Beazley plc | Annual report and accounts 2022
Insurance. Just different.
Preface to Beazley 2022 Annual Report and
Accounts
A version of Beazley's Annual Report and Accounts for the year ended 31 December 2022 was originally approved by The Board
on 1 March 2023 and Beazley announced its final results for the year ended 31 December 2022 on 2 March 2023. The final
results reported an alternative performance measure of net assets per share that had been calculated using the weighted
average of shares for the year. This alternative performance measure was used by Beazley to determine the LTIP awards for
Adrian Cox and Sally Lake that were initially approved by the Remuneration Committee and included in the Directors
Remuneration Report.
It had been intended that the alternative performance measure would be calculated using the number of shares at 31
December 2022, rather than using the weighted average of shares for the year. On 7 March 2023, Beazley published an RNS
entitled ‘Alternative performance measure correction NAVps’, which provided updated information on the net asset value per
share calculation. On 8 March 2023, Beazley published an RNS entitled ‘Alternative performance measure correction NAVps –
update', which provided updated information on the LTIP awards for Adrian Cox and Sally Lake once the Board had considered
the updated net asset value per share calculation.
The Company, having taken advice, has determined that the annual report and accounts as initially approved by the Board on 1
March 2023 were neither sent or supplied to shareholders in accordance with the provisions of the Companies Act 2006, nor
were such accounts as a matter of fact, laid before a general meeting of the Company or filed with Companies House. The
Board therefore rescinded its approval of the version of the accounts that were approved on 1 March 2023 and, in their place,
approved this version of the accounts as the 2022 Annual Report and Accounts on 12 March 2023. As a result, this final
version of the 2022 Annual Report and Accounts reflects the updated figures set out in the RNSs published on 7 and 8 March
2023. Other than as described in those RNSs and the related changes, no changes have been made to the annual report and
accounts as initially approved by The Board on 1 March 2023.
The Company acknowledges that a hyperlink was contained in the announcement of its final results to the version of the
accounts that were approved on 1 March 2023 which appeared temporarily on the Company's website. No reliance should be
placed on that document which was removed as soon as the error came to light.
The updated information announced by Beazley on 8 March 2023 (which is reflected on page 121 in this 2022 Annual Report
and Accounts) is set out below:
Fixed pay
Pay for performance
£
Adrian P
Cox
Sally M
Lake
Adjustment 2022
Salary
Revised 2022 525,250
Original 2022 525,250
0
Revised 2022 414,000
Original 2022 414,000
0
Adjustment 2022
Pension
Total fixed
pay
Total annual
bonus
Long term
incentives
Total
(LTI)1
variable pay
65,656 610,666 787,875 106,663
894,538
65,656 610,666 787,875 245,127 1,033,002
-138,464
692,190
800,310
-108,120
0 -138,464
45,960 462,898 621,000
71,190
45,960 462,898 621,000 179,310
0 -108,120
0
0
0
0
Total
remuneration
1,505,204
1,643,668
-138,464
1,155,088
1,263,208
-108,120
Benefits
19,760
19,760
0
2,938
2,938
0
1 The LTI figures for 2022 have been calculated using the average share price in the last three months of 2022 of 630.7p.
Financial statements
157 Consolidated statement of profit or loss
158 Statement of comprehensive income
159 Statements of changes in equity
161 Statements of financial position
162 Statements of cash flows
163 Notes to the financial statements
232 Alternative performance measures
Strategic report
01
02
03
04
08
11
13
18
21
29
50
55
58
67
Highlights
Key performance indicators
Our purpose
Our business model
Statement of the Chair
Chief Executive Officer’s statement
Chief Underwriting Officer’s report
Performance by division
Responsible business
Task Force on Climate-Related
Financial Disclosures (TCFD) 2022
Stakeholder engagement
Section 172 statement
Financial review
58 Group performance
63 Balance sheet management
64 Capital structure
Risk management & compliance
Governance
Letter from our Chair
Statement of corporate governance
Board of Directors
Governance Framework
Shareholder engagement and investor relations
Board evaluation
Audit and Risk Committee
73
75
77
79
87
88
91
100 Nomination Committee
106 Remuneration Committee
108
Letter from the Chair of our
Remuneration Committee
111 Directors’ remuneration report
139 Statement of Directors’ responsibilities
140 Directors’ report
146
Independent auditor’s report
Highlights
Financial
Gross premiums written
Net premiums written
Net earned premiums
$5,268.7m $3,876.2m $3,614.2m
(2021: $4,618.9m)
(2021: $3,512.4m)
(2021: $3,147.3m)
Net investment (loss)/income
Cash and investments
Investment return
$(179.7)m $8,998.1m (2.1)%
(2021: $116.4m)
(2021: $7,875.3m)
(2021: 1.6%)
Rate increase on renewals
Profit before tax for the financial year
14%
(2021: 24%)
$191.0m
(2021: $369.2m)
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Beazley | Annual report 2022
01
Key performance indicators
Financial
Average five year return on equity of 8%.
Our combined ratio has averaged 98% over five
years.
The Group is of the view that some of the above metrics constitute alternative performance measures (APMs).
Further information on our APMs can be found in the financial review on page 59.
Non-financial
Female representation in senior
leadership roles
People of Colour representation in
the workforce
Overall carbon emissions
43%
(2021: 38%)
25%
(2021: 23%)
5,283.0tCO2e
(2021: 2,228.5 tCO2e)
Employee engagement
Employee favourability
85%
(2021: 86%)
80%
(2021: 81%)
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Beazley | Annual report 2022
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Earnings per share (c)13.044.6(8.0)50.926.320182019202020212022-100102030405060Dividends per share (p)11.712.30.012.913.5Interim and second interimSpecial20182019202020212022051015Net assets per share (c)256.2286.3278.0331.2367.424.223.320.920.419.3TangibleIntangible20182019202020212022050100150200250300350400450Return on equity (%)515(3)16720182019202020212022-505101520Gross premiums written ($m)2,615.33,003.93,563.84,618.95,268.720182019202020212022010002000300040005000Combined ratio (%)39383635355962735854981001099389Expense ratioClaims ratio20182019202020212022020406080100120
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Statement of the Chair
Beazley posted a pre-tax profit in 2022 of $191.0m (2021: $369.2m), and an impressive
89% (2021: 93%) combined ratio, a result that demonstrates the impact of our disciplined
underwriting. I am also pleased to confirm that The Board has declared a dividend of
13.5p. Our business is grateful for the support of our shareholders, partners and
customers during a challenging year of geopolitical uncertainty. I am particularly proud
of the confidence our investors placed in us during our equity raise in November 2022,
which will help us further invest in the sustainable growth of our business.
A specialty insurer that delivers sustainable growth
Our deepest sympathy is with all the people suffering from the
devastation in Turkey and Syria, and those impacted by the
human tragedy of the war in Ukraine. These events have made
us acutely aware of this kind of geopolitical uncertainty. This
uncertainty is compounded by the pervasive economic stress
of high inflation and the cost of living challenges it creates for
so many. In this environment our role, as a sustainable,
specialty insurer, is to support clients and broker partners to
manage the additional risks as we all adapt and deliver value
for our shareholders. Beazley adds tangible value when things
are complex, volatile and changing in areas such as Cyber,
Specialty, Marine and Political Risk, where we have
consistently demonstrated our ability to help our clients grow,
while allowing our insureds to explore, create and build.
We believe growth is driven by our ability to assess external
realities and use our platforms, people and geographical
strengths to lean into emerging opportunities as conditions
change, rather than just be dictated by hard or soft market
conditions. I like to think of this as anticipatory competence.
During 2022 the rating environment in Property insurance and
reinsurance reached a transition point, as the market
understood that it was unsustainable to continue to
underwrite this business in a commoditised way, in the face of
overwhelming evidence about the impact of climate change.
This is a moment where our market expertise and underwriting
competence becomes a differentiating factor and where we
are able to add real value to our brokers and clients. We are
excited about the opportunity these changes offer to grow and
develop our Property portfolio as we move through 2023.
This enthusiasm is based on the long-term approach we have
taken to Property, which saw our exposure, on both our
Property and Reinsurance books within our Property Risks
division, reduce as rates were depressed and the impact of
climate change began to be felt. During this time, we invested
in expertise and modelling tools to explore how the changing
climate is impacting Property Risks. The knowledge gained is
now allowing us to grow our share of the Property market as
the underwriting environment significantly improves.
Our successful equity raise in November 2022, puts us in an
excellent position to take up the opportunity in Property and
also deliver against our Cyber ambitions, while extending our
market share across our classes of business, delivering
sustainable, diversified growth for shareholders across a
balanced portfolio. Focusing on sustainable growth has
resulted in our gross premiums written doubling between
2018 and 2022 - and saw our US platform reach a significant
milestone as it passed gross premiums written of $2bn.
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Beazley | Annual report 2022
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Strong culture guides us through change
In autumn 2022, I assumed the role of Interim Chair of
Beazley, I was previously the Senior Independent Director and
Chair of the Remuneration Committee. The role of Chair has
offered a fresh perspective on our business and I have been
energised by the exciting future our fast changing and growing
business has ahead of it.
On 25 April, at the conclusion of the 2023 Annual General
Meeting, I will relinquish this role to our outstanding new
Chair, Clive Bannister and I will return to my previous role.
Clive is currently the Chair of the Rathbones Group plc and the
Museum of London. He was previously the CEO of the Phoenix
Group plc. He will bring deep strategic, commercial and
transformational experience to The Board.
In the selection process we drew on our corporate values and
founding principles, which have propelled Beazley to be the
business it is today. We are a value driven, growth minded
and disciplined company which has created a respectful and
inclusive workplace and I believe that in Clive, we have a
leader who embodies these values and who will be an
outstanding advocate for Beazley.
On behalf of The Board, I would like to thank David Roberts for
his leadership as we faced the challenges of COVID-19, for
the transformation of our executive management team and for
his genuine conviction that by creating a diverse environment
that is respectful and open, you achieve better outcomes. He
has left us a stronger business and we wish him well as he
takes up the challenge as Chair of the Court of the Bank of
England.
I would also like to thank Robert Stuchbery for assuming the
role of the Senior Independent Director and Nicola Hodson for
chairing the Remuneration Committee, while I undertook the
Interim Chair role. Nicola will remain Interim Chair of the
Remuneration Committee following the 2023 AGM.
On behalf of The Board, I would also like to recognise
Catherine Woods for her excellent service as a Non-Executive
Director, having stepped down following the conclusion of two
three-year terms in March 2022. On 31 May 2022, The Board
appointed two new Non-Executive Directors, Fiona Muldoon
and Cecilia Reyes Leuzinger. Fiona is a member of the Audit
and Risk Committees and Cecilia the Audit, Risk and
Remuneration Committees. They both bring insight and offer
experience-led advice to The Board.
A talented team that champions diverse thinking
Our company has thrived because our people can thrive.
People are the bedrock on which we continue to build and
grow our business. They are a vital asset and one that
becomes more valuable over time. Understanding this leads
us to commit to creating a market leading workplace.
Building a highly differentiated, talented, cross functional
team means recruiting and retaining the best people. In 2022
we recruited 410 new joiners and our turnover rate was 10%.
We give our people the tools, support and create a learning
environment where they are able to grow in their roles, make
decisions and execute with autonomy. By remaining a mostly
flat organisation, our team knows that they are making
individual contributions to the collective success of the
company. This approach results in positive behaviours and
outcomes and a willingness to seize opportunities - which I
believe is not just what makes Beazley a market leading
workplace, but is also the key to our ongoing success as a
business.
We are able to attract and keep top talent because of this
compelling culture and the inviting workplace we have created,
which resonates with both new and long-standing staff, as is
reflected in our annual employee survey. Our engagement
score, which measures whether colleagues are willing to go
above and beyond for the organisation, was 85% and we
remain above the global benchmark for both favourability and
engagement. We continue to see parity in the demographics
of respondents such as gender, ethnicity, age and length of
service to the employee survey.
Only with a team that embraces the purpose of our business
to explore, create and build will we deliver the innovation that
our clients and broker partners expect. It is no surprise,
therefore that during 2022 innovation remained at our core.
We collaborated with the market to explore and create new
insurance solutions to the emerging or changing risk
landscape and in 2022 these included the build out of Carbon
Offset Invalidation and specialist parametric property
products, and building on our long-standing expertise in space
underwriting by offering the first commercial insurance for
vehicles on the moon. We are constantly looking to the risk
horizon to identify where our specialist underwriting can add
value.
www.beazley.com
Beazley | Annual report 2022
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Statement of the Chair continued
Being a responsible business
Beazley is committed to being a responsible business and in
2022 we launched our ESG Consortium and Syndicate 4321.
We also made significant strides towards embedding ESG
criteria through the underwriting process with the addition of
tools and talent to truly get our arms around this challenge.
We continue to make progress at pace against our 2023
targets of 45% senior leadership roles held by women, and
25% of our people being people of colour. The same is true of
our target of a 50% reduction in greenhouse gas emissions by
2023, where we have in fact achieved a reduction of 55% so
far to date. The Board will closely monitor our achievements
against these targets and looks forward to reconfirming our
Responsible Business commitments and presenting new
targets for beyond 2023.
Dividend
The Board is pleased to continue with its progressive dividend
policy, which will be paid annually, and as such has declared
an interim dividend of 13.5p for the full year of 2022.
New Era, consistent vision
In December 2022, Beazley joined the FTSE 100 for the first
time. We welcome the additional responsibility, visibility and
scrutiny that comes with this and expect to be better for it. It
is worth reflecting that we have reached this point not through
acquisition or merger but by focusing on growing and
developing our business organically through our talented
people, expertise and skill.
It has been a pleasure to lead such a committed and talented
team of Directors as Chair of The Board for the past several
months. Together we are steering your company as it
continues to grow successfully and offer meaningful solutions
to the challenges that risk presents to our clients and broker
partners.
As a business we operate within a framework of underwriting,
responsibility and financial probity that we can all be proud of,
driven by an extremely skilled team. Our vision of being a
leading sustainable, Specialty insurer, is both lived every day
and drives our aspirations, as our products, people, platforms
and culture all come together. As Clive succeeds me as Chair,
I can reflect that our new brand descriptor perfectly
encompasses what it is about Beazley that makes us stand
out from the crowd.
Christine LaSala
Interim Chair
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Beazley | Annual report 2022
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Chief Executive Officer’s statement
Beazley’s combined ratio of 89% (2021: 93%) and gross premiums written of $5,268.7m
(2021: $4,618.9m) are testament to our hard work over the last few years, and are
particularly pleasing given that 2022 witnessed geopolitical uncertainty unseen since the
Cold War. The overall result, a profit before tax of $191.0m (2021: $369.2m), consisted of a
strong underwriting performance, offset by a reduced investment performance, driven by
mark to market losses as a result of the volatile interest rate environment.
I am proud of Beazley’s progress throughout 2022. We
delivered a strong underwriting result, raised capital that will
enable us to make the most of a structural change in the
Property insurance and reinsurance markets, realigned our
underwriting teams to better deliver for clients and launched
Lloyd's first ESG syndicate. All against a backdrop of high
inflation, an energy price crunch and the overhang of war in
Europe.
Specialty insurance in a time of geopolitical turmoil
The war in Ukraine has shaken us all, causing real human
suffering; and, as we all take stock, it is right to reflect on the
impact it has had on our business. Firstly, the conflict resulted
in us provisioning for claims directly from the war itself, for
which our estimate of loss remains unchanged since our
2022 interim report. Secondly, the energy price spike and
rising inflation caused central banks to increase interest
rates, leading to mark to market losses in our fixed income
portfolio resulting in an $179.7m investment loss. Finally, the
war has reinforced the value a specialty insurer like Beazley
brings in complex situations. From our claims team’s support
for mariners injured by missiles in the conflict zone, or
enabling shipments of grain needed by some of the world’s
poorest people, to offering clients reassurance as they
navigate a complex sanctions regime - the innovation and
responsiveness of the Beazley team has shone through and
I’d like to thank everyone for their hard work and focus on
supporting clients.
Sustainable growth
Our business received a strong endorsement from the capital
markets in November 2022 as we raised $404m in new
equity capital to support our exciting growth agenda. We see a
multi-dimensional opportunity to show our agility and grow in
response to changes in market conditions whilst continuing to
pursue our sustainable long-term growth strategy, which this
additional capital will further support.
The market dislocation in Property is a signal of structural
change as it adjusts to the increased exposure climate
change brings. This gives us a strategic opportunity to
accelerate rather than simply re-grow our Property franchise
(which used to be a significantly larger proportion of the
business than it is now) but also to retain more of our Cyber
and Specialty Risks business.
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Beazley | Annual report 2022
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Chief Executive Officer’s
statement continued
Firm foundations
Our ability to pivot our business to take up new opportunities
as they emerge is part of our DNA. Platform strength, product
and geographical diversity are cornerstones of this. Our
strategy is to achieve the successful intersection of platforms
and products to offer our brokers and clients access to our
expertise and specialist underwriting capacity where and when
they do business. We believe that a mix of international,
wholesale and domestic platforms delivers straightforward
access to us and adds real value.
People are, of course, Beazley’s most important asset and
in October 2022 we had to say goodbye to one of the best,
David Roberts, our Chair of five years, who left to become
Chair of the Court of the Bank of England. We are grateful for
David’s leadership and I would like to thank him personally for
his counsel and wisdom over his time with us, but particularly
when I transitioned to CEO last year. David’s calm presence
during COVID-19 and his personal drive and commitment to
diversity and inclusion have had a profound impact on
Beazley. Christine LaSala has ably assumed the role of
Interim Chair and returns to her role as Senior Independent
Director and Chair of the Remuneration Committee with our
sincere thanks. I look forward to working with our incoming
Chair, Clive Bannister, who brings a wealth of experience with
him which will aid us as we enter the next phase of Beazley's
journey.
and I look forward to reporting our progress in next year’s
annual report, when we will recommit ourselves to additional
and equally challenging targets for the next three year cycle.
Insurance. Just different
Beazley’s Cyber team took a leading role in the market this
year on the issue of systemic Cyber risk. If the Cyber
insurance industry is to achieve its potential and play its role
in managing and mitigating Cyber risk, it needs to define and
build parameters that will allow insurers to manage their
balance sheet prudently, whilst encouraging more capital to
come into the sector. We are fully committed to supporting
this adjustment to happen. Innovation has come right across
our business, from insuring the first commercial moon rover
vehicle to providing an insurance solution for e-sports events.
In early 2023 we launched the market's first cyber
catastrophe bond, an innovation that will see new capital
come into a cyber market that needs to grow at pace in the
next decade to meet business demand. All have the same
characteristics in common - they require a specialist approach
to insurance as the issues raised are complex; but with the
right investment they offer significant long-term potential.
As you can see from our digital version of this annual report;
beazley.com/2022-annual-report, in 2022 we refreshed our
brand identity to better reflect the age in which we live. Our
fresh look and feel retains the essential qualities for which
Beazley is well known, reflects our three corporate values of
being bold, striving for better and doing the right thing, but
introduces a more engaging and forward-looking approach to
communication which better represents how our business is
growing and changing.
Developing and supporting our employees is crucial to our
success and in June 2022 we reflected the cost-of-living
challenges we are all facing by making a one-off payment of
up to £3,000 (or equivalent currency) to the people in the
company most impacted. As we approached the end of year
salary and bonus cycle this was also upper most in our minds
and we awarded eligible staff an additional 2% cost of living
pay rise in addition to an average company wide annual uplift
of 5%.
The support of all our stakeholders is key. Brokers are our
first, vital link in the chain, but the purpose of our business is
to help our clients explore, create and build their businesses.
To better achieve this in 2022 we established our client
engagement team which will actively ensure clients have
access to our full product range and our research and
expertise. We see this a two-way process that will allow us to
develop more relevant products and insurance solutions that
better meet the needs of our clients going forward.
What we say is what we do
Beazley believes that fundamentally we must deliver what we
promise; and in 2022, we did just that with the launch of the
ESG consortium and Syndicate 4321, Lloyd’s first ESG
syndicate. Since its launch on 1 January 2022 the new
syndicate has offered additional capacity to clients who
achieve high scores on ESG metrics, the syndicate is also
helping Beazley to understand more about how high scoring
businesses operate and test our hypothesis that companies
which do well on ESG criteria are also likely to be less risky.
We are using the lessons learnt as part of a wider effort,
which got fully underway in 2022, to embed ESG thinking into
all our underwriting.
We also know that what gets measured, gets done and that is
why in 2019 we set robust and challenging targets for our own
ESG efforts. Specific highlights include targets of 45% of
senior leadership roles being held by women, 25% of our team
being people of colour and a 50% drop in carbon emissions,
from 2019 levels; all to be achieved by the end of 2023.
