Specialty lines

Adrian Cox
Head of specialty lines

Our structure ensures that we can adapt quickly at a time when competition is more intense in some parts of the world than others.

$744.0m Gross premiums written

The specialty lines division, led by Adrian Cox, concentrates on professional and management liability business. Our experience in these lines of business is substantial. We have been underwriting some lines, including lawyers’ professional liability and architects’ and engineers’ (A&E) professional liability (which together comprised 14% of our book in 2010), since Beazley was founded 25 years ago.

We are therefore no strangers to soft or softening markets and our cycle management experience played a major role in achieving a 93% combined ratio in 2010, despite competition in many lines of business. The diversity of our book also benefited us: we underwrite a wide range of professional liability risks in the US and Europe and our Lloyd’s-based management liability underwriters are the leading insurers of US directors’ and officers’ (D&O) insurance and employment practices liability (EPL) insurance in the London market. Over the past several years, we have achieved a diversity of product, geography, size of risk and distribution channel that has significantly mitigated our exposure to the softening market.

Our structure ensures that we can adapt quickly at a time when competition is more intense in some parts of the world than in others. Our combined underwriting and claims teams are globally organised and can therefore flex their underwriting strategies to maximise profitable opportunities on a global basis. In 2010 we were able to grow our business profitably in a number of areas while retrenching in lines that did not meet our underwriting requirements, such as D&O and mid-market A&E business.

We have historically maintained, and will continue to maintain, a conservative reserving approach. As the cost of claims against the policies we underwrite becomes clear, we can make prudent reserve releases. These releases amounted to $56.9m in 2010 (2009: $57.8 million).

Our strongest growth line has been data breach insurance. Our Beazley Breach Response flagship product continues to make the running in a market where demand is constantly fuelled by high profile media stories of the damage that poorly managed data breaches can cause. Ours is essentially a reputation management solution, focusing on handling the aftermath of a data breach as professionally and reassuringly as possible, including providing free credit monitoring for affected individuals.

Other growth lines of business include miscellaneous medical risks and small business (see case study). Healthcare is the largest industry in the US and there is a very wide array of specialist healthcare providers and service companies – including blood and tissue banks, contract research organisations, and medi-spas and dialysis clinics – that require tailored coverage and expert claims services. Our team, led by Evan Smith in Chicago, is well equipped to meet their needs.

We have made encouraging progress in the new markets that we began to target in 2009 and 2010, environmental risks and M&A transaction liability. Our environmental risks team, based in Philadelphia under John Beauchamp, now has a full product range. One member of the team, Nick Pearson, has begun underwriting at the Beazley box at Lloyd’s; we aim to help foster the development of a specialist environmental risks market in the London market.

John McNally, who joined us at the end of 2009, has made a very strong start in building a presence for Beazley in the growing market for M&A transaction liability insurance. John and his team have been buoyed by a rise in M&A activity globally and also by a more risk averse attitude among private equity investors, making them more inclined to purchase insurance.

Exceptional claims service strengthens client loyalty in a competitive environment and is central to our value proposition. In 2010 we began to handle a large volume of A&E and EPL claims internally, as opposed to outsourcing them to external counsel – a move that has helped us get closer to our clients as well as saving costs.

We are always mindful of the pressures facing our clients and look for ways we can help them grow and prosper. At the end of 2010, we were delighted to win the business of a large international law firm created by the merger of two smaller, but still substantial firms, neither of which had been Beazley clients before. We see significant opportunities ahead for us to help meet the needs of large scale professional services firms with global operations. 

Small business shows robust growth

The professional liability needs of small businesses have proven a strong growth area for Beazley’s US underwriters, with premiums more than doubling in volume in two years, from $9.1 million in 2008 to $18.5 million in 2010.

Beazley’s US private enterprise team focuses primarily on the professional liability needs of businesses with fewer than 500 employees or with assets of less than $35 million. Many of these businesses are technology service providers that can face crippling lawsuits it they fail their clients. Others engage in widely varying activities – such as market research, or event planning or graphic design – that would not generally be seen as “professions” but where clients nevertheless expect professional standards and can sue if they are dissatisfied. These exposures are covered by what is known as miscellaneous professional liability cover, demand for which has been growing steadily.

A more recent driver of demand has been the risk of losing sensitive customer data. Small companies have been sensitized to this risk by almost daily news coverage of high profile data breaches and their impact on customer confidence. Beazley Breach Response, which provides a turnkey service to notify and protect customers whose personally identifiable data has been lost or stolen, is particularly attractive to small businesses that lack the knowledge or resources to manage a data breach effectively by themselves.

For both Beazley and our brokers, small business – which typically generates commissions of only a few hundred dollars per client – must be transacted very swiftly and efficiently if it is to be economical. Beazley structures its small business units to allow efficient distribution of its products both in London and on-shore in the US. We use a variety of methods of placement to allow both access to skilled underwriters and process efficiency through the use of MGAs as well as an in-house sales force for our US admitted business. This latter distribution has proven to be extremely effective, and the growth of our small US admitted business  has been rewarding.

In these markets, as in others, Beazley’s credibility is supported by a long track record as the insurer of some of the largest professional services businesses in the world, including many of the largest and best known management consultants, law firms, and engineering design firms. In the technology arena, Beazley also insures two thirds of the top 25 global software and software services companies as ranked by Software Magazine.