Daily briefing: Wednesday - How did Beazley do it?

2011 has been a year of nasty surprises for the London markets. From the Japanese tsunami to Thai floods, the year has seen a succession of catastrophic events.

In this context, the surprise from Beazley’s third-quarter interim management statement is the lack of surprises contained within. Even after Hurricane Irene and widespread flooding, the Lloyd’s insurer still expects to see its full-year combined ratio sneak in under 100%, broadly in line with its predictions at both the first-quarter and half-year stages.

At both stages, Beazley was predicting a combined ratio in the mid 90s for 2011. It looks to be a slight slippage, but a marginal one bearing in mind the events of the last nine months.

There’s no change either on the gross written premium, which at £851.7m is the same as the amount written in the same period last year.

By contrast, Catlin revised its loss estimate up by 25% when it published its IMS last week, although to be fair the bigger Lloyd’s player said its GWP was up 12% to £3.7bn for the first three months of the year.

Nevertheless, Beazley’s cautious approach is likely to be applauded by investors. Rather than trying to impress earlier in the year, it will gain credit for delivering what it said it would. The company’s disciplined approach to underwriting will also win brownie points.

This year’s performance lends credibility to Beazley’s prediction that it expects premium levels to grow to the tune of 5%-10% next year. This will be further buttressed by this morning’s report from US risk managers association RIMS that premium levels rose during the third quarter of 2011 across three out of four key lines of business.

After eight years in the doldrums, RIMS clearly believes that the market for commercial insurance has bottomed out, although it does not go so far as to predict a hard market.

Nevertheless, for Beazley, with its strong exposure to the North American market, RIMS’ forecast will be sweet music. And while a rise in the US market will not have a direct impact on UK commercial rates, it will boost sentiment that there is some light at the end of what looks otherwise like a long and very dark tunnel.

Insurance just isn’t black and white

Michael Wade is a big hitter both in the London market and beyond. He has been a big player in the Lloyd’s market since the early 1980s and is well connected in the Conservative party. Therefore, the Besso executive chairman’s salvo warning that the London market risks losing billions of pounds worth of premium due to the FSA’s anti-corruption drive will carry weight in the corridors of power.

Willis and Aon have already paid multimillion-pound fines after the City watchdog found their systems and controls for monitoring and preventing the risk of bribery wanting. The global nature of the London market, where brokers are reliant on an often complex web of relationships, does not fit with the black and white edicts of London-based regulators.

And, as Wade points out in his interview with Insurance Times, the less gold-plated jurisdictions will willingly pick up the risks that London-based brokers are forced to decline. London brokers are already having to turn away good, honest business, he argues.

Last week’s trade figures, which showed an increase in the insurance industry’s contribution to the UK’s balance of payments, reinforced how crucial our sector is to an economy that is still in intensive care.

The London market contains a globally unique concentration of insurance expertise. It would be rash for the government and its agencies, however unwittingly, to put at risk one of the UK’s diminishing stable of world-beating export industries.