I believe we are firmly on track to deliver our target on senior
leadership roles held by women, having reached 43% by the
end of 2022, and I am delighted to have already hit our 25%
people of colour target and reached a 55% reduction in carbon
emissions (for more information please see pages 21 to 28)
As we start 2023, and we see positive market conditions,
Beazley is able to look at that opportunity from a strong
capital position, with a talented and committed team and the
platform strength and product range to deliver for our clients,
brokers and shareholders. For 2023 our growth expectations
are for higher net premium growth than gross premium growth,
with net growing in the mid 20s while gross is at mid teens.
The difference is caused by us no longer writing portfolio
underwriting through the Group in 2023 (as syndicate 5623
became a standalone syndicate and no longer requires the
Group to cede the majority of the business written to it),
alongside our reduction in purchased reinsurance on both
Cyber Risks and Specialty Risks. These changes have the
impact of increasing the net premium growth compared to the
gross premium growth. Taking the above into account, we
expect to deliver a high-80s combined ratio for 2023
assuming average claims experience. Although significant
geopolitical headwinds remain, I believe we are in an excellent
position to sustainably grow our company and I am looking
forward to all we will achieve together in 2023.
Adrian Cox
Chief Executive Officer
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Beazley | Annual report 2022
www.beazley.com
Chief Underwriting Officer’s report
Beazley achieved gross premiums written growth of 14% and a very strong combined
ratio of 89% (2021: 93%). We delivered this impressive underwriting result by executing
against our underwriting strategy of deploying specialist products in markets that value
expertise and are demand driven, combined with an agility to pivot in new directions as
opportunities from changing market conditions emerge.
Balanced underwriting combined with agility
2022 was a year of global dislocation and complexity, but
throughout we remained true to our core values, executing our
ambitious strategy to deliver profitable growth across all lines.
We achieved this by underwriting a balanced book of business
across multiple platforms, with the agility to respond to
changing market conditions. Innovation also remained at our
core with the development of new insurance solutions such as
CryptoGuard and Carbon Offset Invalidation. We also continue
to evaluate and support various parametric Property products
to provide the market with solutions beyond traditional
insurance.
Market conditions moved markedly during 2022. The Directors
and Officers insurance (D&O) market saw competition emerge
and a slow down in IPOs and SPACs, resulting in an over
supply of capacity and lack of demand driving rates down.
Cyber rates continued an upward path, albeit at a more
conservative pace following the much needed price correction
of the previous two years. In Property Risks we have reached a
market turning point, and we anticipate significant rate
increases in Treaty reinsurance and the direct Property market
in 2023. However as the market changes, our approach to
underwriting remains consistent – our focus is on underlying
pricing and risk dynamics, market knowledge and experience,
and standing by our clients.
New structure – more specialism
In March 2022 we restructured our underwriting teams to
improve interconnectivity and achieve synergies. We now have
an underwriting structure of four more equally sized divisions,
which ensures a balanced book of business and is better able
to manage short and long tail drivers of risk and reward.
Bringing together the Property insurance and Reinsurance
teams to form Property Risks, and the Executive Risk and
Speciality Lines teams to create Specialty Risks, has given us
access to deep and broad insights into market dynamics,
allowing us to better anticipate trends, identify opportunities
or raise the alarm if risks are rising.
MAP Risks underwriters are experts in their specialist
products and segments and while the specifics of risk differ
between classes, their clients are sometimes the same and
often face similar challenges, making for an ideal environment
for cross fertilisation of ideas and growth of our underwriting
via our international platforms.
Cyber Risks has exciting growth opportunities ahead as
digitalisation sees demand for Cyber insurance protection
grow exponentially. As a Cyber market leader, we have the
experts in-house who continue to build our comprehensive
Cyber ecosystem and in 2022 led the market wide debate on
catastrophic Cyber, to protect our clients, the market and
shareholders from the growing threat of a Cyber catastrophe.
www.beazley.com
Beazley | Annual report 2022
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Chief Underwriting Officer’s
report continued
second half of 2022 as we anticipated dramatic changes to
Property Treaty reinsurance rates, and with our November
equity raise, we are well placed to retain more risk and profits
on our own balance sheet rather than extend our use of
outwards reinsurance.
Small business underwriting
Alongside these four divisions, Beazley Digital offers cross
class specialist digital underwriting capabilities to the SME
market. Our SME brokers and clients can now access our
expert underwriting team via multiple channels, ensuring ease
of doing business. In its first full year of trading the new
division has experienced significant increased demand.
Data driven specialists
To ensure we continue to add greater insight and build
knowledge and expertise in exposure management and the
use of data, we are actively investing further and adding
specialists to our team. Beazley hired its first Chief Data
Officer in 2022, appointed a Senior Financial Climate Risk
Specialist, and we are focused on building our pricing and
exposure management team. As we make a concurrent
investment into modelling tools, we will continue to need
highly skilled specialists who can turn data into useful tools
and benchmarks for underwriting action.
Agility in action
New structures, platform strength and a high-quality team are
the firm foundations from which we can respond and change
as market conditions move. In the second half of 2022 we
saw movement in Property markets and as rates began to
harden, we were able to optimise our Property portfolio as
both a seller and buyer of reinsurance. Our Property Risks
division will take advantage of this excellent opportunity for
growth as the market is rapidly hardening into 2023. However,
it will do so in the certain knowledge that the ongoing work we
are doing to manage climate risk will mean we are not just
here for short-term gain but to sustainably underwrite this core
class of business.
D&O, long one of our key areas of specialism, has seen
competition come into the market at a point where our
assessment is that the risk landscape remains extremely
high. As a result, when we do not believe the rate justifies the
risk we have pulled back, reduced our appetite as we continue
our disciplined approach to underwriting D&O. This is a
caution we will maintain in 2023, although we believe the
market will likely stabilise with supply and demand coming
more in line.
Our US business continues to grow, and we hit our goal of
$2bn gross premiums written through the platform in
December 2022. Beazley’s ‘Insurance. Just different.’
message resonates strongly in the thoughtful way we
underwrite and the client centric approach we take to claims
in the world’s largest insurance market. Growth also continues
at pace in Europe, where we see significant opportunities and
where we are investing in underwriting expertise. Our Lloyd’s
wholesale platform sees our underwriters leading global
thinking on the challenges our client and brokers face. In
particular, we can be proud of innovations that come from our
specialist teams in this market, such as underwriting the first
commercial insurance policy for projects on the moon.
We underpin our strategy by flexing our reinsurance
purchasing and choosing to retain risk or share it based on
the pricing dynamic. This thinking came to the fore in the
Successful strategy
I joined Beazley just over a year ago because I was impressed
by the quality of the underwriting team and the effective and
considered way in which they execute our underwriting
strategy. In 2022, it was testament to this approach that we
have delivered a 89% combined ratio and seen growth of 14%
despite perhaps the most challenging geopolitical situation in
a generation.
Underwriting focused on rigorous attention to detail and
delivered by a team of experts who question decision making
and actively value challenge and follow up have been key to
this result.
This is combined with an agile approach to seizing
opportunities as they emerge, whilst always keeping the
interests of our shareholders and clients at the forefront of
our minds. These will remain our defining principles
throughout 2023.
Cyber Risks
Cyber Risks continued to see strong rate increases of 40%
(2021: 88%) leading to an increase in gross premiums written
to $1,156.1m (2021: $814.3m).
A successful year
New business was strong across all geographies with our
business outside of our core US client base growing
exponentially. In the US, we are seeing strong demand from
the mid-market segment which is driving ongoing growth.
Outside of the US, demand came from Europe, Asia, Australia
and beyond and we expect this trend to continue as business
becomes increasingly aware of and keen to protect itself from
the Cyber threat. The substantial rate increases we have seen
over the last two years, did begin to moderate during 2022,
but they remained at very significant levels, reflecting the
scale of the challenge that Cyber poses.
Our positive result reflects the good work we have done since
October 2020, to build our Cyber ecosystem, which focuses
on pre-underwriting and post-loss mitigation efforts. In 2022
we also added our threat intelligence and Beazley Cyber
Council to this offering.
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Underwriting yearRate changeRate change graph 2017-2022 (%)Cyber RisksDigitalMAP RisksProperty RisksSpecialty RisksAll divisions20172018201920202021202250100150200250300
To reflect the demand we are experiencing and to respond to
that opportunity, the team has continued to grow during the
year, we’ve invested in people, expertise and resources
across the globe. We also made specific investments into
threat and intelligence pilots during 2022, of which, the
successful ones, will become operational during 2023.
Adapting now, to grow tomorrow
We are a market leader in Cyber and we believe we need to
use that position to address the challenges the market faces.
In 2022 this saw us tackle the issue of Cyber catastrophes.
To date no Cyber attack has been big enough to create a
widespread breakdown in essential services; however, we
have modelled the possible scenarios and believe now is the
time to actively build market awareness and the capital
needed to address the threat as the market grows.
Looking ahead, we believe that the flattening of rate increases
will continue through 2023, but we expect that to be a
moderation in what have been substantial, but required, rate
increases over the last two to three years. We expect to see
continued strong new business demand, particularly outside
of the US, where we see the mid-market as the largest area of
growth for our Cyber products and services. In Europe and
across the globe, we are seeing large corporations seek
greater Cyber protection and expect the level of demand to
continue. Our continued focus is on maintaining and
advancing our knowledge and understanding of the Cyber
threat, and maintaining vigilance about the threat actors and
their changing methods of operation as we move forward.
In January 2023 we launched the market's first cyber
catastrophe bond and with strong demand from investors we
expect to be able to launch additional tranches through 2023
and beyond.
Through the equity raise in 2022, we are also looking to retain
more of the business which we write, and capitalise on future
profitability in this division.
Digital
Our profit before tax of $14.4m (2021: $40.6m), reflects the
successful build out of our small business proposition across
our key territories. Demand for our digital underwriting and
distribution capabilities continues to grow and our delivery of
$204.9m (2021: $190.8m) in gross premiums written for our
first year of full operation and combined ratio of 87% (2021:
76%), demonstrate our success.
It is testament to the outstanding work of our team, that in
our first year of operating as a separate division we have
delivered a strong performance. Throughout the year we have
made considerable progress in technology innovation and are
seeing the benefits of a multi-skilled team working across all
lines of business.
Digital started underwriting as a separate division in January
2022. It was created to build on the success of our myBeazley
portal and to respond to demand from clients and brokers for
accessible Digital insurance placement for small to medium
sized risks. Digital gives brokers one Beazley point of contact,
supported by a cross functional team, to access multiple
product lines and digital services via their preferred platform
or channel.
By committing to our strategy of meeting the client where they
want to be met, we are seeing success across all access
points: the myBeazley portal, APIs, on digital market hubs and
our artificial intelligence enhanced email submission
capabilities.
Take up of each channel differs depending on location. In the
US, the prevalent method of placement remains via email, but
through 2022 we have seen a shift to engagement via APIs
and market hubs. In Europe and the UK, myBeazley has
established itself as a key link in the insurance chain, while
for our German business, market hubs or ‘broker pools’ are
increasing in use.
Specialist insurance for small business
We recognise that not all small businesses are the same and
neither are the risks they face. A small manufacturing
business has very different exposures to business interruption
risk than a small financial consultancy. By leveraging the
deep-seated specialist knowledge that we are known for and
that is prevalent across our organisation, we are able to
effectively design and price relevant cover for a myriad of
organisation types and sizes, which can be accessed at the
touch of a button and delivered digitally.
At our core, we have a broad Specialist Lines portfolio,
focused on lines such as Professional Indemnity,
Management Liability, Tech Professions Errors and Omissions,
Medical Malpractice for small scale health and care services
providers, Event Cancellation and Pleasure Craft. During
2022, we have also matured the way we underwrite flagship
products like Cyber for small business, where we are seeing
significant demand and there is an opportunity to grow at
pace.
Growth going forward
We remain confident about our growth trajectory going into
2023 and expect to see moderate rate increases across the
portfolio.
Service is key, and we continue to invest in the people and
technology of our customer success team who support our
brokers with client queries, providing product information, and
transacting business. Similarly, our dedicated territory
manager sales team continues to grow and expand our
distribution by region and by digital channel.
In the year ahead, we are targeting growth in all regions. We
see plenty of opportunity to expand our digital distribution in
the US, and Europe. In 2023, we will also launch the
myBeazley portal in Canada, with the support of our well
establish specialist teams in Toronto, Montreal and
Vancouver.
Although Digital is tailored for the small to medium business
segment, looking ahead, we see opportunities to direct more
digitally placed larger risk business to our complex risk
underwriting teams via channels such as APIs.
www.beazley.com
Beazley | Annual report 2022
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Chief Underwriting Officer’s
report continued
MAP Risks
MAP Risks reported gross premiums written of $1,107.8m
(2021: $897.5m), and a combined ratio of 84% (2021: 85%).
The division is exposed to the war in Ukraine in its Marine,
Aviation, Political Risk and Terrorism lines of business - yet,
despite the claims arising from the conflict, delivered a profit
of $91.6m (2021: $167.5m).
Positive results from specialist team
The 2022 result was impacted by the war in Ukraine, and this
has represented a potentially material loss to our book which
remains unchanged since our 2022 interim report. Despite
this, MAP Risks delivered a profit for 2022, which is a credit
to the expertise and hard work of our team, who have been
focusing on helping clients as they have faced extraordinary
difficulties.
Bringing together Beazley’s Marine division with the Political,
Accident and Contingency division and Portfolio Underwriting
has brought synergies and opportunities for cross selling. Our
specialist underwriting teams are leading members of the
Lloyd’s market and we see positive opportunities to expand
access to their technical skill and sector knowledge by
leveraging our domestic underwriting platforms: in the US and
Europe alongside Asia via our Singapore operation, where
business comes into our Lloyd’s syndicates.
Value of expert underwriting reflected in rates
The rating environment remains buoyant, with an overall rate
increase of 4%, although we are now seeing pressure in some
lines, including Aviation where capacity has returned after
COVID-19. The war in Ukraine has impacted a range of
classes and as a result we have seen significant uplifts in the
rating environment in some of these areas. As a responsible
business we are mindful of the importance of Ukraine as an
exporter of grain, and the negative impact the conflict is
having on world food supplies, and are supportive of market
efforts to assist in facilitating the flow of these vital global
commodities.
2022 saw our Contingency underwriting recover from the
impact of COVID-19 with positive premium growth and, despite
recessionary fears, we expect that trend to continue into
2023.
The value of our Political Risk cover has been fully
demonstrated by the geopolitical turmoil of the past 12
months and we are seeing heightened interest from
businesses looking to protect overseas assets, and the rating
environment remains robust for this class.
Our Portfolio Underwriting business, which is primarily
reinsured to an external special purpose Syndicate 5623, has
delivered three consecutive years of profit. In January 2023,
Syndicate 5623 became a full stand alone syndicate, writing
all Portfolio Underwriting business directly. Beazley will be
providing circa 18% of the capacity for the 2023 year of
account for this syndicate.
ESG Syndicate 4321 launched in the year and wrote $10.5m
of premium which the Group has a 10% share of. The
syndicate provides additional follow capacity across several
different classes of business to over 250 Beazley clients with
a strong ESG rating since January 2022, building momentum
through the year. A unique offering, the ESG consortium has
been particularly successful for clients actively seeking to
include ESG within their insurance programme and we have
registered strong take up for both Financial Lines and Cyber
clients in particular, and we are exploring growth opportunities
in Europe.
Our specialist underwriters continue to innovate in established
lines, be it on Marine, Cyber, embedding ESG principles and
helping clients transition to net zero, or in underwriting the
first commercial insurance on the moon and acting as the
leader in the development of insurance for commercial space
ports.
While there are rating pressures beginning to be felt in some
classes, the geopolitical turbulence of the last 12 months only
serves to demonstrate the importance of the specialist
insurance and sector expertise that our underwriters
consistently deliver.
Property Risks
2022 saw the combining of our Property insurance and
Reinsurance business. Non-catastrophe exposed business
performed well contributing to an increase in gross premiums
written to $859.8m (2021: $812.6m). Hurricane Ian has, in
line with expectations for such a large event, dampened our
overall result, which nevertheless saw the combined ratio
improve to 98% (2021: 106%).
The success of work painstakingly done in recent years to
address the impact of climate events and refine our risk
selection, has seen the book progressively improve. With
market conditions reaching a pivot point during 2022, we are
now in a great position to reap the rewards. While Hurricane
Ian will see a claims burden in the range of a $120m net loss
and has undoubtedly had an impact on the 2022 result, we
comprehensively plan for events of this size, and it falls within
our expectations for such an event.
Ready for the future
The combined expertise of our Property insurance and
Reinsurance teams is allowing us to look across our portfolio
strategically and benefit from both detailed site level insights
and high-level trends, giving us a bird’s eye view of market
dynamics. Over time we believe this bottom up and top down
approach will deliver competitive advantages as we address
the sector’s challenges of which climate change is perhaps
the most urgent.
Throughout 2022 we continued to further our understanding of
and implement enhancements to our underwriting approach
and analysis around climate risk. We believe we are ahead of
the curve, having actively invested in modelling tools and
taking steps to embed the learnings into our underwriting
processes. We are also making strides in regards to the
impact of climate change on non-modelled perils such as
wildfire, flood, and severe convective storm.
Our non-catastrophe business continues to benefit from the
work we’ve done in the last few years to improve risk
selection. A key driver of that has been the use of better,
more insightful, modelling and tools. In particular, we released
a new dynamic Property underwriting tool that provides the
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teams with the ability to analyse, model and rate all aspects
of a risk at a location level with an informed view.
A significant opportunity
These focused efforts have put us firmly on the front foot to
strongly build our Property premium base through 2023 - not
just as we respond to an immediate and much needed
improvement in the rating environment, but for the long term.
As the rating environment remains favourable we will lean into
the market opportunity; the equity raise of November 2022,
has given further charge to this effort as we anticipate
Property Treaty rate increases of up to 50% and over 15% in
the direct Property book during 2023.
In contrast, as a buyer of reinsurance we are seeing an
increase in costs; but balanced against the overall benefit of
more effective market pricing and our dual role as a Property
reinsurer, we believe this environment creates excellent
opportunities for Beazley as a leading specialist Property
insurer.
Specialty Risks
Specialty Risks achieved gross premiums written of
$1,940.1m (2021: $1,903.7m) with rate increases of 2%.
The combined ratio improved to 93% (2021: 95%). Through
2022 we achieved synergies and gained insights as we
brought together our Executive Risk and Specialty Lines
teams.
Specialty Risks offers scale and diversification over 27
different product lines, across global geographies, serving
insureds from SME’s to the world’s largest companies. Our
distribution methods are equally diverse and include; broker
partners along the insurance value chain, coverholders,
delegated authority arrangements and reinsurance. This not
only creates a truly diversified book of casualty business but
actively offers diversification benefits to Beazley as whole.
The newly combined division leverages its expertise and
interconnected broker relationships to deliver strong and
effective cycle management across our diverse book, by
pushing and pulling the relevant levers of geographies,
platforms and products and moving our focus as market
conditions evolve and change.
Active cycle management
Our focus on active cycle management lets us see where risks
are growing, or the rating environment is becoming
unattractive and move swiftly to protect that business area.
A good example of how this works is in the current D&O
market cycle. We avoided growing in the depth of the soft D&O
market by methodical underwriting, and when the market
changed direction in 2020/21 we stepped up and seized the
opportunity. As conditions have moderated since the second
quarter of 2022, we’ve become more selective on rate and in
some instances, reduced our appetite. We are hopeful that
conditions will stabilise during this year and we will adjust our
underwriting as opportunity emerges.
This year we’ve seen growth across areas where innovation
plays a key role, such as our Safeguard Product and Beazley
Product Solutions embedded reinsurance segment. Here we
take a market leading position in these smaller or niche lines
and invest significantly, giving them airtime to grow at pace.
This approach sees us able to move swiftly into new or
emerging areas where growth potential and client demand is
high for Beazley's unique solutions. Another new area for
2022 was our geographic expansion of Product Recall to
Singapore alongside our overall Specialty Risks growth in the
Asia Pacific region.
Outperformance is our focus
Discipline is the watch word of our approach to underwriting;
while growth makes the headlines, profit is the real mark of
success. The current economic environment is challenging but
the hard de-risking work we undertook during the last
recession gives us confidence that we are well placed at the
start of 2023.
Our underwriting capabilities are fully demonstrated by how we
behave at these moments and this includes leveraging our net
growth and varying our reinsurance purchasing, to ensure we
deliver market share and a positive result in any given year,
regardless of market conditions. Our November equity raise
will see us keep more of our carefully selected risk within our
own business rather than purchase additional, more
expensive, reinsurance thus maintaining our outperformance.
It takes discipline to leave our egos at the door, invest in
future business areas and to pull back on some of our most
respected classes of business if the rating environment is
wrong.
