Lloyd’s Names. This has enabled us to write larger lines for our preferred clients.

Eighteen named storms formed in the north Atlantic but none made landfall in the US. However, the Chilean earthquake that struck at the beginning of the year generated a loss to Beazley, across our reinsurance and property teams, originally estimated at between $55m and $75m, based on a market-wide loss of $5bn to $8bn. The share of this borne by the reinsurance division must wait on the adjustment of claims at the primary level.

The New Zealand loss proved more challenging for the market to quantify and in common with almost all market participants, we have revised our original estimate upward to $35.0m (originally $15m - $30m).

Losses of this kind are of course the raison d’être of a reinsurer. In the aftermath of the Chilean earthquake we took steps to support clients that were under severe financial pressure by advancing funds before their claims were fully adjusted.

We see a broad range of business at the Beazley box at Lloyd’s but in 2008 we also opened an office in Munich to access continental European business that would normally be placed exclusively in the local market. Andreas Bergler and his team moved to a new and larger office in 2010 and the business, sourced from throughout southern Europe, continues to grow and perform well.

Chile earthquake

Early in the morning of 27 February 2010, the seventh strongest earthquake ever recorded occurred off the coast of Chile, 325 km south-west of the capital Santiago. The quake, which killed hundreds and badly damaged more than half a million homes, was the biggest to hit Chile in 50 years.

Far stronger than the quake that had hit Haiti the previous month, the Chile earthquake was also far deeper.  This, combined with the more robust construction of many of the affected buildings, meant that the destruction and loss of life – although extensive – was far less than that caused by the earlier catastrophe.  

For insurers, however, it was a far more costly event.  Estimates of the total insured cost were in the region of $8 billion.  Chile is a heavily insured country and the quake struck near to major centres of population, including Santiago, with a population of more than five million.

For Beazley the cost of the quake, which ranked as the most expensive catastrophe of 2010 for insurers, was relatively modest, at between $55 million and $75 million.  Lloyd’s has estimated net losses for the Lloyd’s market as a whole at $1.4 billion.

The full scale of claims will take some time to materialise for reinsurers, judging from previous earthquake experience.  However, the pressures on the local insurance market in the immediate aftermath of the quake were in some cases acute and our reinsurance team moved swiftly to provide them with the support they needed.