Beazley expects Covid-19 claims to double to $340m
By Michele Maatouk
Date: Tuesday 22 Sep 2020
(Sharecast News) - Beazley said on Tuesday that Covid-19 claims are set to be twice what it previously expected, mainly due to event cancellation losses.
The insurer said in April that claims were expected to be $170m, but this has been increased to $340m net of reinsurance. This figure assumes the company returns to "some form of normality" in the second half of 2021. If it doesn't, there would be a further $50m of claims net of reinsurance.
"In determining this figure, we made a number of assumptions including that events would resume in September this year which would lead to a normalisation in the levels of contingency claims. Given the evolving status of Covid-19 we no longer expect this to be the case," it said.
"As our book of business is heavily weighted to the US and UK, with the largest segment being conferences, our clients are still largely unable to operate as restrictions on holding events persist. Conferences that were postponed earlier in the year are now being cancelled as are ones due to take place in the final quarter of this year which means our loss estimates have increased."
Beazley also expects further claims based on its exposure for events in 2021.
The company said it continues to see improving growth prospects across its portfolios of business, driven mainly by rate improvements, with an overall rate change of 13% at the end of August. It estimates the overall growth for 2020 will be in the mid-teens.
"Looking towards next year we expect these rate improvements to continue, and are again planning for double digit growth in 2021. We have contemplated this growth within our capital planning and, following the equity raise and LOC extension earlier this year, are able to take full advantage of the opportunity that lies ahead of us."
Shore Capital said: "While the increase in losses is disappointing, we believe the losses are manageable, and Beazley remains well placed to take advantage of potentially the hardest insurance market in a decade, and we reiterate our huy recommendation.
"An acceleration is losses will only result in a further hardening of the insurance market, in our view. Beazley has been weak recently, and we believe the certainty of the losses, combined with the further acceleration in the hard market, could be a positive catalyst for the stock."
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