However, this mantra is key to our strategy of growing in a
smart, sustainable way.
Bob Quane
Chief Underwriting Officer
www.beazley.com
Beazley | Annual report 2022
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Performance by division
Growth across all of our divisions, with two divisions growing in double digits.
Growth of managed gross premiums written by division $m
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Performance by division continued
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Responsible Business
Our vision is to be the highest performing sustainable specialist insurer.
Building a responsible culture
We define our culture, through our brand and values which
inspire the way we work, from how we engage with our
stakeholders and colleagues, to how we design our
workspaces, treat our customers and behave as a
responsible business.
We are proud of our culture, which is embodied by our
people. We attract and nurture curious people, that value
constructive challenge and a collaborative approach to
problem solving. We provide an environment where this
approach can thrive by creating an inclusive culture, true to
our values, to ensure our success now and for the future.
Together our people and culture make it easy to do
business with Beazley.
Inclusion and Diversity
Our culture and people strategy is underpinned by our
approach to inclusion and diversity, which is powered by
our 5 employee networks. These play an important role in
embedding our inclusion and diversity strategy, ensuring
that colleagues right across our company have clear
channels through which their voices can be heard.
• Beazley Families – Our newest network supports parents-
to-be and experienced parents on the parental journey in
the company
• Beazley Proud – Our LGBTQ+ employee network
• Beazley RACE – Focused on raising awareness and
celebrating People of Colour
• Beazley SHE – Our women’s network
• Beazley Wellbeing – creates supportive content to help
break the stigma around talking about mental health.
We will not achieve our goal without setting ourselves a
series of measurable and bold targets that incorporate
ESG thinking into every aspect of our business. We know
that we are on a journey and that it will take time to deliver
but we are committed to building better resilience for our
clients, staff, our local and global communities, the
environment and all our stakeholders.
Our Responsible Business strategy is based around four
central pillars. These pillars are supported by nine key
areas across the organisation which are detailed within the
outer ring of our responsible business wheel, which is
designed to demonstrate the interconnected nature of our
approach to responsible business.
We not only set metrics against which we can measure our
performance, these are regularly reviewed by our Executive
Committee and Board. Beazley’s Responsible Business
Steering Group is responsible for challenging the progress
and development of the strategy and providing support to
the business as it addresses ESG issues and climate
related risk.
On pages 29 to 49 you can read our disclosures made as
part of Task Force on Climate-Related Financial Disclosures
(TCFD), which will give you an in depth overview of how
Beazley is addressing the challenges of climate change. On
our Responsible Business and culture and values pages of
our website you will find detailed information and our key
policies and disclosures. In the following pages we have
set out our key responsible business metrics for 2022.
www.beazley.com
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Responsible business continued
Inclusion & diversity
Inclusion and diversity are a key element of being a responsible business. To support our ambitions we have not only set robust
targets for inclusion and diversity but actively encourage our staff to play their part via our five employee networks. These
networks ensure that colleagues right across the company have clear channels through which their voices can be heard and
they can help the business tackle some of the complex issues that will lead to a more equitable and inclusive culture.
Network Activity
The five networks are:
Beazley Families – Our newest network supports parents-to-be and experienced parents focusing on enhancing the support
and resources available for those on the parental journey.
Beazley Proud – Our LGBTQ+ employee network.
Beazley RACE – Focused on raising awareness and celebrating People of Colour.
Beazley SHE – Our women’s network.
Beazley Wellbeing – Seeks to create supportive content to help break the stigma around talking about mental health.
Climate change
For more information please see page 29.
Supply chain
Ensuring that our supply chains are responsible is vital for us to deliver a seamless service to clients. With much of our supply
chain focused mainly on services, products are only a significant part of the mix when associated with an office fit out, the
procurement of office supplies, or the delivery of events. During 2022 we continued to use our environmental management
system and leveraged ESG data to appraise and inform our procurement decisions.
Building a responsible culture
Our business is underpinned by our shared values and culture. Attracting diverse talent, building multidisciplinary teams and
creating an inclusive culture true to our values is how we create success now and for the future. Put simply, our values inspire
the way we work, how we engage with stakeholders and colleagues, the design of our workspaces, and form the basis of our
service to customers, ensuring our behaviour is that of a responsible business.
We are proud of our culture, and a mark of our success in building it from the inside out is the high score very high in our
employee engagement surveys. By attracting and nurturing curious people. We have built a company that values constructive
challenge and has a collaborative approach to problem solving.
Non-financial information statement
Beazley presents its non-financial information statement in compliance with sections 414CA and 414CB of the
Companies Act 2006.
Certain aspects of the non-financial information required pursuant to the Companies Act 2006 is provided in this report
by cross reference to the following locations:
Non-financial information
Business model
Principal risks
Key non-financial performance indicators Key performance indicators
Section
Our business model
Risk management and compliance
Responsible business metrics
Pages
4
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22
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Policy embedding, due diligence and outcomes
We have a range of policies in relation to environmental matters, employees, human rights, social matters and anti-corruption
and anti-bribery, that support our strategy and business model and ensure good outcomes for our stakeholders.
Our performance against our non-financial key performance indicators is an important way in which we measure the
effectiveness of our strategy and associated policies. The Board ensures that the relevant policies are in place, remain
appropriate and are operating effectively through setting a review cycle for the key policies. As part of this process, the key
policies are reviewed by the person within Beazley who is the subject matter expert and responsible for the policy. This may
include obtaining external advice, where appropriate. The Board also reviews and approves the key policies annually or
bi-annually, as well as reviewing non-financial information, KPIs and other monitoring data through its regular reporting.
Our key non-financial policies, a brief description of their purpose and any important outcomes from our due diligence
processes during 2022, are set out in the table below.
Further information
Responsible business
(page 21)
TCFD (page 29)
Section 172
statement (page 57)
Directors' report
(carbon emissions)
(page 144)
Responsible business
(page 21)
Stakeholder
engagement (our
people) (page 50)
Nomination Committee
(inclusion and
diversity) (page 104)
Relevant non-financial
KPIs and other metrics
Weighted average
carbon intensity of
corporate bond and
equity portfolios
Overall carbon
emissions
Greenhouse gas
emissions per full time
equivalent
Energy procured from
certified renewable
sources
Female representation
in senior leadership
roles
People of colour
representation in the
workforce
Employee engagement
score
Employee favourability
score
Reporting requirement
Environmental matters
Our long-term
commitment to
sustainability and
playing our part in
addressing the issue of
climate change and
reducing our impact on
the environment is a
key competitive
advantage.
Policy or standard, its purpose, and outcomes
Environmental policy
Details our approach to environmental matters aligned with ISO14001:2015 and is
reviewed every two years, with the next review by the Board in 2023.
Responsible business strategy
Our responsible business strategy ensures that we act responsibly across every
aspect of our business and includes our approach and objectives across the areas of
environment, employees, human rights, society and anti-bribery and corruption.
Responsible investment policy
This financial policy sets out how environmental, social and governance matters are
incorporated into investment analysis and decision-making processes.
The company’s
employees
Our people are a key
pillar within our
business model and our
values of being bold,
striving for better and
doing the right thing
inspire the way we work
and deliver value for our
stakeholders.
Inclusion and diversity policy and Board inclusion and diversity policy
These policies cover Beazley’s commitment to creating a truly inclusive environment
that operates zero tolerance to discrimination or harassment and fully supports and
celebrates differences. The Board’s inclusion and diversity policy was adopted in
2022, and specifically sets out how the Board can use its influence in meeting our
diversity objectives.
Conflicts of interest policy
This policy ensures we have effective systems in place to prevent conflicts of interest
wherever possible and that potential conflicts of interest are identified and addressed
across Beazley plc, its subsidiaries, and syndicates.
Beazley Code of Conduct
Our code of conduct sets out the minimum standards required of all employees in
their dealings in and on behalf of Beazley and is aligned with our values and ways of
working.
Employee handbooks
Our employee handbooks set out all of the policies and procedures for employees in
their local jurisdiction and includes items such as our equal opportunities policy,
policy for employees with disabilities, and parental leave amongst others. The
employee handbooks are owned by the Head of Culture and People and are kept up
to date with changing legislation globally through regular review both internally and
externally.
Health and safety policy
This policy details how health and safety matters are managed for our workforce,
contractors, service providers and others impacted by the Group’s activities, and
ensures we adhere to all health and safety regulations in the jurisdictions in which we
operate. The Board annually reviews health and safety information, associated risk
assessments and accident reporting. All employees receive a health and safety
induction on training and refresher training where required.
www.beazley.com
Beazley | Annual report 2022
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Responsible business continued
Reporting requirement
Human rights
Beazley is committed to
respecting human rights
and human rights are
integrated across our
responsible business
strategy.
Policy or standard, its purpose, and outcomes
Human Rights policy
In 2022, we introduced a new Human Rights policy. The policy explains how we fulfil
our commitment to respecting human rights and how we aim to uphold the standards
set by the United Nations and International Labour Organisation in respect of human
rights. It applies to all Beazley plc entities, employees, contractors, and third-party
suppliers. It covers how we respect human rights as an employer, investor, business
partner and insurer and incorporates other policies operated by the group which help
support our approach. The policy sets out our commitment to prevent adverse
impacts on human rights and remedy any adverse impact if it occurs. We also seek
to promote awareness and respect along our value and supply chains. The policy is
owned by our Responsible Business Steering Group.
Supplier code of conduct and procurement policies
Our supplier code of conduct and procurement policy are referenced in our Human
Rights policy. They help us ensure that our suppliers follow applicable standards, and
our supplier due diligence and RFP questionnaires require confirmation of compliance
with human rights legislation and the UK Modern Slavery Act 2015 (where
applicable), and that suppliers have other appropriate policies in place.
Modern slavery
Beazley group complies with the UK Modern Slavery Act 2015. In accordance with the
requirements of the Act, we release an annual Beazley Group Statement on Modern
Slavery, which outlines the actions we have taken in seeking to identify and address
the risks of modern slavery and human trafficking in our operations and supply chain.
Responsible business strategy
See above under environmental matters.
Relevant non-financial
KPIs and other metrics
The Board does not
monitor any non-
financial KPIs in relation
to human rights,
however it receives
reporting in relation to
these policies and
matters.
Further information
Responsible business
(page 21)
Stakeholder
engagement –
suppliers (page 54)
Modern Slavery Act
statement (our
website)
Social matters
Charity and community
and making a difference
in our local communities
is important to Beazley
and a component of our
responsible business
strategy.
Charity and community donation policy
Our employees are encouraged to raise money and donate time to volunteering
opportunities in our local communities. We also partner with a chosen charitable
organisation on a rotating basis, to allow us to have a deeper relationship with the
chosen partner and a greater impact on our communities. The policy sets out the
approach taken to charity and community donations, including matched funding, and
ensuring organisations receiving donations are registered charities and do not
operate discriminatory policies.
Number of hours
volunteered and
charitable donations (to
match responsible
business metrics).
Responsible business
(page 21)
Stakeholder
engagement
(communities) (page
54)
Responsible business strategy
See above under environmental matters
Anti-corruption and
anti-bribery matters
We operate a zero-
tolerance approach to
bribery, corruption and
fraud and protecting our
stakeholders is a key
pillar of our strategy.
Adhering to our values
helps protect Beazley,
our stakeholders and
our communities from
financial crime.
Financial crime policy
In 2022 our policies in relation to anti-corruption and anti-bribery were combined into
one policy: Beazley Financial Crime Policy. This policy sets out that we do not tolerate
criminal activity of any kind both within the business or by our business partners and
third-party suppliers, and we are committed to doing the right thing and acting within
the law. It covers six broad areas of anti-bribery and corruption, anti-money
laundering, sanctions, fraud, market abuse and anti-tax evasion facilitation.
The policy sets out how our values and culture, systems and controls, management
oversight and reporting, assurance monitoring and record keeping create an ethical
environment which helps ensure the effectiveness of our policy. Our controls require
due diligence to be completed in accordance with the group’s due diligence
guidelines, which are maintained by our Compliance function. Any exceptions must be
reported to and approved by Compliance.
The Board does not
monitor any non-
financial KPIs in relation
to these policies,
however the Board and
relevant committees
receive reporting and
updates from
Compliance, which
includes monitoring
data including
information in relation
to any breaches.
Risk management and
compliance (page 67)
Audit and Risk
Committee (page 91)
All employees have an important role to play in helping to detect, prevent and deter
financial crime and our mandatory annual compliance training program ensures that
our workforce is aware of our policies, how to implement them in their day-to-day
roles, and how to report any breaches or suspicions. All of the policies and training
modules are maintained by our Compliance function, are reviewed annually, and are
available in our policy depository on the intranet.
Sanctions policy
Our sanctions policy is incorporated into our Financial Crime policy and has been vital
during 2022 in keeping our business protected during a time of increased
geopolitical uncertainty and sanctions in connection with the Russia-Ukraine conflict.
To ensure that Beazley and any agents or third parties do not violate any sanctions
requirements in the jurisdictions in which we operate, we also utilise third party
screening and subject third parties to regular sanctions screening.
Whistleblowing Policy
We operate a separate Whistleblowing policy which sets out how any concerns
relating to wrongdoing, malpractice, or danger in connection with Beazley, should be
reported, as well as the safeguarding measures in place to protect any employees
who report concerns.
During 2022, following review, an independent whistleblowing hotline was introduced
as an additional method for the workforce and others to report concerns. The policy
was enhanced using external guidance and benchmarking. The whistleblowing policy
is included in the annual compliance training program. The Audit Committee has
overall responsibility for the effectiveness of the whistleblowing policy and procedures
and the Chair of the Audit Committee is the whistleblowing champion.
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Task Force on Climate-related
Financial Disclosures (TCFD) 2022
1. Governance
1.1 Board oversight on climate-related risks and opportunities
1.1.1 plc Board oversight
A summary of Beazley’s corporate governance structure, the general responsibilities of the plc Board and plc Board
Committees, on behalf of Beazley plc, are outlined on page 80 of this report.
A description of how the plc Board, and supporting Committees, have oversight of climate-related issues, is set out in the table
below. Board members are informed through a combination of Board papers, training and awareness. The corporate governance
team support the Chair of the relevant Board/Committee in putting in place a yearly agenda plan and agreeing the agenda for
each meeting.
Board/ Committee
Plc Board
Description of how climate-related matters are considered
The plc Board considers climate-related matters as part of the annual process to approve:
• the risk framework;
• the Group’s corporate business plan, including capital adequacy and the own risk and solvency assessment (ORSA);
• updates to the Group's Responsible Business Strategy;
• the Responsible Investment Policy;
• the Investment strategy;
• annual report and accounts, including the TCFD report
Beazley plc Audit and Risk
Committee
Throughout the year the plc Board monitors progress against the goals and targets set to address climate-related issues, through
update papers provided primarily from the following functions: responsible business, risk and underwriting.
The plc Board has delegated oversight of the risk management framework to the Audit and Risk Committee. Committee
responsibilities include overseeing the effectiveness of the risk management framework at Beazley, of which climate-related risk is
one element. In 2022, the Committee reviewed the draft TCFD report and accompanying improvement report. A paper providing an
update on the development of TCFD reporting was also reviewed. One audit on TCFD reporting was undertaken during the year, for
which the audit findings were sent to the Committee for review. On 9 December 2022 The Board approved the proposal to replace the
Audit and Risk Committee with a separate Audit Committee and Risk Committee from 1 January 2023.
Beazley plc Nomination
Committee
The Committee considers the current and anticipated future needs of the organisation to operate effectively. Given the growing
importance of climate change, this is a consideration in assessing candidates for future Board and senior executive positions. The
Committee also recommends, for approval by the plc Board, the annual board knowledge and training plan. Climate-related matters
can form part of this plan.
Beazley plc Remuneration
Committee
This Committee is responsible for ensuring climate-related risk is considered within executive remuneration. Evidence that this occurs
is documented within each Executive Director’s remuneration scorecard, where climate-related risk matters are considered as part of
Beazley’s wider approach to ESG. Remuneration is reviewed on an annual basis.
1.1.2 Training and awareness
The culture and people team are responsible for maintaining
both board skill matrices and the annual board training plan.
To facilitate increased knowledge on climate-related matters,
and thus enable The Board to make informed decisions,
Board members receive additional training and awareness
throughout the year. The scope of this training and awareness
is shaped by a combination of emerging trends and market
developments, stakeholder expectations, progress against
Beazley’s Responsible Business Strategy, and regulatory
demands. In 2022, The Board received an awareness raising
session on Beazley’s proposed expected future state
scenario. Sessions on the impact the transition to net zero
will have on key sectors were included as part of the 2022
Board away day.
1.1.3 Subsidiary Board oversight
Beazley has four key subsidiary entities: Beazley Furlonge Ltd
(BFL), Beazley Insurance Designated Activity Company
(BIDAC), Beazley Insurance Company, Inc. (BICI), and Beazley
America Insurance Company, Inc. (BAIC), each with their own
board and supporting committees. The responsibilities of
these Boards mirror those set out at a plc Board level, and
ensure the subsidiary company is operating in accordance
with both legal and regulatory requirements and relevant
Beazley Group policies and procedures. These entities are
more insurance-risk-focused than the plc Board, and therefore
the impact of climate-related risk on underwriting is
considered in greater detail at these Boards.
The subsidiary Boards consider climate-related matters as
part of the annual process to approve the risk framework and
ORSA. Further updates on climate-related matters are also
provided throughout the year, via the Responsible Business
report.
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Beazley | Annual report 2022
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TCFD 2022 continued
1.2 Summary of management’s role on climate-related matters
1.2.1 Key individuals at Beazley for climate-related issues
At management level, the responsibility for ensuring climate-related issues are managed/ assessed is covered by
a number of roles across the organisation. In summary these are as follows:
Responsible individual
Chief Executive Officer
(CEO)
Summary of engagement
The CEO provides a quarterly update to The Board and Executive Committee summarising discussions at the responsible business
steering group. This is contained within the CEO report. The CEO is an Executive Director, and a member of both the plc Board and
Executive Committee.
Chief Risk Officer (CRO)
The CRO has responsibility for risk management framework, of which climate-related risk is one part.
They provide updates on risk matters (including climate-related risk) to the plc Board, Executive Committee, and Audit and Risk
Committee. The CRO is a member of the Executive Committee. The role of senior management function (SMF) for climate-related risk
is split within Beazley between the Chief Underwriting Officer (CUO) and Chief Risk Officer (CRO).
Group Finance Director
(GFD)
The GFD provides updates on the financial performance of the company (including investments and capital) to The Board, Executive
Committee and Audit and Risk Committee. The GFD is an Executive Director, and a member of both the plc Board and Executive
Committee.
Chief Underwriting Officer
(CUO)
The CUO has responsibility for ensuring climate-related matters are embedded within the underwriting process. The Head of Financial
Climate Risk and Head of Exposure Management report into the CUO. The CUO has ownership of the outputs of the Climate Risk
Working Group and ESG in Underwriting project.
The CUO provides updates on the underwriting performance of the company (including matters arising from climate-related exposures,
progress against climate-related risk objectives, and Exposure Management) to the plc Board, Executive Committee, Audit and Risk
Committee. The CUO is a member of Executive Committee.
Chief Operating Officer
(COO)
Group Head of Strategy
The role of senior management function (SMF) for climate-related risk is split within Beazley between the CUO and CRO.
The COO has responsibility for business operations, which includes office energy consumption; managing data demands for the
business (including the use of data centres); and procurement.
The Group Head of Strategy has responsibility for overseeing the delivery of Beazley’s business strategy. The Head of Incubation and
Head of Responsible Business report into this role.
The Group Head of Strategy provides updates on at least an annual basis to the plc Board and Executive Committee in respect to
business strategy. The Group Head of Strategy is a member of the Executive Committee.
Chief Investments Officer
(CIO)
The CIO is responsible for all investment activity within the Beazley Group, including the development of investment strategy, delivery
of appropriate investment returns, and the effective management of investment risks. Managing climate risks to our investment
portfolio is a key aspect of this role.
Head of Capital
The Head of Capital oversees the assessment of climate-related capital requirements. They do this using modelled and non-modelled
information to help determine the impact of climate change on the business. The Head of Capital reports into the Executive
Committee and plc Board on a regular basis.
Head of Responsible
Business
The Head of Capital provides updates on a quarterly basis to the plc Board, Audit and Risk Committee and Executive Committee in
respect of capital. This includes the allocation of capital to address the potential impacts of climate-related events occurring and
Beazley being liable for insurance claims.
The Head of Responsible Business leads on the development and delivery of the objectives set within the Responsible Business
Strategy, including those in relation to climate-related responsibility. They also ensure all ESG and climate-related disclosures are
delivered in line with regulatory and voluntary requirements.
The Head of Responsible Business provides a quarterly update on responsible business matters to the Executive Committee and plc
Board. These updates include progress against the objectives and targets set out within the Responsible Business Strategy, climate-
related risk, climate-related responsibility, and an overview of items discussed at the responsible business steering group. An annual
update is also provided to the Audit and Risk Committee.
Head of Financial Climate
Risk
This role was created in 2021 to firstly deliver the CBES return and then to become part of the business as usual approach to
managing climate-related financial risk. Their responsibilities include overseeing the day-to-day delivery of embedding climate-related
risk into underwriting, coordinating climate risk activities and initiatives across business functions, and providing subject matter
expertise to strengthen Beazley's technical capabilities of managing climate risk.
This role reports to the CUO, and also reports to the Underwriting Committee and Responsible Business Steering Group on a quarterly
basis.
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Responsible individual
Head of Compliance and
compliance department
Summary of engagement
The Head of Compliance is responsible for overseeing the compliance function at Beazley. This includes ensuring that we conduct
business in accordance with all applicable laws and regulations we operate a group-wide compliance framework designed to measure
risk exposure, govern decision-making and monitor performance. Our framework consists of a number of systems and controls,
including:
• Senior management oversight;
• Risk assessments;
• Staff training and awareness;
• Compliance monitoring; and
• Compliance reporting.
Beazley is mandated to ensure compliance with the following climate-related requirements:
• Annual disclosure against the TCFD reporting framework; and
• Adherence with SS3/19.
The Head of Compliance reports into the CRO.
Head of Internal Audit and
internal audit department
The Head of Internal Audit is responsible for overseeing a robust audit function within Beazley. From the perspective of climate-related
matters, this role holds the responsibility for ensuring appropriate audits are undertaken on underwriting functions, investments and
TCFD disclosures.
Head of Exposure
Management
The Head of Exposure Management leads the team responsible for developing approaches to monitoring the aggregation of exposure
to natural catastrophes. The exposure management team reports to the CUO, who in turn provides regular updates to The Board on
these matters. The exposure management team is supported by the Head of Financial Climate risk.
1.2.2 Summary of management-level
reporting structure
To help the business address climate-related issues, the roles
outlined in 1.2.1 report into a number of different committees,
steering groups and working groups. A brief description of
these committees, steering groups and working groups is as
follows:
Executive Committee
The Executive Committee is responsible for: managing all
operational matters of the Group; reviewing the risk
management framework; and having oversight of the Group's
sub-committees and business functions. The Executive
Committee receives updates throughout the year on both
climate-related matters and ESG issues. Throughout 2022,
and prior to the plc Board for final sign off, the Executive
Committee has approved the updates to Beazley’s
Responsible Business Strategy, its ESG disclosures, and
TCFD report. It also reviewed applications to join global
sustainability initiatives for the insurance industry such as the
Net Zero Insurance Alliance (NZIA) and Sustainable Market
Initiatives (SMI) Terra Carta. In these instances, the matters
have been discussed at the Responsible Business Steering
Group (RBSG) prior to being submitted to the Executive
Committee.
Responsible business steering group
The RBSG is scheduled to meet 11 times during the year. The
RBSG oversees the delivery of responsible business across
Beazley, monitoring progress against the objectives set out in
the responsible business strategy. It provides a forum for
strategic matters relating to ESG and climate-related issues to
be discussed, and knowledge to be shared. In 2022, agenda
items have included: progress updates from the climate risk
working group and ESG in underwriting project; reviewing the
application to join the NZIA and SMI Terra Carta; reviewing
progress against key climate-related KPIs e.g. GHG emissions;
and the finalisation of the annual responsible business
strategy refresh. The RBSG is chaired by the CEO, and
attended by the Chief Risk Officer, Chief Underwriting Officer,
Chief Operating Officer, Group Head of Strategy, Head of
Responsible Business, Head of Financial Climate Risk, and
investment manager responsible for ESG matters. On a
quarterly basis, Non-Executive Directors from across the
Beazley plc Board and key regulated subsidiaries are also in
attendance. This provides a further link between management
and the plc Board on climate-related matters.
The RBSG's role is to provide recommendations to the
decision-making Committees within Beazley i.e. Executive
Committee, Underwriting Committee, Investment Committee.
There is often dialogue between the RBSG and these
Committees/Boards, which demonstrates that responsible
business matters are becoming embedded across the
organisation.
Investment Committee
Chaired by the Group Finance Director, this Committee is
responsible for overseeing the investment strategy, and
ensuring there is a robust framework and appropriate
resources to deliver against this strategy. It is also
responsible for ensuring investment risk aligns with overall
business risk appetite.
To further promote sustainability and climate-related matters,
Beazley has a responsible investment policy. This policy sets
out how we have incorporated ESG issues into our investment
analysis and decision-making process, and our approach to
the management of climate change risk within the investment
portfolio. The Investment Committee, in conjunction with the
RBSG, also oversees progress against the investment-related
objectives within the responsible business strategy. Beazley
has undertaken to invest up to $100m of its assets in
investments with a measurable social and/or environmental
impact and the Committee is responsible for reviewing and
approving these impact investments.
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Beazley | Annual report 2022
31
Climate risk working group (CRWG)
This group was set up following the delivery of the CBES
return in 2021, to further embed climate-related risk into the
underwriting process. The CRWG's work forms part of the
climate risk strategy, as approved by the plc Board. In 2022 it
has been chaired by the CUO and its membership includes the
Head of Exposure Management, the Head of Financial Climate
Risk, the Head of Responsible Business, the Lead Pricing
Actuary - Property Risks, and underwriting representatives from
each of the four divisions. The CRWG meets monthly and
oversees and tracks climate risk projects and activities in
relation to underwriting risk. The CRWG reports into the
Underwriting Committee and RBSG on a quarterly basis.
ESG in underwriting project group
This group was established to oversee the further embedding
of ESG matters within underwriting. Its work includes:
• Enhancing data collection within the underwriting process to
facilitate the collection of carbon emissions and transition-
related information;
• improving data gathering within the underwriting process on
ESG matters; and
• enhancing colleagues’ knowledge on both ESG and climate-
related issues through the delivery of training modules.
This project group reports to the Chief Underwriting Officer,
with regular progress updates also provided to the
Underwriting Committee and RBSG. its membership includes
the Head of Financial Climate Risk, the Head of Responsible
Business, and underwriting representatives from each of the
four divisions.
Risk and regulatory Committee
The plc Board has delegated executive oversight of the risk
management department to the Executive Committee, which
in turn has delegated immediate oversight to the Risk and
Regulatory Committee, which meets monthly. The roles,
responsibilities and oversight of this Committee are further
discussed in the risk section.
TCFD 2022 continued
Underwriting Committee
The Underwriting Committee is responsible for monitoring
progress and ensuring the delivery of underwriting, claims
and reinsurance business plans. Chaired by the CUO, the
Underwriting Committee includes representation from the
underwriting teams, the Group Head of Claims, the Group
Actuary, Chief Risk Officer, Group Head of Strategy, and Digital
Head of Underwriting. Within its remit is a responsibility to
ensure ESG, with prominence given to climate risk and
opportunities, is implemented as efficiently as possible within
underwriting. The Underwriting Committee has ultimate
oversight and decision- making power on climate-related risk
matters related to underwriting. As a minimum, a quarterly
update to the Underwriting Committee is made by the Head of
Responsible Business, who summarises key discussions at
the RBSG, updates are also provided by the Head of Financial
Climate Risk on climate-related risk matters. The Underwriting
Committee reports into the Executive Committee on a monthly
basis, with the outputs summarised within the Chief
Underwriting Officer’s report.
Underwriting sub working groups
Feeding into the Underwriting Committee are the following
working groups:
Physical damage exposure management group (PDEMG)
This group is responsible for monitoring: the natural
catastrophe risk appetite set by the plc Board; the risk
appetites assigned to Beazley Group companies, including
Beazley plc, BIDAC, BFL and BICI; and the physical damage
RDS plan agreed by Lloyd’s. The PDEMG reviews, on a monthly
basis, the modelled loss output by team and the overall Group
total showing utilisation of the plan, and provides challenge
where there is a variance to plan. Its remit includes
responsibility for the Group view of physical damage
catastrophe risk written within the underwriting teams, and
climate change analysis. The PDEMG reports to the
Underwriting Committee on a monthly basis.
Casualty and Cyber Management Group (CCMG)
The CCMG has responsibility for the Group view of Cyber and
Casualty risk written within the underwriting teams. This
includes how climate change can impact the underwriting. The
CCMG provides governance for climate litigation scenario
development and monitoring. The CCMG reports to the
Underwriting Committee on a monthly basis.
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2. Strategy
2.1 Climate-related risks and opportunities
2.1.1 Definitions of time horizons
Beazley considers risk across three broad time horizons for climate-related risks. These time horizons are reflective of Beazley’s
approach to business planning, the type of products Beazley provides, and the investment decisions the company makes.
These time horizons are outlined in the table below, along with a summary of climate-related issues which could potentially
have a material financial impact on the company within each timeframe. The summary of climate-related issues is based on a
general review of external research and information. A more detailed review of how climate-related risks specifically apply to
Beazley over the three time horizons will be developed in 2023.
Time horizon
Short term
(1 year)
Description
Beazley’s performance is evaluated on the results of each financial year and the business plan is developed on this basis. Most of
Beazley’s underwriting business is in short-tail classes. The impact of physical climate-related events occurring through the year are
reflected in Beazley’s approach to underwriting and pricing. Specific climate-related issues arising within this time horizon could
include:
• liability-related claims relating to greenwashing;
• reputational incidents arising from the underwriting of, or investment in, companies which have a significant impact on climate
change;
• impact of green technology;
• failure of Beazley to act as a responsible business on these matters; and
Medium term
(1 to 5 years)
Some of Beazley’s underwriting business is in medium-tail classes, whilst investment in larger projects and platform developments
may run over multiple years. Some emerging risks may crystallise over several years.
Through the medium term, the issues identified within the short term are likely to persist. The frequency and severity with which
acute impacts of natural catastrophes are felt is expected to begin to increase. Liability related claims associated with a failure to
prepare or adapt to climate change are expected to increase in severity and likelihood. Transitional issues are also expected to arise
over the medium term, whether from policy intervention, market forces, or technology advances. Some of Beazley's strategic
objectives are typically set over the medium term to deliver the strategy.
Long term
(5+ years)
Beazley’s strategy and strategic objectives are generally set over multiple years. Mega trends and slow-moving emerging risks may
crystallise over many years. From a climate risk perspective there will be an increased trend in the acute physical climate-related
risks, whilst longer term and more chronic impacts may also begin to be realised.
From a material financial impact perspective, the issues identified within the short term are likely to persist. The frequency and
severity with which acute impacts of natural catastrophes are felt is expected to begin to increase. The chronic impacts of climate
change are also expected to begin to feature. Liability claims associated with a failure to prepare or adapt to climate change are
expected to increase in severity and likelihood.
2.1.2 Process to identify climate-related risks with a material financial impact
It is acknowledged that climate-related issues are likely to manifest more over the medium and long term. As set out in the
table below, Beazley uses a variety of qualitative and quantitative tools to help manage and prioritise our approach to climate-
related risks and opportunities. This ensures we can prioritise those with the most material financial impact.
Processes used to identify
risks and opportunities
Materiality assessment
process (hereafter referred
to as the materiality
assessment)
Scenario analysis
Focus group deep dives
Description
Using 2020 written premium and modelled losses, in 2021 Beazley undertook a materiality assessment by country and physical risk
peril. The outputs of the materiality assessment determined that the US is the most material geographical location, and the material
perils are US tropical cyclone, US inland flood, US wildfire, US severe convective storm, US winter storm, European windstorm, and
Japan tropical cyclone.
Beazley participated in the CBES Stress Test in 2021, the results of which have been used to inform Beazley’s identification of
climate-related risks. The outputs of this exercise are discussed later in this disclosure. Beyond the physical peril analysis, climate
litigation risk was identified as a material risk to Beazley, given our exposure on specialty risks. Climate litigation risk will continue to
be reviewed by a cross-functional team at Beazley. We are engaging with a third-party expert that could assist us with reviewing and
challenging our scenario development and analysis, and wider thinking on climate litigation risk
In 2022, Beazley commenced a strategic project to further embed ESG considerations within the underwriting process. To facilitate
this, the project engaged with each underwriting focus group, through a series of deep dive workshops, to help identify both the risks
and opportunities associated with ESG issues. A number of these opportunities are linked to climate-related issues. The output of
this work has informed the project objectives for 2023.
Wider peer and investor
engagement
As part of our wider approach to responsible business, Beazley is involved in a number of market initiatives. This engagement
enables us to identify emerging workforces and disclosure requirements. This work is also supported by feedback from our investors
on ESG matters. The outputs of this correspondence can be found within our responsible business strategy and ESG disclosures.
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Beazley | Annual report 2022
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TCFD 2022 continued
2.1.3 Process to identify climate-related opportunities with a material financial impact
Beazley has a number of processes to identifying climate-related opportunities with a material financial impact. These
processes complement one other, and which ones we use depends on their alignment with existing products and services, the
knowledge required to ascertain the size of the opportunity, and the resources required to deliver the opportunity. In summary,
therefore, this means that climate-related opportunities can be identified through the mechanisms described in the following
table:
Method of identification
Description
Identified as a result of
determining a risk
Incubation process
The methods used to determine a risk also enable identification of an opportunity. The development of an opportunity, where
underwriting-related, will be delivered using one of the three processes described below.
The Incubation Underwriting team develops new products that sit outside of existing underwriting team business plan and appetite.
New product opportunities are sourced from brokers, InsurTechs, Beazley underwriting teams and internally from within the
incubation team itself. When reviewing a new product opportunity, and thus its potential materiality, the Incubation team will
consider: the addressable market; buyer urgency; market saturation; product economics; and customer interests.
Should the opportunity meet the threshold to pursue further, the incubation team will engage with experts within Beazley before
presenting the opportunity to the head of strategy and the underwriting strategy manager. Following feedback from these internal
stakeholders, a decision paper is prepared. This is then presented by the Incubation team to the CUO and/or the underwriting
committee.
Opportunities are launched in pilot periods, typically to maximum aggregate limits, to test the opportunity. If suitably ‘proven’ in the
underwriting pilot, and following approval, the opportunity will be handed over to an existing Beazley team, where suitable.
Business planning process Underwriting focus group leads are responsible for developing the annual business plan, in which they may identify an area of
Currently the Incubation team is investigating solutions for the carbon transition. Their work is monitored by the underwriting
committee.
business in which to either enter or expand their portfolio. They will document their strategy within their business plan. This could
include the type of products/services they will insure, and the size of the market and the opportunity for Beazley. This work is
supported by input from specialists. One such example of this approach is the work being undertaken to develop a business plan for
renewable energy, with a view to the energy team decarbonising its energy portfolio over the long term. This will align with the metric
currently disclosed for the premium generated from low and zero carbon technologies.
Extension to an existing
product or service
Due to the specialist nature of Beazley’s products and services, there may be several existing products and services which can be
used to cover similar risks in new settings. Where this occurs, the relevant underwriting team use their knowledge and expertise to
ensure any adjustments to the policy wording are implemented. This work is supported by the product development team.
2.1.4 Summary of risks and opportunities
identified
Physical climate-related risks and opportunities
Based on the materiality assessment, the US was determined
the most material geographical location in which the Group
operates and underwrites. The material perils are US tropical
cyclone, US inland flood, US wildfire, US severe convective
storm, and US winter storm. Perils not related to the US are
European windstorm, and Japan tropical cyclone, which are
material to our Property and Treaty underwriting business.
The opportunities related to these areas for Beazley lie, in the
first instance, in further developing our understanding of these
perils and the impact they may have on the business. By
enhancing our understanding of the risk and being able to
improve the quantification of this this risk then we will be able
to better mitigate the risk. Such mitigation measures may
include; better risk selection and pricing; diversification of our
underwriting portfolio to avoid any material risk concentration
thus optimizing our portfolio to increase underwriting
performance; better transfer of the risk through reinsurance;
supporting our clients to mitigate climate risk and improve
their risk management.
Liability-related climate risks and opportunities
Climate liability risk could be a material risk given Beazley’s
exposure on speciality risks. We continue evolving our
understanding of climate liability risk, and understanding how
our policy wording could respond to climate liability scenarios,
and engaging with clients to understand the risks better. This
risk could also bring products and services opportunities that
we will keep exploring.
Transition-related climate risks and opportunities
For Beazley, it is important to support a just transition to a net
zero world. Whilst there are risks associated with the
transition, opportunities are also available in this area for
Beazley. These opportunities include Beazley developing its
own transition plan, incubating products which provide
coverage for clean/green technology, and supporting our
clients as they begin their transition. From an investment
perspective, seeking to align our investment portfolio with a
1.5 degree Celsius pathway is important, and work has been
undertaken to help establish the current alignment of our
investment portfolio.
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2.2 Impact of climate-related risks and
opportunities on business strategy and
financial planning
Our insureds are the most important part of our value chain, in
respect of developing long-term value for Beazley. We do not
see this value just in being their insurer, but in the
partnerships we can create to support our clients as they
themselves address climate-related risk. Both Beazley’s
climate risk strategy, and wider responsible business strategy.
help set out how we manage our material climate-related risks
and opportunities. A summary of our approach to climate-
related matters across our underwriting, investments and
operations and how they are helping to inform our strategy is
provided in the following section.
2.2.1 Developing Beazley's plan for the
transition to net zero
The transition to net zero is an important topic for Beazley,
and cuts across our approach to our operations, investments
and underwriting. The development of the first iteration of our
transition to net zero plan will be completed in 2023, and will
form a key part of our strategic approach to ESG and climate-
related matters going forward. This plan can be broken down
into three key areas:
Underwriting
In 2022, Beazley became a member of the NZIA, which is an
industry initiative led by the United Nations Environment
Program Finance Initiative (UN EPFI) to develop an appropriate
methodology for measuring the apportioned GHG emissions
arising from the underwriting portfolio. The methodology - the
NZIA target setting protocol 1.0 was published in January
2023, and will enable all NZIA members to develop their first
round of targets relating to the decarbonisation of the
underwriting portfolio by 2050. As a condition of continued
membership of the NZIA, Beazley is mandated to publish its
first target by the end of July 2023, for which work has already
commenced.
Operations & Investments
Beazley has also committed to adopting a Science Based
Targets initiative (SBTi) target. The SBTi methodology is a well
established framework by which Beazley can set a credible
pathway for the decarbonisation of our operations and
investments to near to net zero emissions by 2050. In
accordance with the SBTi requirements, the plan will set a
number of clear qualitative and quantitative targets, at a
maximum of five year intervals, for both the operations and
investments.
In brief, for the operations element, this will include the
continued decarbonisation of the material GHG emissions
generated by Beazley across our Scopes 1, 2 and 3. This plan
will build on the GHG reductions the Group has already
achieved, as reported within the Metrics section. For our
investments, our initial transition plan will cover our approach
for the decarbonisation of the relevant asset classes set out
within the latest version of the SBTi finance sector guidance.
This work will build on the metrics reported in the Metrics
section of this report. We will of course, look to expand the
reporting of the emissions arising from our investments as
and when new guidance is published for asset classes not
currently covered within existing methodologies, i.e. sovereign
bonds.
For the elements of our transition plan which can be verified
by the SBTi, Beazley has set the objective to achieve this
verification by the end of 2023.
2.2.2 Climate risk strategy for underwriting
Our climate risk strategy forms the basis for the planning the
actions the business will take, in the short term, to further
embed climate change into our, business as usual,
approaches. The strategy covers four key areas:
• embedding climate risk into underwriting;
• underwriting product opportunities;
• risk mitigation; and
• financial stewardship
Approach to embedding climate risk into underwriting
The CBES stress test conducted in 2021 has moved us forward in the work required to fully embed climate-related matters into
underwriting and has triggered a series of key projects and activities, all of which are overseen by the CRWG. A summary of
progress is as follows:
Initiative
Summary of progress and plan for 2023
1. Strengthen catastrophe
modelling capabilities and
develop forward looking
view of risk
2. Develop climate
adjusted pricing for key
perils
3. Develop underwriting
climate change metrics
In 2022, we validated and implemented a US hurricane climate-change-conditioned model for use as our view of risk for 2023. This
takes account of the fact that hurricane risk is elevated due to climate change and allows us to develop a forward-looking view of
risk. This view of risk for US hurricane is implemented in portfolio management, pricing, and capital setting. We also validated the US
wildfire model during 2022 and the model is planned to be implemented in 2023.
In 2023, we also plan to further review US hurricane climate change impacts including storm surge and tropical cyclone induced
flooding to update our view of risk. For US wildfire and inland flood, we will continue evaluating the models and develop a forward-
looking view of risk. We will also continue strengthening our modelling approach for other key perils.
In 2022, we introduced key peril model calibration pricing. We introduced climate loss trends in pricing for US wildfire, US inland
flood at the end 2022, and US hurricane in January 2023. In 2023, we plan to review and incorporate other key peril climate loss
trends (US hail, US tornado, and US winter storm). We plan to investigate and evaluate whether catastrophe model outputs for US
wildfire and inland flood could be used in pricing. If they are proven to be better than the current climate risk models used in pricing,
we will incorporate the catastrophe model outputs for US wildfire and inland flood into the pricing tool and provide underwriters with
training to help them understand any changes in pricing methodology and outputs.
We developed a climate change metric on US hurricane risk during 2022 to be implemented in January 2023 into our key property
pricing tool. This metric has been developed by using a third-party tool that provides climate change projections for a list of physical
risk perils. The US hurricane climate change metric was validated and is to be implemented first, given that it is the most material
peril. This metric will help underwriters understand future climate change impact in the assessment of their portfolio, which will
support underwriting decision-making. At this stage it will not impact the modelled premium as this is already captured in the
hurricane adjusted climate loss trends. This metric could also be shared with clients to support client engagement. During 2023, we
plan to embed this metric into the underwriting process and provide training to underwriting teams to understand uses of this metric
and how it can be used in underwriting. Additionally during 2023, we also plan to review and evaluate the third-party climate-change-
conditioned data and scores, and develop and incorporate into the pricing tool climate change metrics for other key perils.
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TCFD 2022 continued
Initiative
Summary of progress and plan for 2023
4. Portfolio management:
develop and implement
catastrophe optimisation
framework and tools
In 2022, we developed a catastrophe optimisation framework and tool. This framework and tool enables underwriters to optimise the
US property risks portfolio using risk appetite metrics and performance metrics. This allows underwriters to manage their portfolios
dynamically and make decisions on where we would like to expand or retract our exposure to optimise the overall portfolio.
In 2023, we will implement this framework and tool and proactively manage the US property risks portfolio using the optimisation
tool. We will consider how climate risk can be further incorporated into the framework and tool.
5. Climate litigation:
scenario development
In 2022, we have developed an internal realistic disaster scenario on greenwashing to assess and quantify the potential impact of
greenwashing and consider actions needed to mitigate this risk.
In 2023, we plan to work with a third party partner that could assist us with reviewing and challenging our scenario development and
analysis, underwriting questions development, wording impact assessment, and our wider thinking on climate litigation risk.
6. Wording analysis
7. Development of climate
change risk assessment
framework
An analysis of wording was carried out in 2022 to investigate if there were any potential ambiguities of peril coverage in underwriting
policies.
To enhance our approach to defining material issues, Beazley is working to further incorporate scientific research into our materiality
assessment. This process is going to be part of the climate change risk assessment framework which will be developed in 2023.
This framework will enable Beazley to further communicate not just the material issues, but also the actions being undertaken to
manage the risks (e.g. model validation, model adjustment, actions to pricing and underwriting). This work, will be supported by the
establishment of a natural hazards research team, which will further strengthen our model evaluation and research capabilities.
Underwriting product opportunities
It is important to consider climate risk impact on end-to-end
insurance operations that will drive opportunities for new and
changes to existing products and propositions. The processes
we have in place, as discussed in section 2.1.3, will help
facilitate the development of product opportunities.
In 2022, we undertook a review on how Beazley's current and
planned product suite applies for industries and sub-industries
that are key to carbon transition (i.e. green/clean tech). As
part of the review, we gathered information from our
underwriting teams on both their appetite and demand for
coverage for these industries. There is clearly a demand for
products and services for renewable energies (wind, solar,
hydro-electric, wave & tidal, geo-thermal, and hydrogen), as
well as being demand for green technology (carbon capture &
storage, battery technology, recycling) and green services,
(green consulting, technical services, green finance).
The exercise also enabled Beazley to identify the challenges
to underwriting green/clean tech, which include:
• a lack of available historical data, such as claims
performance, creating significant challenges for underwriting
and pricing new products; and
• having difficultly in predicting which green technologies will
prove most successful, or how quickly they will be adopted.
Risk mitigation services opportunities
We feel it is important to be able to support our clients in
better understanding, mitigating and managing their climate
risks. This work is to commence in 2023.
Financial stewardship
In 2023, work will commence to investigate further how we
can best support our clients during their transition to net zero.
We wish to support as many of our clients as we can during
their transition to net zero. We believe that this can be
delivered through a combination of: education on the need for
a smooth and just transition; knowledge sharing from the
learnings we gain during our own transition journey; and the
provision of products and services in this space.
For Beazley, a key part of the transition to net zero is to
ensure it occurs in a just manner, and the short term social
needs of energy security are balanced against the longer term
needs to reach net zero by 2050. At the beginning of 2022,
we adopted a policy of not underwriting any new thermal coal,
oil tar sands, or arctic energy exploration projects, or
businesses which generated more than 5% revenues from
these areas. However, in November, due to the ongoing war in
Ukraine, it was decided that the exclusion for thermal coal,
would be revised. This revision applies only to our Marine and
Political Risk underwriting classes, where Beazley is prepared,
until June 2024, to insure new clients who are transporting
thermal coal from existing coal mines. This approach was
adopted in order to support the need for energy security, and
the fact that a number of global countries are having to
increase their use of thermal coal plants to provide electricity.
Working with brokers
Brokers are a key link between Beazley and our clients and
therefore our relationship with our brokers will be central to
our response on climate-related matters. We have recently
begun working with external analytics teams to enhance our
knowledge of the latest research of climate change impacts to
physical risk perils, catastrophe models and tools, and
climate scenario analysis. This will enhance our ability to
model and manage climate risks, and allow us to keep
abreast of latest market developments on catastrophe and
climate risk analytics.
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2.2.3 Investments
In 2021 Beazley published, for the first time, its Responsible
Investment Policy, which sets out how ESG factors and
climate risk are considered as part of the investment decision-
making process. In 2022, we took a number of steps to
further enhance this approach, which include:
• Moving the calculation of climate risk metrics for our
corporate bond and listed equity exposures to a specialist
platform to improve consistency and quality of data. This
has enabled Beazley to determine the apportioned carbon
emissions and weighted average carbon intensity (WACI),
which we now report as part of our climate-related metrics;
• Using the same platform to access information on the Paris
alignment of our assets and physical and transition risks,
this knowledge will help us to monitor and manage our
climate risk on an ongoing basis; and
• Commencing work to develop and incorporate climate data
and emission factors for sovereign exposures. It is
anticipated these numbers will be incorporated into our
annual reporting at the end of 2023.
Alongside this work, Beazley also made its first impact
investment. This was based on a Beazley commitment in
2021 to invest, over time, up to $100m of the investment
portfolio in impact investments (these are defined as
investments that have a measurable positive social and
environmental impact as well as a financial return). In 2022,
following detailed analysis, we made our first such
investment, in a fund focused on the creation of renewable
energy capacity. This fund is managed by a member of the
Natural Capital Investment Alliance (NCIA) which was
established through the Sustainable Markets Initiative (SMI)
to increase the scale of natural capital investment. In 2023,
we will maintain our focus and momentum in searching for
impact investments. Progress will be overseen by the
Investment Committee.
For 2023, in addition to supporting the development of
Beazley's plan for the transition to net zero, will also focus on
developing our analysis on the impact of different climate
scenarios on the EBITDA of the companies we invest in, over
various time horizons out to 2050, to enable us to reduce
exposure to climate risk across our investments.
For our internally managed investment-grade fixed income
portfolios, we will look to reduce our exposure by disinvesting
from companies not making sufficient progress to
decarbonise. We feel this approach is appropriate given the
size and nature of investments are not sufficient scale to
allow us to effectively engage directly with companies we
invest in. Equity investment is a small proportion of our
portfolio and the management of these assets is outsourced
to external investment managers; we do require that they
exercise our voting rights and engage with our investee
companies on climate issues. We continually monitor
available investments to ensure we are invested in the most
sustainable comparable option and/or engage with the
manager to apply pressure to make changes to the mandate
where possible.
2.2.4 Operations
Greenhouse Gas reduction strategy
Beazley operates from a number of offices across the globe.
Whilst these locations could be impacted by physical climate-
related events, in the short term the focus of business
strategy is on how Beazley can best work to reduce our
contribution to climate change, particularly in respect to the
greenhouse gases (GHGs) we generate. As laid out within our
Responsible Business Strategy, a 40% reduction in GHG
emissions was targeted for 2022, and a 50% reduction
sought in 2023; both targets are set against a 2019 baseline.
Progress against these figures is reported in the metrics
section. Beazley’s GHG emissions predominantly arise from
our Scopes 2 and 3 emissions, as set out in within our GHG
emissions disclosures. We aim to deliver our targets through
the following actions:
Office space selection
We are selecting our office spaces based on our changing
needs as a business. The move to an activity-based working
approach means that our office space is smaller than in
previous years. Furthermore, by selecting offices which
achieve a BREEAM or LEED certificate, we can guarantee that
the energy performance of the fabric and technology within the
building is energy efficiency.
Carbon travel budget
Business travel is a significant part of our scope 3 emissions.
To help address the impact of business travel, a carbon
budget was introduced at the beginning of 2022. As with a
financial budget, each division has a total amount of carbon
they can ‘spend’ on GHG emissions arising from business
travel. Updates on performance were provided throughout the
year, so teams could track budget spends.
For 2023, we have developed this further to improve the
alignment between the carbon travel budget and the financial
budget for business travel. We will monitor both the financial
and carbon budgets in 2023 in order to identify where
improvements to this revised approach can be made.
Supply chain
Currently we do not disclose emissions arising from our supply
chain, beyond those produced by two of the data centres we
lease. However, Beazley has committed to embedding ESG
matters into our procurement, including a focus on GHG
emissions arising from our suppliers' operations. We will
begin to develop this procurement strategy in 2023. Progress
against targets, and the emissions arising from our supply
chain, will be reported in subsequent years in the metrics
section.
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TCFD 2022 continued
3. Scenario analysis
3.1 Climate Biennial Exploratory Scenario
In 2021, Beazley took part in the PRA’s Climate Biennial Exploratory Scenario (CBES) stress test. The exercise covered
modelling of physical, transition and liability (litigation) risk over a 30-year time horizon within three different scenarios – Early
Action (EA), Late Action (LA), and No Additional Action (NAA). The scenarios were based on those established by the Network for
Greening the Financial System (NGFS), with their key characteristics summarised in the table below:
Physical Risks
Mean global warming rise by end of scenario
(since pre-industrial times)
Mean sea level rise in UK (m)
Transition risks
Transition begins
Nature of transition
Impact on output
Early Action
Limited
1.8
Late Action
Limited
1.8
No Additional Action
High
3.3
0.16
Medium
2021
Early and orderly
0.16
High
2031
Late and disorderly
Temporarily lower
growth
Sudden contraction
(recession)
0.39
Limited
n/a
Only policies that were
in place before 2021
Permanently lower
growth and higher
uncertainty.
The exercise focussed on both assets and liabilities, taking
a view, based on end-of-year 2020 balance sheets, of what
might happen depending on future climate-related policies,
technological advancements and consumer behaviour to limit
greenhouse gas emissions. A quantitative questionnaire also
accompanied the qualitative exercise, asking for the
disclosure of potential management actions to improve the
management and mitigation of climate-related risks.
It was determined that the overall balance sheet impact is
material over the long term, particularly in the NAA scenario
which sees greater physical and transitional risk. However, in
no scenario is Beazley rendered unviable as an organisation.
On physical risk, the biggest impact on loss occurs in the NAA
scenario, specifically the US perils (i.e. US windstorm, US
inland flood, US wildfire, US severe convective storm, and US
winter storm). There is however, a range of reliability of
climate data and this leads to significant uncertainty as to the
impacts of climate change on individual perils and regions. As
a result, the modelling of physical risk triggered a series of
further actions on improving catastrophe modelling by
developing climate change conditioned view of risk,
incorporating climate risk trends for most material perils.
On transition risk, the largest asset portfolio loss occurs in
the NAA scenario and the smallest in the EA scenario. The
‘balance sheet shock’ approach has its limitation, however we
continue to decarbonise our investment portfolio.
The climate litigation risk scenarios have been useful to
stimulate discussion, raise awareness, and consider timing of
impact on industry sectors. The impact on the underwriting
portfolio was estimated to be the highest for the
greenwashing scenario. This led to development of an internal
deterministic greenwashing scenario.
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Scenario analysis plan for 2023
On physical risk, we have already assessed the impacts on
key perils in our CBES exercise. Recognising the need to
continue carrying out such scenario analysis, however, we
plan to keep developing short-term, medium-term, and long-
term scenarios. We will link these to our business planning
and decision making. We plan to link the future likely state
scenarios to individual perils when developing physical risk
scenarios. This will enable Beazley to understand what the
physical risk impacts would be under future likely state
scenario, and the stressed version of the scenario.
On litigation risk, we are investigating the merit of working with
a third-party partner to review and challenge the way we
undertook the CBES litigation scenario, and also our internal
climate litigation scenario. This would potentially not only
allow us to better understand and assess our climate
litigation risk, but also refine/update the scenario and design
more scenario(s) if necessary. The internal climate litigation
scenario will be monitored on a quarterly basis. We will review
the quarterly movement in scenario results linked to climate
ligation claims and the risk landscape, enabling us to review
the scenario and its use for decision making.
3.3 Climate-related issues and the financial
planning process
The outputs from scenario analysis and risk modelling help to
determine Beazley's capital allocation for risks. The risk
modelling continues to be updated to reflect the latest
consensus of scientific opinion. For example, the US hurricane
model includes assumptions that are based on climate-
conditioned output. The process also informs the amount of
reinsurance which needs to be purchased to cover claims
arising from climate-related issues. This work is conducted on
an annual basis, as part of the business planning process,
and ensures Beazley has sufficient capital to cover ongoing
claims.
3.2 Post CBES actions
CBES has significantly moved us forward in embedding
climate risk into our business and has triggered a number of
actions, as discussed previously in section 3.1. From a
scenario analysis perspective, our focus in 2022 was to
develop a Beazley most likely future state climate scenario, a
deterministic greenwashing scenario, and a plan for further
scenario development in 2023. Progress on these matters is
summarised in the section below.
Likely future state scenario
In 2022, we developed a 'likely future state' scenario which
ensures that all areas of the business are aligned in terms of
views on likely future scenarios and what ‘degree world’ we
are operating in and planning for. This scenario has been
developed to support internal business activities (e.g. view of
risk selection, underwriting and pricing decisions, capital
investment choices). The scenario is based on NGFS
scenarios and the Intergovernmental Panel on Climate Change
(IPCC) scenarios. The proposed ‘Beazley most likely’ scenario
parameters are:
• a 3 degree celcius warmer world at 2050;
• a 0.6m sea level rise at 2050; and
• a very late and more aggressive policy transition. Assumes
annual emissions do not decrease to 2030.
This corresponds to the NGFS ‘Delayed transition’ scenario
and the IPCC RCP4.5 scenario. We also proposed stressed
versions of the scenario, for both physical risk and transition
and liability risk. The likely future state scenario will be
reviewed on a regularly basis to ensure the continued
appropriateness of the parameters.
The 'likely future state' scenario parameters have already
been used to decide which view of risk we should take in our
US hurricane climate-change-conditioned model, and also
when developing climate change metrics for US hurricane for
underwriters.
Deterministic climate litigation scenario
Post CBES, we found that one of the climate litigation
scenarios merited further investigation internally, and this has
resulted in the development of a deterministic greenwashing
scenario to assess and quantify the potential impact of
greenwashing and consider actions needed to mitigate this
risk.
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Deterministic scenarios
Beazley runs RDSs in order to determine the impact of
different risks. The natural catastrophe RDS and climate
litigation RDS are run on a regular basis. This modelling
process is overseen by the exposure management team, who
have developed a complex and emerging underwriting risks
protocol. This sets out the activity in place to review
potential,complex, and / or emerging risks relating to
underwriting. There are approximately 60 Deterministic
Realistic Disaster Scenarios (D-RDS) used to monitor the
most significant.
These scenarios are either modelled, using data drawn from
third-party modelling partners, or non-modelled, where experts
across Beazley collaborate to determine the impact. An
example of our approach to non-modelled risks is wildfires, an
increasingly common event due to the impacts of climate
change. The modelling approach, meanwhile takes into
account the impact of sector, geography and business
segment, in order to determine Beazley’s exposure. This helps
to determine the relative significance of the climate-related
risk in relation to other risks. In turn this informs decision-
making across the business.
Climate-related strategic risks
The Board identifies and analyses emerging and strategic risk
on an annual basis for discussion at The Board level. In the
context of climate-related matters, strategic risks relate to
Beazley’s approach overall to climate risk and behaving as a
responsible business by seeking to minimise our
environmental impact. This includes our approach to the
transition to net zero, key disclosure requirements, and
embedding climate risk and responsibility actions into
business as usual approaches.
Strategic risks are also reviewed, twice a year, by the risk
team as part of Beazley’s risk assessment process. These
reviews are a collaborative effort with all the business
functions, and are an opportunity to identify emerging risk,
review existing risks, and provide appropriate mitigation
measures to reduce/manage the risk. This assessment is
inward looking and primarily concentrates on operational
processes, whilst helping to encourage open dialogue with
risk owners. This assessment is also where Beazley’s own
response to climate change is noted, and the appropriate
action to deliver improvements is documented.
TCFD 2022 continued
4. Risk management
4.1 Risk management framework
4.1.1 Overview of Beazley’s risk
management framework
Beazley’s risk management framework establishes our
approach to identifying, measuring, mitigating and monitoring
the Group’s key risks, including climate risk. See additional
detail on the risk management framework in the strategic
report which starts on page 1.
4.2 Identification and assessment of
climate-related risks
We use the key mechanisms set out below to identify and
assess a range of climate-related risks relevant to Beazley,
whether that be by geographical location, sector or product
line.
Scenario analysis
Scenario analysis includes stressing the scenarios of the first
line or developing additional scenarios to consider climate
related risks.
Natural catastrophe modelling
Beazley utilises physical damage catastrophe models, such as
those created by Moody's proprietary modelling system RMS,
to help understand the implications of physical events. The
modelling of physical events with a climate-adjusted view, i.e.
models that enable us to review potential changes in physical
risk as a result of a changing climate, is a discipline in its
infancy. The Group has licensed, and validated, the RMS
climate-adjusted model for our most material peril and
expects to review and validate more climate-adjusted models
released in 2023.
The primary purpose of the tool is to gather data from the
underwriting portfolio and provide loss-related information
about pre-defined events, such as Lloyd's Realistic Disaster
Scenarios (RDSs). However, it is also used to assist with
determining rate adequacy and as a key input in portfolio
management decisions; for example, in terms of
diversification and geographical spread.
The modelling enables the impact of climate-related risk to be
reviewed from the following perspectives:
• regional variation;
• different climate risk scenarios; and
• different loss perspectives
Beyond this modelling, we also engage with other data and
tool providers to review potential changes in physical perils at
an individual location level.
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4.3 Management of climate-related risks
4.3.1 Consideration of climate-related risk
within the Risk Management Framework
The classification of climate-related risk has evolved at
Beazley. The Board identified it as an emerging risk in 2019
before being reflected under enterprise risk which is a
principal risk within the risk framework in 2021. However,
enterprise risks including climate-related risks are pervasive
and span multiple risk categories and risk owners.
A brief outline of how climate-related matters are reflected in
the risk categories wider than enterprise risk, is outlined in
the tables below.
Identification of emerging trends and regulatory
requirements
Regular scanning of the horizon for emerging trends,
regulatory requirements and stakeholder perspectives is
undertaken. Key elements which are looked for include:
• Understanding the perspectives of stakeholders, whether
they be investors, activists or our employees, through
regular dialogue;
• Determining current and emerging legal requirements,
whether they be mandated or voluntary. This includes
compliance with regulatory demands and legislation. It also
extends to voluntary initiatives Beazley is a member of,
such as the UN Principles for Sustainable Insurance, or the
Net Zero Insurance Alliance; and
• Understanding the evolving reputational risks associated
with our activities.
Regular communication on these matters occurs across the
teams identified in section 1.2 in order to ensure Beazley’s
approach to responsible business meets stakeholder
expectations. Where necessary, proposals are put to the
responsible business steering group for further discussion or
clarification and recommendations for any appropriate action.
Last year the Group committed to setting a net zero target for
2050.
Insurance risks
Risk type
Market cycle risks
Relevance to climate-related matters
This is the risk of systematic mispricing of the medium-tailed speciality risks business, which could arise due to a change in the
US tort environment, changes to the supply and demand of capital, companies using incomplete data to make decisions. In the
context of climate-related matters, liability risks could manifest themselves, especially in relation to accusations of greenwashing.
Transitional risk may also play a part in claims arising from market cycle risks.
Natural catastrophe risks
events
The Group uses a range of techniques to mitigate this risk including sophisticated pricing tools, analysis of macro trends, analysis
of claim frequency and the expertise of our experienced underwriters and claims managers.
This is the risk of one or more large events caused by nature affecting several policies and therefore giving rise to multiple losses.
Given Beazley’s risk profile, such an event could be a hurricane, major windstorm, earthquake or wildfire.
Reserve risk
This risk is monitored using exposure management techniques to ensure that the risk and reward are appropriate, and that the
exposure is not overly concentrated in one area.
This is the risk that established reserves are not sufficient to reflect the ultimate impact climate change may have on paid losses.
This includes unanticipated liability risk losses arising from our clients facing litigation if they are held to be responsible for
contributing to climate change, or for failing to act properly to respond to the various impacts of climate change. With support
from our Group actuarial team, claims teams and other members of management, the Group establishes financial provisions for
our ultimate claims liabilities. The Group maintains a consistent approach to reserving to help mitigate the uncertainty within the
reserves estimation process.
Asset, credit and liquidity risks
Risk type
Risk to earnings
Relevance to climate-related matters
This is a risk of investment loss, in any period, sufficient to impact capital and/or cause reputational damage. Beazley’s
investment portfolio could suffer detrimental returns following drops in the share prices of investments following a climate-risk-
related incident.
Reinsurance credit risk
To mitigate this risk, an approved investment strategy is in place that provides guidance on appetite. In addition, adherence to the
investment strategy is monitored through ongoing review, oversight and audit work.
In the event material natural catastrophe events, there would be a risk that our reinsurance counterparties are unable to pay
reinsurance balances due to Beazley. If the frequency or severity of these events is increased due to climate change, this could
cause a corresponding increase in credit risk. An important consideration when placing our reinsurance programme is evaluation
of our counterparty risk. Every potential reinsurer is evaluated through a detailed benchmarking exercise which considers financial
strength ratings, capital metrics, performance metrics and other considerations.
Liquidity risk
There is a risk that losses resulting from unprecedented natural disasters or extreme weather could erode our ability to pay
claims in a timely manner, due to unavailability (or not having access to) the neccesary financial resources to meet obligations.
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Beazley | Annual report 2022
41
TCFD 2022 continued
Strategic risk
Risk type
Strategic decisions
Relevance to climate-related matters
The Group’s performance would be affected in the event of making strategic decisions that do not add value.
The Group mitigates this risk through the combination of recommendation and challenge from Non-Executive directors, debate at
the Executive Committee and input from the Strategy and Performance Group (a group of 30+ senior individuals from across
different disciplines at Beazley).
In the context of climate-related matters, this relates to decision making around the transition to net zero across underwriting,
investments and our operations.
Communication
Having the right strategy and environment is of little value if the strategy is not communicated internally so that the whole Group
is heading in the same direction, or if key external stakeholders are not aware of Beazley’s progress against its strategy.
Beazley regularly communicates internally and externally on responsible business matters. This is underpinned by the responsible
business strategy.
Senior management
performance
There is a risk that senior management could be overstretched or could fail to perform, which would have a detrimental impact on
the Group’s performance.
The performance of the senior management team is monitored by the CEO and Culture and People team, and overseen by the
Nomination Committee. Climate-related objectives are built into senior management remuneration packages. This ensures
progress can be measured and reported against.
Enterprise risk
Risk type
Climate financial risk
Environmental, social, and
governance (ESG)
Reputation
Operational risk
Risk type
External event
Commercial management
Regulatory and legal
Relevance to climate-related matters
This relates to potential financial risks that may result from the physical impact and transition requirements of a changing climate
on Beazley’s underwriting and investment portfolios. This could be due to systemic mispricing of climate-related exposures,
mismanagement of our aggregate exposures, or greater claims costs than expected resulting in financial loss and/or reputational
damage.
The Group mitigates this in a number of ways, including having a clearly defined and documented underwriting and investment
strategy. There is training and guidance on related risks as part of the business planning process. Pricing models are regularly
reviewed and updated to include/reflect climate-risk-related information. Exposure management processes are in place, including
stress and scenario analysis.
ESG is the umbrella term for environmental, social and governance factors that are used to measure the sustainability and ethical
impact of a business. The risk is that we fall short of the expected standard of ESG in relation to our stakeholders. For example,
this could stem from failing to understand and keep pace with ESG related thinking (that continues to gain momentum) and
consequently not taking appropriate actions to address Beazley’s stance and exposure in those areas. This could result in actual,
or a potential, material negative impact and/or reputation of Beazley, arising from an adverse sustainability impact.
We mitigate this risk by ensuring there is a clearly defined and documented ESG strategy driven by the executive team, that
includes targets and milestones which are communicated to all staff. This is primarily governed via the Responsible Business
Steering Group to ensure we take a consistent approach across the Group. Sustainability initiatives are incorporated into the
business planning process.
Although reputational risk is a consequential risk, i.e. it emerges upon the occurrence of another risk manifesting, it has the
potential to have a significant impact on an organisation. Beazley expects its staff to always act honourably by doing the right
thing.
From a climate-related risk perspective, reputational risk manifests itself in the decisions we make on climate matters. This
includes our approach to the transition to net zero, our approach to underwriting and investments, particularly in carbon-intensive
sectors, and performance against the objectives we have set within our Responsible Business Strategy.
Relevance to climate-related matters
This is the risk that the physical impact of climate-related events has a material impact on our own people, processes and
systems, leading to increased operating costs or the inability to deliver uninterrupted client service. The Group has business
continuity plans in place to minimise the risk of interrupted client service in the event of a disaster.
The Group aims to minimise where possible the environmental impact of its business activities and those that arise from the
occupation of its office spaces. As we operate in leased office spaces, our ability to directly influence the building's environmental
impacts is limited. However, we do choose office space with climate change mitigation in mind, and engage with our employees,
vendors and customers in an effort to reduce overall waste and our environmental footprint.
Regulators, investors and other stakeholders are becoming increasingly interested in companies’ responses to climate change.
Failure to appropriately engage with these stakeholders and provide transparent information could result in the risk of reputational
damage or increased scrutiny. The Group regularly monitors the regulatory landscape to ensure that we adhere to any changes in
relevant laws and regulations. This includes making any necessary regulatory or statutory filings with regard to climate risk.
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Beazley | Annual report 2022
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4.3.2 Processes for managing climate-related risks
Beazley’s risk management philosophy is to balance the risks the business takes on with the associated cost of controlling
these risks, whilst also operating within the risk appetite agreed by The Board. In addition, our risk management processes are
designed to continuously monitor our risk profile against risk appetite and to exploit opportunities as they arise. As a specialist
insurer, a number of classes of business that we underwrite are susceptible to the impact (or potential impact) of climate
change. There are broadly four options that we have as an insurance company in relation to these risks: we can accept the risk,
avoid the risk, mitigate the risk, or transfer the risk.
Tools to help manage climate-related risks
Beazley employs a variety of tools to help manage climate-related risks. These are as follows:
Tools used
Stress and scenario
framework
Description of use
The stress and scenario framework is a key element of the risk management framework, enabling senior management to form an
understanding of the vulnerabilities of the business model. There are two levels of stress and scenario tests conducted at
Beazley, which ensures there is coverage of the key risks facing us and ownership at the appropriate management level.
Monitoring of aggregation of
exposure
Capital modelling
Risk appetite
Single-pillar stress and scenario tests such as RDSs are performed as part of normal business processes, with RDSs for natural
catastrophes run on a regular basis in order to determine the impact of different risks.
In addition, multi-pillar testing is conducted as part of the Own Risk and Solvency Assessment (ORSA) process, to ensure that
tests continue to develop and reflect the evolving risk environment.
The Exposure Management team has the responsibility for developing approaches to monitor the aggregation of exposure to
natural catastrophes. Part of this work involves assessing the latest views on climate change and reporting to the business on
the impacts any changes could have to the insurance portfolios. The Exposure Management team reports to the Chief
Underwriting Officer, who in turn provides regular updates to The Board on these matters. The Exposure Management team is
supported by the Head of Financial Climate Risk.
The Head of Capital provides an update to The Board, using modelled and non-modelled information, to help determine the impact
of climate change on the business. An example of this is the internal modelling the capital team undertook to determine the
impact of wildfires, which are becoming increasingly prevalent as a result of climate change. They also set out a view on the more
material hurricane risk as part of this process.
On an annual basis, Beazley’s risk appetite is reviewed and is informed by outputs from the RDS, capital model, and credit risk
assessment, as well as input from the trading teams. This helps guide the trading teams for the following year, before being
reviewed against the capacity available.
This appetite is agreed and set by The Board, before being tracked by the exposure management team on a monthly basis, who
flag up to the business any areas where we are close to the limits the business has set. Capacity is obviously impacted by the
number of physical weather events which occur throughout any given year, and therefore the impact of climate change is
considered when deciding on risk appetite.
During 2022, risk appetite statements and specific Board-level key risk indicators (KRIs) have been developed for climate-related
financial risk, which includes investment and underwriting. These are being monitored from 2023 onwards.
Quantitative and qualitative assessment of climate-related risks within the Risk Management Framework
Specific Board-level key risk indicators (KRIs), as set out in the risk appetite statements, are being monitored, as part of the
risk management framework from 2023 onwards. They are designed to provide triggers that through monitoring can be
addressed through Beazley’s governance structure. They set out tolerance levels using red, amber and green ('RAG') ratings to
help indicate the extent to which a risk is inside or outside appetite and whether any escalation is required. The climate change-
related KRIs will be as follows:
Area of the business
Key Risk Indicator
Underwriting
Investments
Operations
Phase 1 Climate change in underwriting and pricing objectives met
Regulatory disclosure requirements met
Compliance with responsible investment policy and transition risk
Reduction in carbon emissions for our operations compared to the 2019 baseline of 40% in 2022, and 50% in 2023.
Where possible, these KRI’s have been reported in the metrics section of the TCFD disclosure, with full incorporation expected
from 2023.
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Beazley | Annual report 2022
43
5.3 Investments
Beazley uses data from Standard & Poor's Market Intelligence
Capital IQ pro (S&P CAP IQ pro) to help determine a number of
metrics across our investment portfolio.
Total apportioned GHG emissions arising from
our investments
This is the total Carbon Emissions apportioned to Beazley's
portfolio of publicly listed equities, which are 1.8% of our
overall holdings. The value of holdings is $159m. This metric
is the starting point for carbon footprinting of our listed equity
portfolios. It adopts the equity ownership approach, consistent
with the GHG Protocol accounting standard, allocating
emissions based on levels on equity ownership (market
capitalisation) on an enterprise value including cash (EVIC)
basis.
The GHG emissions data is based on Scope 1 and 2
emissions only. Data to complete the calculation has been
sourced from S&P CAP IQ pro. The data was reported as at
1st January 2023, and is the first year we have reported this
figure. This metric will form part of the suite of metrics Beazley
will report on going forward.
Apportioned GHG emissions (tCO2e) arising from
our investments (Publicly listed equities only)
2,359.29
2022
Weighted average carbon intensity (WACI)
The weighted average carbon intensity (WACI) of our corporate
bonds and equity portfolios is set out in the table below. The
WACI is calculated by taking the sum of the GHG emissions
(Scope 1 and Scope 2) for the holding and dividing by the total
revenue of each holding. This figure is then multiplied by its
investment weight (the current value of the holding to the
current value of the total holdings as at 1 January 2023). The
scope of the reporting is limited to the GHG emissions arising
from our publicly listed corporate bonds (investment grade and
high yield) and publicly listed equities. The GHG emissions
data is sourced from S&P CAP IQ. Emissions have been
reported for 90.23% of the portfolio of publicly listed equities
and corporate bonds. Work continues to source data required
to report on the remainder of the portfolio.
WACI (tCO2e/$m sales) arising from our
investments (Publicly listed corporate
bonds (investment grade and high yield)
and publicly listed equities)
2021
2022
75.50
49.92
TCFD 2022 continued
5. Metrics
5.1 Enhancing our approach
to climate-related matters
The creation of the CRWG in 2022 has enabled the Group to
work to begin to enhance our approach to climate-related
matters within underwriting. For 2022, there are two
quantitative metrics which we can report against as a
measure of initial progress, with the expectation that we will
develop more metrics to measure our progress against our
climate risk strategy in 2023.
Number of perils with climate- change- conditioned
view of risk
Beazley is investigating the climate change conditioned
models in the market and updating our understanding of
climate change impact on physical risk perils from dedicated
research, in order to develop a forward-looking climate-change-
conditioned view of risk. We developed and introduced a
climate change conditioned view of risk for US hurricane, our
most material peril, in 2022, and plan to develop climate
change conditioned view of risk for other key perils in 2023.
2021
0
2022
1 (US hurricane)
Number of perils with climate loss trends introduced
into pricing model calibration
Beazley is in the process of incorporating climate trends for
key perils into the model calibration for pricing. This is the first
step in the process to fully embed climate loss trends for key
perils into pricing. In 2022, we reviewed climate loss trends
for US hurricane, US wildfire, and US inland flood. These were
introduced into the key property pricing tool in December
2022 for US Flood and US Wildfire and January 2023 for
US Hurricane. We plan to further embed these perils within
pricing, whilst also reviewing and incorporating other key peril
climate trends.
2021
0
2022
2 (US wildfire, US inland flood)
5.2 Underwriting
Net Estimate Premium Income arising from low and
zero carbon technologies
The sum of net estimated premium income (net EPI) arising
from low and zero carbon technologies underwritten in 2021
and 2022 is as outlined in the table below. The scope of
inclusion is for estimated insurance premiums written for
policies related to energy efficiency and low and net zero
carbon technology, including renewable energy insurance,
energy savings warranties, and carbon capture and storage
insurance).
2021
$4.5m
2022
$8.0m
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Temperature alignment of our investment portfolio
The reporting of the temperature alignment of Beazley's
portfolio is based on the methodology set out by the S&P Cap
IQ. The methodology apportions the value of holdings with
regards to the ‘under/over 2°C budget’ metric which is
produced by S&P each year for every company. This is
calculated by multiplying the ‘under/over 2°C budget’ figure by
the investor’s value of holdings and then dividing this value by
the total market capitalisation of that particular company. The
individual values are then summed across the entire portfolio
in order to either give a negative figure (aligned) or positive
figure (misaligned). The scope of the reporting is limited to the
GHG emissions arising from our publicly listed corporate
bonds (investment grade and high yield) and publicly listed
equities. The data was reported as at 1 January 2023.
Emissions have been reported for 90.23% of the portfolio.
Work continues to source the missing data required to report
on the remainder of the portfolio.
The reporting of Beazley's current pathway alignment is the
starting point from which future comparisons will be made.
Beazley has set an objective to align its investment portfolio
with a 1.5 degree Celsius pathway and will continue to work
towards this in 2023.
Current Temperature
Pathway Alignment
2022
2-3 degree Celsius
5.4 Beazley’s operations
5.4.1 GHG emissions
The Greenhouse gas (GHG) emissions are calculated and in
accordance with the Greenhouse Gas Protocol, Corporate
Reporting and Accounting Standard including the amended
GHG Protocol Scope 2 Guidance, and HM Government,
Environmental Reporting Guidelines, using the applicable UK
Government’s (BEIS) GHG Conversion Factors for Company
Reporting unless otherwise indicated. Beazley Group’s
(hereafter Beazley) GHG emissions are, where possible,
calculated using emission factors for ‘kgCO2e’ (i.e. the sum of
emission factors for carbon dioxide, methane and nitrous
oxide). The full methodology for calculating the GHG emissions
is available on Beazley's website. The exceptions to this are:
1 Emissions associated with refrigerants, which are reported
as GHG dioxide equivalent (tCO2e) emissions;
2 GHG emissions for company cars are calculated using
information provided on: the yearly mileage agreement,
make, model, registration and fuel type. Consumption has
been based on the maximum agreed mileage for the car in
2022, as set out in the lease agreement.
3 GHG emissions associated with the Dublin office electricity
use are calculated using information reported by the
Sustainable Energy Authority of Ireland (SEAI) and reported
as gCO2/kWh (NCV). The kgCO2e emission figure was
calculated by adding BEIS NO2 and CH4 emission factors to
SEAI’s kgCO2 figure.
4 Due to data coverage, US office electricity use and heating
energy (Scope 2) are estimated using the office floor area
and the 2021 CIBSE Guide F for Energy Benchmarking.
5 US office electricity use (Scope 2) and US grid electricity
transmission and distribution (Scope 3) where the
Environment Protection Agency (EPA, 2020) EPA US State
emission factors are used
6 US office business travel by rental car, personal car, air and
rail (Scope 3) where the US Environment Protection Agency
(EPA, 2020) emission factors are used.
7 Where emissions factors are not listed by BEIS for the
country of hotel stay, then data from the Cornell Hotel
Sustainability Benchmarking (CHSB) index is applied
8 Emission figures for electricity used in ‘ROW’ offices
(Barcelona, Dublin, Munich, Montreal and Paris) are country
emission factors sourced from Carbonfootprint’s GHG
Footprint emissions document
9 Car hire for business use has been estimated, as data is
unavailable to assess the mileage travelled as part of the
rental period. Calculations have been based on an
assumption that the user would travel 100 miles per day as
part of the rental.
The parameter of Scope 1 and Scope 2 reporting in 2022
includes 16 sites covering London (UK), Birmingham (UK),
Dublin (Ireland), Munich (Germany), Paris (France), Barcelona
(Spain) and Atlanta, Boston, Chicago, Dallas, Farmington, New
York, San Francisco, Philadelphia, Miami (USA) and Montreal
(Canada) and two third party data centres. Additional offices
are located across the globe, many of which are considered
shared space or serviced office suites. Beazley pays a service
charge for their use, however, has no control over the
operation or use of utility provisions. Responsibility for energy
consumption and carbon emissions, therefore, falls to the
landlord, and is considered out of scope for the purpose of
these calculations. The global emissions reported do not
include data for the following office locations: Houston, Los
Angeles, Denver, Singapore, Rio de Janerio, Shanghai, and
Vancouver. These offices make up 8% of Global FTE in 2022.
This equates to 94% of Beazley employees including
contractors. The 2022 reporting scope is comparable with the
GHG emissions reported for 2019 to 2021. Beazley’s two
subsidiaries, Lodestone & BHI, are excluded due to data
quality and will aim to be incorporated in future reporting.
Reporting is based on operational control. Beazley Group does
not have operational control over the building infrastructure
and plant at its offices due to the presence of facility
management companies and shared tenancy; as a result,
emissions primarily fall within Scope 2 and 3 of the
Greenhouse Gas Protocol.
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Beazley | Annual report 2022
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TCFD 2022 continued
5.4.2 Location- based GHG emissions
Our Green House Gas (GHG) emissions normalised for Beazley's full-time equivalent (FTE) were 2.49 tonnes carbon dioxide
equivalent (tCO2e/ FTE) in 2022. This equates to an 55% reduction when compared to our 2019 baseline. This sizeable
reduction is a reflection of the actions taken over the last three years, which have included the relocation of our office in London
to more energy efficient premises at 22 Bishopsgate, the outsourcing of our data centres, and a reduction in business travel.
Location- based GHG Emissions (tCO2e)
Scope 1
Scope 2
Scope 3
Total tCO2e
Total tCO2e/FTE
2019
2020
2021
21.08
2,010.84
6,735.91
8,767.83
16.50
1,773.92
1,647.04
3,437.46
8.23
1,412.87
807.37
2,228.46
2022
65.20
1,144.79
4,073.96
5,283.00
5.52
2.09
1.22
2.49
5.4.3 Market- based GHG emissions
Beazley Group’s market-based GHG reporting for 2022, taking into account the procurement of 538,589.43 kWh of electricity
from certified renewable sources, is summarised in the table below. Renewable energy was procured for our Dublin, Barcelona,
Paris and London offices, and equates to renewable energy being 53.46% of Beazley's overall in scope energy use. The
procurement of renewable energy resulted in a saving of 116.63 tonnes of CO2 equivalent. The contribution of renewable energy
to our overall energy consumption is lower than the 65.55% saving achieved in 2021. This is because we were reporting energy
arising from both our new and old London offices whilst in the process of relocating. Both offices used renewable energy, and
therefore both our overall energy consumption and the contribution from renewable energy was temporarily higher than in a
normal operating year.
The market-based emissions, which take into account the carbon emission reductions achieved through the use of renewable
energy in four of Beazley's offices, are set out in the table below.
Market-based GHG Emissions (tCO2e)
Scope 1
Scope 2
Scope 3
Total tCO2e
Total tCO2e/FTE
2021
8.23
1,038.22
776.12
1,822.57
2022
65.20
1,027.79
4,066.63
5,158.65
1.00
2.43
5.4.4 Detailed Breakdown of Emissions
SCOPE 1
Our Scope 1 emissions arise from company car use, refrigerant top ups of air conditioning systems and back-up generator use
for our Dublin office. Emissions are as follows for 2022:
UK
5.71
USA
0.00
Europe
59.49
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Beazley | Annual report 2022
www.beazley.com
SCOPE 2
Beazley Group does not have operational control over the building infrastructure and plant at its offices due to a combination of
shared tenancy and the presence of facility management companies. Beazley offices are heated/ cooled by the building’s
central HVAC systems, which are managed by the landlord or landlord’s agent. This does influence the options we have for
procuring energy. Our Scope 2 emissions can be broken down by region:
UK
Total location-based GHG Emissions (tCO2e)
Total market-based GHG Emissions (tCO2e)
USA
Total location-based GHG Emissions (tCO2e)
EUROPE
Total location-based GHG Emissions (tCO2e)
Total market-based GHG Emissions (tCO2e)
2019
856.10
2020
615.26
173.94
2021
319.02
19.97
2022
135.28
72.73
2019
1,013.76
2020
1,013.76
2021
964.18
2022
909.32
2019
140.98
2020
144.90
50.62
2021
129.67
54.08
2022
100.19
45.73
SCOPE 3
A breakdown of our Scope 3 is detailed below, with travel being a predominant part of our overall reported emissions. The UK/
Rest of World (ROW) data includes travel booked through our UK/ROW travel partner, which is predominantly for staff located
within all offices except those in the USA. The data cited for the USA includes travel booked through our US travel partner,
which is predominantly for staff located within all US offices.
UK/Rest of World GHG emissions
Air travel
Rail travel
Hotel stays
Car hire use
Electricity transmission & distribution losses (location-based)
Taxi use
Personal car use
Electric vehicle charging transmission & distribution losses
Imported heat transmissions & distribution losses
Data centres
Total
USA GHG Emissions
Air travel
Rail travel
Hotel stays
Car hire use
Electricity transmission & distribution losses (location-based)
Taxi use
Personal car use
Electric vehicle charging transmission & distribution losses
Imported heat transmissions & distribution losses
Data centres
Total
2019
(tCO2e)
4,318.84
18.32
126.22
9.19
67.99
89.40
19.51
–
0.46
–
4,649.94
2019
(tCO2e)
1,755.20
89.33
57.00
14.33
39.99
75.71
54.41
0.00
0.00
0.00
2,085.98
2020
(tCO2e)
825.05
3.68
24.31
1.39
46.71
30.20
6.07
0.28
0.45
–
938.14
2020
(tCO2e)
612.65
2.01
10.42
1.86
39.99
28.93
13.04
0.00
0.00
0.00
708.90
2021
(tCO2e)
165.79
3.54
8.88
0.07
34.18
9.91
4.81
0.26
0.45
128.24
356.13
2021
(tCO2e)
361.60
0.66
21.93
2.67
37.25
12.78
14.34
0.00
0.00
0.00
451.24
2022
(tCO2e)
2,139.48
9.16
50.79
–
9.19
56.11
7.79
0.27
0.45
134.25
2,407.49
2022
(tCO2e)
1,527.01
2.78
45.34
9.56
37.92
43.86
0.00
0.00
0.00
0.00
1,666.48
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Beazley | Annual report 2022
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TCFD 2022 continued
Our overall Scope 3 emissions are as detailed below. We have provided further details of how the market based emissions
factors also impact our overall emissions.
Air travel
Rail travel
Hotel stays
Car hire use
Electricity transmission & distribution losses (location-based)
Taxi use
Personal car use
Electric vehicle charging transmission & distribution losses
Imported heat transmissions & distribution losses
Data centres
Total
Electricity transmission & distribution losses (market-based)
Total revised for market-based emissions
2019
(tCO2e)
6,074.04
107.65
183.22
23.52
107.98
165.11
73.92
0.00
0.46
0.00
6,735.92
2020
(tCO2e)
1,437.70
5.69
34.74
3.24
86.70
59.13
19.11
0.28
0.45
0.00
1,647.04
2021
(tCO2e)
527.39
4.20
30.81
2.74
71.43
22.68
19.15
0.26
0.45
128.24
807.37
2022
(tCO2e)
3,666.49
11.93
96.13
9.56
47.11
99.97
7.79
0.27
0.45
134.25
4,073.96
2019
(tCO2e)
107.98
6,735.92
2020
(tCO2e)
42.92
1,603.27
2021
(tCO2e)
40.18
776.12
2022
(tCO2e)
39.77
3,932.38
5.4.4 Carbon offsets
Whilst Beazley does purchase carbon offsets, it does not use these as a mechanism to enable more emissions to be generated
during the year. The targets we have set for carbon reductions do not include any allowance of the use of carbon offsets.
5.4.5 Water Consumption
As part of the Building Management System, Beazley has sub meters on the incoming water feed to the two floors we occupy
within 22 Bishopsgate. This sub metering covers the water consumption arising from the use of our kitchenette facilities, and in
2022 resulted in 1,013m3 of water being used. This is an increase on the 305m3 used in 2021, however, office occupancy
rates were lower due to the impact of social distancing for COVID-19. The consumption figures cited do not include for the water
being used for the toilets being used on our floors, nor water consumption arising from central functions across the remainder
of the building. These elements are controlled and measured by the building's landlord. Water consumption is cited only for our
22 Bishopsgate office, as this is the only office for which we currently have accurate water data for. This office is occupied by
42.51% of FTEs.
5.4.6 Waste Consumption and Recycling Rate
Beazley is also able to measure the amount and type of waste being generated from our London office, Data is provided by our
landlord, who is responsible for coordinating the collection and disposal of the waste generated by all building occupants. This
information confirms the amount and type of waste stream being generated, by weight. This data is recorded and collated by
the landlord's appointed waste contractor, before being provided to Beazley. Based on the information provided, for 2022,
Beazley generated a total of 10.98 tonnes of waste, with 6.58 tonnes of this waste being recycled across multiple waste
streams. We were able to achieve a recycling rate of 59%. This is an increase on the 1.12 tonnes of waste recycled in our
London office in 2021, however, office occupancy rates were lower due to the impact of social distancing for COVID-19. This
office is occupied by 42.51% of FTEs.
5.5 External Benchmarks
Beazley uses a number of external ESG ratings to help benchmark our progress on ESG matters. Of the ESG ratings we
participate in, two are relevant to benchmarking climate-related matters: – Climatewise and Carbon Disclosure Project (CDP).
The 2022 scores are detailed in the table below, with historic data provided for comparison.
Rating Scheme
Climatewise
CDP
2020
46
C
2021
72
C
2022
72
B
Improvement in 2022?
No Change
Yes
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Beazley | Annual report 2022
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5.6 Remuneration
As set out within the remuneration dashboard on page 124, a
section of executive compensation is linked to the
achievement of ESG objectives. The score-card, and the
degree to which it has been achieved, is determined by the
Remuneration Committee. A quantitative key element of the
scorecard is the ESG ratings we achieve, based on third-party
ESG rating agencies' assessment of Beazley’s ESG
performance. The CDP rating cited in this report forms part of
the scorecard.
Compliance with TCFD Requirements
Beazley has included on pages 29 to 49 in the Strategic
Report and various notes within our Financial Statements on
page 157 to 232, climate-related financial disclosures
consistent with the TCFD’s Recommendations and
Recommended Disclosures, with the exception of the
following:
Strategy 2a: Organisations should describe the climate-
related risks and opportunities the organisation has identified
over the short, medium, and long term.
Beazley has partially disclosed against this requirement. In
2023, as part of the development of the Beazley's transition
plan we will work to further understand the sectoral impact of
climate-related risk. Beazley expect it will add real value to the
business to be able to disclose not just the risks, but also the
opportunities arising on a sector by sector basis. Beazley has
also committed to publish the first iteration of the Group’s
transition to net zero plan by the end of 2023. This document
will include detail on future GHG targets for Beazley. At the
point of disclosure, it was considered that the work currently
in progress is not sufficiently completed to meet the
requirement of the disclosure recommendation.
Strategy 2b: Organisations should describe the impact of
climate-related risks and opportunities on the organisations
business, strategy and financial planning.
Beazley’s responses to this requirement are still developing, it
is not possible to consider all possible future outcomes when
determining asset and liability valuations, and timing of future
cash flows, as these are not yet known. Nevertheless, the
current management view is that reasonably possible changes
arising from climate risks would not have a material impact on
asset and liability valuations at the year-end date. Our TCFD
disclosures are to be updated on an annual basis, therefore,
we will be able to set out our progress as part of our 2023
TCFD disclosure.
Beazley has partially disclosed against the supplementary
requirements for insurance companies and asset owners.
Beazley is working to further develop our approach to climate-
related matters. At the point of disclosure, it was considered
that the work currently in progress is not sufficiently
completed to meet the requirement of the disclosure
recommendation.
Strategy 2c: The organization should describe how resilient
their strategies are to climate-related risks and opportunities,
taking into consideration a transition to a low-carbon economy
consistent with a 2°C or lower scenario.
Beazley’s responses to this requirement are still developing, it
is not possible to consider all possible future outcomes when
determining asset and liability valuations, and timing of future
cash flows, as these are not yet known. Nevertheless, the
current management view is that reasonably possible changes
arising from climate risks would not have a material impact on
asset and liability valuations at the year-end date. Our TCFD
disclosures are to be updated on an annual basis, therefore,
we will be able to set out our progress as part of our 2023
TCFD disclosure.
Metrics and Targets 4a: Organisations should disclose the
metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk
management process. Beazley partially complies with this
requirement and is currently working to develop an appropriate
tranche of data metrics by which to further monitor climate-
related risks in underwriting. Once developed these metrics
will compliment the metrics already reported. Beazley is a
member of the NZIA, and has also committed to publish the
first iteration of the Group’s transition to net zero plan by the
end of 2023. At the point of disclosure, it was considered that
the work currently in progress is not sufficiently completed to
meet the requirement of the disclosure recommendation.
Supplementary requirements for insurers
and asset owners
For the supplementary requirements, our status is as follows:
Strategy 2c: Beazley has partially disclosed against the
supplementary requirements for insurance companies and
asset owners.
Risk 3a: Beazley does not comply with the supplementary
requirements for asset owners and insurance companies.
Risk 3b: Beazley is partially compliant with the supplementary
requirements for insurers, but is not compliant with the
supplementary requirements for asset owners.
Metrics and Targets 4a: Beazley partially complies with the
supplementary requirements for asset owners, but does not
comply with the supplementary requirements for insurers.
Metrics and Targets 4b: GHG emissions and related risks
Beazley does not comply with the supplementary requirements
for insurers, but partially complies with the supplementary
requirements for asset owners.
For these areas of the supplementary requirements, Beazley
is working to further develop our approach to climate-related
matters. At the point of disclosure, it was considered that
the work currently in progress is not sufficiently completed
to meet the requirement of the disclosure recommendation.
Our TCFD disclosures are to be updated on an annual basis,
therefore, we will be able to set out our progress as part of
our 2023 TCFD disclosure.
www.beazley.com
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49
Stakeholder engagement
Our key stakeholders
The following pages describe how Beazley engages with its
stakeholders to enable us to fulfil our purpose, deliver our
strategy and deliver great outcomes for all our stakeholders.
Beazley is focussed on achieving long-term sustainable growth
that delivers real value to all our stakeholders. The Board is
committed to engaging with each of our stakeholder groups to
help inform our strategy, annual plans and specific decision
making.
The Board reviews who it determines to be its key
stakeholders. The key stakeholder groups continue to be: our
people, our clients and broker partners, our shareholders and
our regulators. The Board also continues to recognise
suppliers and communities as important groups.
Our Chief Executive Officer regularly engages with the
workforce through his email and spoken updates and
encourages questions on all topics through the ‘Ask Adrian’
forum.
More formal workforce engagement takes place at our ‘how
are we doing? Live’ strategy event. This event is held annually
in person in multiple locations globally and gives an
opportunity for the Executive Committee members and other
employees to present on key developments. There are also
annual all-employee surveys on engagement and leadership,
the findings of which are presented to the Executive
Committee and Board in order that plans can be developed to
address any findings. There is regular reporting to the
Executive Committee and Board by the Head of Culture &
People on employee matters.
An important element to support our employee engagement is
our whistleblowing hotline. This enables employees and other
members of the workforce to raise in confidence any specific
concerns, and we undertake to investigate fully any matters
raised.
This section of the report provides further information on how
Beazley and The Board engage with each of these key
stakeholder groups, what have been the outcomes of this
engagement in 2022, and how the views of stakeholders have
been considered in the key decisions taken by The Board
during the year.
How does The Board engage?
As previously mentioned, The Board receive regular updates
from the Head of Culture & People on employee matters in
general and on the findings from the annual surveys on
employee engagement and leadership.
Our people
Why we engage?
Our people are fundamental to Beazley’s long-term success
and as such have been identified as one of the five key pillars
supporting our strategy. We believe that by listening, sharing
ideas, and learning we help each other strive for better. We
seek to be open and honest in our dealings with our
employees and contractors and support Beazley’s values and
culture of ‘doing the right thing'.
How does Beazley engage?
Employee engagement takes place informally and formally at
all levels of the organisation. Our managers are encouraged to
communicate actively with their teams, seeking engagement
at team meetings and in their day-to-day work.
We have five employee networks consisting of individuals from
across the business in different roles and locations. Each
network is focussed on raising awareness of different
elements of our inclusion and diversity strategy and are able
to give an employee view on matters within their remit. You
can read more about these networks in the responsible
business report.
Members of our Executive Committee support the overall
approach to engagement, including through hosting ‘executive
coffees’ with groups of employees and ‘executive Q&A panel
events’ held virtually with the entire workforce. These
sessions provide an opportunity for two-way engagement and
for the executive to keep our people updated on what is
happening across Beazley. Members of the Executive
Committee are also regular contributors to our ‘weekly news’
emails, and other employees are also encouraged to
contribute on relevant work developments and with interesting
personal stories.
In addition, and in line with the Corporate Governance Code,
we have appointed a Non-Executive Director with responsibility
for bringing the ‘employee voice’ into Board level decision
making. For the majority of 2022 this role was held by Bob
Stuchbery, with Fiona Muldoon taking on the role from
November.
Fiona will continue Bob’s work on providing updates to The
Board on her formal and informal engagement with the
workforce. This engagement includes attendance at meetings
of the NexCo (an alternative Executive Committee of high
potential employees from across the business which runs in
parallel to the usual Executive Committee meetings), and
attendance at informal meetings held virtually between
members of the Executive Leadership team and a small
number of employees. There is also ongoing engagement with
employees through matters raised via the dedicated
‘employee voice’ pages on our intranet site. In 2022, some of
the Non-Executive Directors hosted a live virtual panel for all
employees, discussing their role and experience and
answering employee questions. During the event Bob
Stuchbery talked about his role as the ‘employee voice’ in the
boardroom.
What is important to our people?
Our annual employee survey continues to highlight the
importance of engagement to our employees, and our 2022
survey showed continued high levels of employee
engagement. Particular themes from the 2022 survey were
the importance of working collaboratively, of feeling trusted
and listened to, and being able to share their thoughts,
opinions and ideas. Further information on the findings from
the 2022 employee survey are contained in the Statement of
the Chair on page 8.
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www.beazley.com
Outcomes from engagement with our people in 2022
Various steps have been taken during 2022 in response to
our engagement with the workforce including:
• Steps to support individual growth and career development
– much of our business requires individuals with specialist
knowledge built up over a number of years. However, we
have addressed feedback around helping individuals
further in their own career development. This has
included hosting careers fairs and workshops, helping
people get to know other areas of Beazley,
communicating internal opportunities and sharing
examples of how others have developed their careers at
Beazley. We have also developed specific career
pathways for our underwriters, distinguishing between the
technical and managerial elements of the role, and
sought to provide further clarity to individuals wishing to
sit on our various leadership forums.
• Providing greater transparency on remuneration and bonus
setting
– remuneration is a key matter for our employees. We have
encouraged open and honest conversations between
managers and employees on remuneration topics and
continued our ‘your compensation explained’ sessions
where the Chief Executive Office and Group Finance
Director provided information and answered questions. In
response to specific feedback on challenges faced due to
the cost of living crisis, the Executive Committee and
Board gave their support to making a one-off cost of living
payment to those individuals where the impacts were
believed to be hardest felt. These impacts were also
considered in agreeing salary increases for 2023.
• Support around mental health – the pandemic brought into
sharp focus the importance of mental health, and we have
continued to receive feedback from employees seeking
support in this area. Our Beazley Wellbeing network has led
on promoting a number of campaigns encouraging
colleagues to strike the right balance between work
pressures and their mental health, including encouraging
people to take a break when needed. Our Culture & People
business partners also work with their teams locally to
identify key issues and resolve them.
• Supporting those with, or intending to start, a family – we
launched the new Beazley Families network in 2022, with a
focus on supporting those colleagues already with a family,
those seeking to start a family and those with caring
responsibilities. Further resources have been developed for
employees and managers on our policies around families,
including the ability for employees to take up to six months’
parental leave. A buddy system has been set up for parents
returning to the office who may need informal support.
• Promoting Juneteenth – the Beazley RACE network received
feedback from our US workforce on the importance of
recognising Juneteenth as an official holiday. As a result,
the executive leadership team gave its support to granting
Juneteenth as a holiday for all of our US workforce from
2023.
Clients and broker partners
Why do we engage
Respecting and listening to the needs of our clients is a
stated key pillar of our strategy to enable Beazley to deliver its
purpose of helping our clients explore, create and build. We
talk about this further in the Chief Underwriting Officer's
report.
We strive for two-way dialogue with our clients to help us
develop products and insurance solutions to best meet their
needs. As Beazley has primarily an intermediated business
model, our broker partners play a vital role in helping us
engage and connect with our ultimate clients as well as being
a vital stakeholder in their own right.
How does Beazley engage
Direct engagement with our insureds and broker partners is
fundamental to how we do business. There is constant
engagement by underwriters with brokers and clients to fully
understand specific risks and requirements and by claims
teams to ensure responsiveness, fair claims outcomes and
excellent service. We are extremely proud that in 2023, for the
seventh year running, we were awarded the Outstanding
Service Quality Marque for claims service by Gracechurch
Consulting.
More coordinated engagement with our broker partners takes
place via our dedicated Broker Relations team. Our Broker
Relations team ensure we are maintaining and fostering the
best possible relationships with brokers to complement our
business teams.
During 2022, and building on the work of our ‘Closer to the
Client’ strategic initiative, we created the role of Client
Engagement Manager (CEM). The CEM has responsibility for
coordinating activities across the business to focus on our
ultimate clients. Their work has included appointing a number
of strategic relationship officers, who are specifically focussed
on the needs of their portfolio of clients, establishing
workstreams to engage with medium-sized and SME clients,
reviewing customer survey findings and liaising with product
development teams to address client feedback on new
products. The continued adoption of a customer relationship
management (CRM) tool will be key in gathering information
on clients from across teams and be able to respond to their
needs.
How does The Board engage?
The Chief Executive Officer is actively engaged with key clients
and broker partners and brings the insight he receives to
Board discussions. Maintaining good relationships with our
broker partners is a key priority of the Chief Executive Officer,
and his engagement takes the form of discussions on specific
and general topics in conferences and at other formal and
informal settings.
A number of our Non-Executive Directors also maintain contact
with broker networks from their previous executive roles and
are able to bring relevant insights to the boardroom.
The Board receives reports on key areas of client and broker
engagement via reporting from the Chief Executive Officer,
Chief Underwriting Officer, and other teams.
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Beazley | Annual report 2022
51
Stakeholder engagement
continued
What is important to our clients and broker partners?
Our ultimate clients want us to have clear and fair policies and
help them find efficient risk solutions, and this is also a
priority of our broker partners. We partner with our clients and
broker partners to offer risk solutions, expertise and
knowledge, to allow our clients to focus on running their
businesses.
Outcomes from our engagement with clients and broker
partners during 2022
Examples of direct engagement with clients and broker
partners during 2022 included:
• holding a summit with Beazley and key client
representatives on the healthcare claims environment – this
summit was very well received by attendees and provided a
great opportunity to share insight into the healthcare claims
environment on a non-specific basis.
• engagement on developments in our cyber policies – we
have engaged with brokers to explain the evolving nature of
cyber risk, particularly in the context of war, and how
Beazley intends to respond to this risk. This engagement
has helped support brokers in their discussions with
insureds.
• development of the ESG product suite – we have engaged
with our clients and broker partners on how we can bring
more innovative ESG products to the market that provide
value to them. The Chief Executive Officer has also provided
input on ESG matters through the feedback he receives as
a participant in the Sustainable Markets Initiative.
Our shareholders
Why we engage?
At Beazley, we recognise the needs of our different types of
shareholder, which range from individuals to large institutions.
We place great importance on communicating with our current
shareholders and with potential future investors.
The ongoing support of our shareholders, and our ability to
attract new investment, is essential as we continue to grow
the business. It is vital that shareholders understand and
have confidence in not only our strategy and ability to deliver
it, but also in the responsible and sustainable way in which we
run our business – helping us to become the highest
performing sustainable specialty insurer.
How does Beazley engage?
We communicate formally with our entire shareholder base
through regulatory news, results announcements and the
annual report and in conjunction with shareholder meetings.
All of our shareholders are also able to access useful
information on the company through our website. The annual
general meeting provides a formal opportunity for engagement
by shareholders with The Board.
Regular engagement with investors is co-ordinated by our
Head of Investor Relations. The Chief Executive Officer and
Group Finance Director regularly meet with our investors. Any
feedback or themes are shared with the wider Board through
the Chief Executive Officer's report and the report from the
Head of Investor Relations.
We invite investors and analysts to meet with management
twice a year following the announcement of the annual and
interim results. We have also increased our level of formal
investor engagement and, in 2022, management attended
four European investor conferences in 2022 and conducted a
number of ad hoc investor meetings. Additionally, Beazley
hosted a capital markets day in May, where the Chief
Executive Officer, Group Finance Director and the Chair met
with our investors. The opportunity was used to remind the
market about Beazley’s products and the platform and
distribution strategy which underpins our planned growth. The
Chief Executive Officer and Group Finance Director also met
with investors as part of the equity raise. More information is
included in the Directors' report (page 140).
How does The Board engage?
The Board receives regular reports from the Head of Investor
Relations on activity during each quarter, which includes
feedback from engagement with analysts and institutional
shareholders. Key shareholder matters are also reported to
The Board via the reports from the Chief Executive Officer and
Group Finance Director.
The Chair of the Remuneration Committee also engages with
shareholders on matters relating to remuneration. In 2022,
there has been specific shareholder engagement by the chair
of the Remuneration Committee and the Interim Chair on
changes to the remuneration policy which are being proposed
for approval by shareholders at the 2023 AGM.
What is important to our shareholders?
All of our shareholders are interested in seeing Beazley grow
profitably. However, they are also keen that growth is carried
out in a responsible and sustainable way to help ensure the
long-term success of the company. The Board is very much
aligned with shareholders in these priorities.
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Outcomes from our engagement with shareholders
and investors in 2022.
Examples of actions taken in response to dialogue with
shareholders during 2022 included:
• Giving shareholders greater visibility of our longer-term
outlook - during the year, a number of our larger
shareholders have expressed a change in their focus to
Beazley's long-term strategy, including the strategy for the
Cyber business and other future opportunities. This follows
shareholders being more focussed on the shorter term
during Covid-19.
• Helping shareholders to understand our platform strategy –
an agenda topic at the capital markets day in May was to
provide specific information on how Beazley carries out its
business globally across multiple platforms. This followed
feedback that the global reach of the business and the
platform strategy were not well understood by some
shareholders.
• Seeking shareholder support in our equity raising – our
shareholders gave us strong support in the raising of new
equity capital in November. The additional capital serves to
not only support our business plans, but also address
feedback from some shareholders on the level of debt to
equity that was maintained in the business. The Board's
decision to raise equity is further discussed in the Section
172 statement on page 55.
• Providing information to shareholders to support the
proposed changes to our remuneration policy – we actively
engaged with the top 100 shareholders and with proxy
agencies on the proposed changes to our remuneration
policy. As part of this, we provided some worked examples
on how the changes to the remuneration policy could work
in practice. Further information on the engagement with
shareholders on the remuneration policy are included on
page 90.
Our regulators
Why do we engage?
At Beazley, we recognise the key role played by our regulators
in protecting our customers. The Group seeks to maintain a
positive and transparent relationship with each of its
regulators, as a key element in carrying out its business
effectively, and living to its value of ‘doing the right thing’.
We have a number of regulators globally including the
Prudential Regulation Authority (PRA), Financial Conduct
Authority (FCA), Central Bank of Ireland (CBI), Lloyd’s, the
Connecticut Insurance Department (CIT) and other US state
regulators, and regulators in other jurisdictions where Beazley
operates.
How does Beazley engage?
Our Compliance function coordinates the Group’s regulatory
relationships, engaging with each of its regulators on a
frequent basis and help the Group meet their expectations.
There are regular scheduled meetings with the supervisors of
the Group’s key regulators, including an annual meeting with
supervisors from the PRA, CBI and CIT and the Group’s Chief
Executive Officer, Group Finance Director, Chief Risk Officer
and Head of Compliance. Regulators may also request
meetings with other members of senior management and The
Board as part of the Group’s supervision.
Beazley also engages with regulators through discussions on
certain topics and business activities, participates in industry-
wide thematic reviews, core risk assessments, thought
leadership and providing industry feedback. The engagement
is two-way, and may be initiated by the regulator or by Beazley.
How does The Board engage?
The Board and its Committees receive reports on regulatory
priorities and regulatory engagement, including any reviews,
requests and responses. This information is considered in
discussions and decision-making. The regulated subsidiary
Boards and their Committees also receive regular reports
which focus on the activities and views of their respective
regulators.
As mentioned, our regulators request meetings with our Board
Directors as required to support their overall supervision.
Following such meetings, Directors share the outcomes and
feedback with the wider Board.
What is important to our regulators?
Our regulators are primarily concerned with the safety and
soundness of the firms which they regulate, the protection of
customers and ensuring the stability of the wider economy.
This is managed through regulation and oversight of a firm’s
activities.
Outcomes from engagement with regulators during 2022
During 2022, we specifically engaged with our regulators on
various matters including business plans and strategy, the
war in Ukraine, climate change, cyber insurance, the
modernisation programme and governance.
Outcomes from regulatory engagement activities during 2022
included valuable feedback on the PRA climate biennial
exploratory scenario (CBES), cyber underwriting and delegated
authority thematic reviews. The Group has also participated in
the general insurance stress test (GIST) during 2022 and is
looking forward to receiving feedback in early 2023.
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Beazley | Annual report 2022
53
Stakeholder engagement
continued
Other stakeholder groups
The Board also recognises suppliers and the communities in
which Beazley operates as important stakeholders.
Suppliers
We actively engage with our suppliers and outsource providers
and recognise the important role they play in helping us run
our business. This engagement takes a number of forms and
is underpinned by a desire to maintain equitable relationships.
Prior to any new engagement, we carry out thorough due
diligence, including face-to-face communication on service
expectations, contractual terms and business practices. We
expect our suppliers to adopt the same standards of ethical
business practice that we expect from ourselves, which
includes respecting human rights and preventing modern
slavery and human trafficking. Further information on the
steps taken by Beazley to eradicate modern slavery in its
supply chain are contained in Beazley’s Modern Slavery Act
statement which is available on our website.
We undertake annual monitoring of material suppliers and
outsource providers to ensure both performance and practices
continue at a high standard. This annual monitoring is a good
opportunity for open engagement with suppliers outside of
day-to-day activities, and two-way feedback on areas for
improvement is encouraged. We also encourage suppliers to
raise any concerns independently through Beazley’s
independent whistleblowing hotline.
Communities
Beazley is committed to actively engaging with and supporting
the communities in which it operates. Community engagement
is a core part of our responsible business strategy, which is
overseen by the Responsible Business Steering Group
(‘RBSG’) and supported through the work of the global charity,
community and environmental committees. We invite a
number of our Non-Executive Directors to attend meetings of
the RBSG on a quarterly basis to give their own perspectives
and they in turn, help update The Board on key initiatives.
Our approach to being a responsible business is described in
the responsible business section of this report on page 21
and the separate responsible business report, which is
available on our website.
Beazley operates in a significant number of local
communities, and employees are encouraged to engage in
their communities through our ‘Make a Difference’
programme. This programme encourages all employees to
devote one working day a year to volunteering, and Beazley
also matches charitable funds raised by our employees.
Beazley’s charitable efforts are overseen by the Global Charity
Committee and take the form of supporting charitable work
both in our local communities and globally.
In 2021 and 2022, our global charitable efforts have been
focussed on our partnership with Renewable World and
supporting the provision of affordable renewable energy
programmes in third world countries. For the next two years,
our employees have voted that our global charitable efforts
should be focussed on providing support to World Central
Kitchen, an organisation which provides meals to communities
impacted by natural disasters and during prolonged
humanitarian crises. Please see the responsible business
report for more information.
In further promoting equitable supplier relationships, Beazley
is a willing follower of the Prompt Payment Code and
publishes its average supplier payment times twice a year.
The Board receives regular updates on the work of the RBSG
and reviews and approves changes to Beazley’s charity and
community donation policy.
The Board is kept informed of material supplier matters
through updates from the Chief Operations Officer and other
reports. The Board also reviews and approves changes to the
key policies governing Beazley’s ethical relationships with its
suppliers and other third parties.
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Section 172 statement
The Board of Directors confirm that during the year ended 31 December 2022 they have discharged their duties to act in a way
that they believe promotes the long-term success of the company for the benefit of its members as a whole, whilst having
regard to the matters set out in Section 172 of the Companies Act 2006. Further information is provided in this statement on
how these duties have been discharged.
The Board is responsible for ensuring that the principal decisions it takes promote Beazley’s long-term success for its members
as a whole and have regard to the matters set out in Section 172 of the Companies Act 2006. Section 172 states that:
A Director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the
company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) the impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
The Board has determined the company’s key stakeholder groups to be its employees, clients and broker partners,shareholders
and regulators. The approaches to engagement with these stakeholder groups and the impact of such engagement on the
outcomes of certain key board decisions are set out in the stakeholder engagement report. The views of these stakeholders are
considered by The Board when principal decisions are taken.
Information is provided below on the principal decisions taken by The Board during the year and how key stakeholders and other
matters set out in Section 172 were considered by The Board in making these decisions.
Principal decisions of The Board
Decision
Approval of an updated
dividend strategy
Approval of a medium-term
plan to support the long
term strategy
Steps to diversify and
strengthen Beazley’s overall
business, supported by the
raising of additional equity
Commitment to specific
targets and market
initiatives around net zero
Creation of separate Audit
and Risk Committees
Section 172 and stakeholders
✓ consequences of decisions in the long term
✓ interests of stakeholders: shareholders and regulators
✓ the need to act fairly as between members of the company
✓ reputation for high standards of business conduct
✓ consequences of decisions in the long term
✓ interest of stakeholders: employees, clients and broker partners, shareholders, regulators and
suppliers
✓ consequences of decisions in the long term
✓ interests of stakeholders: shareholders, policyholders and regulators
✓ the need to act fairly as between members of the company
✓ reputation for high standards of business conduct
✓ consequences of decisions in the long term
✓ impact on the environment
✓ reputation for high standards of business conduct
✓ interests of all stakeholder groups
✓ consequences of decisions in the long term
✓ reputation for high standards of business conduct
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Beazley | Annual report 2022
55
Section 172 statement
continued
Board decision making in action
Approval of an updated dividend strategy
In February 2022, The Board approved that Beazley resumes
the payment of dividends and adopted a new dividend
strategy. The new policy is for a single annual dividend
payment to be considered based on the year-end results, with
the intention being to grow the level of dividend annually but
recognising that some earnings fluctuations are to be
expected.
The Board paused the payment of dividends following the
payment in March 2020. The decision to resume dividend
payments in March 2022 was taken in consideration of the
views of Beazley’s established shareholder base, which
includes a large number of employee shareholders. The
decision to move to an annual cycle of dividend payments was
also taken to give better alignment to business and capital
planning cycles, including to the annual capital planning cycle
with Lloyd’s (and other regulators) and give Beazley greater
flexibility to be able to respond to the needs of its customers.
Approval of the medium-term plan to support the long-
term strategy
In April 2022, The Board reviewed a plan for a number of key
medium-term projects to support Beazley’s longer-term
ambitions. The plan was formulated in consideration of our
purpose of helping our customers explore, create and build,
with key areas of focus around de-risking, simplification,
efficiency and product suite.
The medium-term plan has been developed in consideration of
the interests of all of Beazley’s key stakeholder groups. This
has included the views of clients and broker partners on the
role they would like Beazley to play over the medium term, and
the views of shareholders and regulators to ensure plans are
profitable and sustainable.
A key element in the delivery of the medium-term plan is the
execution of steps under Beazley’s modernisation programme.
The modernisation programme impacts all of our people, and
there has been a particular focus on communicating to the
entire workforce and obtaining feedback to ensure that there
is a culture of engagement and openness around this
important programme. The Board has received updates on the
modernisation programme during the year, including reviewing
and approving the overall governance framework for ensuring
the modernisation programme is implemented successfully.
The establishment of the Risk Committee is discussed below
and a key role of this Committee will be to provide assurance
to The Board around the mitigation of risk on delivery of the
modernisation programme.
Steps to strengthen and diversify Beazley’s overall
business, supported by the raising of additional equity
2022 has been a year of particular turbulence, with the
impacts of war, energy prices and rising inflation impacting all
of our stakeholders. The Board has monitored closely the
developing economic situation to ensure that steps are taken
to support Beazley in remaining resilient through this time.
In the Chief Executive Officer’s report, we talk about the
support we have provided to our employees most likely
impacted by the cost of living crisis, through a one-off payment
in June 2022. In the remuneration report, we have provided
details of the steps we took for year-end salary adjustments
for the workforce.
During the year The Board has also closely monitored the
impact across Beazley’s markets of the macroeconomic
situation. In particular, The Board have noted a strong
opportunity to grow the Property book in response to rising
rates in Property Treaty. Engagement with senior employees
was key to determining that Beazley had the capacity to
support growth to its Property book, which would have the
further benefit of creating greater diversification across
Beazley’s overall book.
In November, The Board approved that steps be taken to seek
to raise additional equity to support the planned growth. This
followed an assessment of market opportunities, including
obtaining the views of brokers, and the need to raise
additional capital versus other alternatives to support these
opportunities. The capital raising is an enabler for the further
diversification of Beazley’s overall book of business to support
long-term and sustainable business growth for the interests of
all of its stakeholders.
Prior to launching the equity raise, the views of most
significant shareholders were assessed via Beazley’s
stockbrokers, to the extent possible under a pre-emptive
equity raising. The recently published recommendations of the
Pre-emption Group were also considered, as Beazley was the
first FTSE 350 company to seek to raise capital under the new
regime.
Via the company’s subsidiary, Beazley Furlonge Limited, The
Board also proactively engaged with Lloyd’s to obtain views on
the impacts to plans for business written in the Lloyd’s
market.
Overall, the equity raise concluded with £340.8m ($404.4m)
of equity capital being raised through an institutional placing
and small retail offering. Some further detailed information on
the equity raise is contained in the Directors’ report on page
140 and in note 21 to the financial statements.
56
Beazley | Annual report 2022
www.beazley.com
Creation of separate Audit and Risk Committees
In December 2022 The Board approved the proposal to
establish a separate Audit Committee and Risk Committee
from 1 January 2023. This step was taken to strengthen the
Group’s overall approach to corporate governance and enable
each committee to give greater focus to their areas of
responsibility.
The key function of the Audit Committee is to support The
Board in relation to the oversight of the financial reporting
process, the system of internal financial controls and the
audit process. The key function of the Risk Committee is to
provide oversight of the Beazley group’s risk management
framework and processes for monitoring compliance with laws
and regulations. Specific duties of the Risk Committee include
oversight of the Group’s whistleblowing arrangements and
providing assurance to The Board in relation to key group-wide
transformational projects, including the modernisation
programme.
The Board approved the establishment of the separate Audit
and Risk Committees as an important step to strengthen
Beazley’s overall approach to corporate governance in light of
the interests of all of its stakeholders. The decision also
supports Beazley’s culture of risk management and the long-
term and sustainable development of the business.
Commitment to specific targets and market initiatives
around net zero
During 2022, The Board made a number of decisions to
further support Beazley’s commitments to making a positive
contribution to society and the environment. These decisions
were taken not only in consideration to Beazley’s impact to its
communities and the environment, but also in consideration
of the views of shareholders, customers and other
stakeholders, given their fundamental impacts.
The specific decisions taken were as follows:
• Committing to a target date for net zero - The Board
approved that Beazley commit to a target date of 2050 for
transition to net zero across all of its operations.
• Becoming a signatory to the United Nations backed Net
Zero Insurance Alliance (NZIA) - The Board approved that
Beazley become a signatory to the NZIA. The NZIA is
focussed on supporting insurers through the specific
challenges they face in their transition to net zero, and
Beazley is now a key participant in its work.
• Obtaining membership of the UN Global Compact - The
Board also approved that the company seek membership of
the UN Global Compact. The UN Global Compact is a
voluntary ESG initiative with a membership of over 15,000
international companies. In order to satisfy the membership
requirements, Beazley has committed to taking a number of
steps to further strengthen its approach to ESG matters.
• Approving of a revised responsible investment policy - The
Board approved revisions to the responsible investment
policy to include an allocation for impact investments.
Impact investments are investments which provide a
measurable social and environmental impact, as well as a
financial return. The Board also considered the work done
to measure the carbon transition pathway of the investment
portfolio, with an aim of setting targets for carbon reduction
by the end of 2022 and further supporting its commitments
as a signatory to the UN Principles for Responsible
Investment.
• Supporting the Terra Carta - The Board approved a proposal
to give formal support to Terra Carta. This is an initiative led
by HM King Charles III to drive engagement and
commitment from corporations to ensure nature, people
and planet are at the core of business value creation. This
support builds on Beazley’s existing commitments as a
member of the Sustainable Markets Initiative taskforce.
www.beazley.com
Beazley | Annual report 2022
57
Financial review
Group performance
Beazley delivered a profit before tax in 2022 of $191.0m, which consisted of a
strong underwriting performance offset by a reduced investment performance,
and a return on equity of 7%.
Result
Profit before tax in 2022 was $191.0m (2021: $369.2m).
This was achieved through a substantial underwriting profit of
$402.0m or a combined ratio of 89% (2021: 93%) offset by
an investment loss of $179.7m (2021: gain of $116.4m) or
an investment return of (2.1)% (2021: 1.6%).
Premiums
Gross premiums written increased by 14% in 2022 to
$5,268.7m (2021: $4,618.9m). Rates on renewal business
on average increased by 14% across the portfolio (2021:
increased by 24%). All of our five divisions saw growth in
2022, with Cyber Risks and MAP Risks achieving double-digit
growth of 42% and 23% respectively.
Our net premiums written increased by 10% in 2022 to
$3,876.2m (2021: $3,512.4m). The slower growth in net
premium compared to gross is due to an increase in
reinsurance purchased during the period. The main drivers of
our additional reinsurance purchasing were areas of
significant growth, particularly Cyber Risks, so as to manage
our net exposure.
58
Beazley | Annual report 2022
www.beazley.com
Statement of profit or loss
Gross premiums written
Net premiums written
Net earned premiums
Net investment (loss)/income
Other income
Gain from sale of business
Revenue
Net insurance claims
Acquisition and administrative expenses
Foreign exchange loss
Expenses
Finance costs
Profit before tax
Income tax expense
Profit after tax
Claims ratio
Expense ratio
Combined ratio
Rate increase
Investment return
2022
2021
Movement
%
14
10
15
(254)
14
(100)
4
7
14
233
10%
1%
(48) %
(50) %
(48) %
$m
5,268.7
3,876.2
3,614.2
(179.7)
32.1
–
3,466.6
1,956.4
1,255.8
24.0
3,236.2
(39.4)
191.0
(30.2)
160.8
54 %
35 %
89 %
14 %
(2) %
$m
4,618.9
3,512.4
3,147.3
116.4
28.2
54.4
3,346.3
1,826.2
1,104.8
7.2
2,938.2
(38.9)
369.2
(60.5)
308.7
58 %
35 %
93 %
24 %
2 %
www.beazley.com
Beazley | Annual report 2022
59
reserve margin (known as risk adjustment for non-financial
risk under IFRS 17) and that the insurance liabilities will be
discounted. Currently, Beazley has an approach of setting
reserves within a preferred range of 5-10% above the actuarial
estimate. The actuarial estimate itself has a level of prudence
already embedded, and is higher than the corresponding best
estimate reserve.
Under IFRS 17, we will move to a preferred confidence level
range of between the 80th and 90th percentile, which will be
disclosed. This will show a percentile giving an indication
about where the reserves sits compared to the best estimate
and the capital requirement. IFRS 17 requires that the level of
this additional amount above a best estimate reserve, known
as the risk adjustment for non-financial risk, needs to be
considered against a number of principles of which there are
two dominant ones. First, the level needs to be consistent
with how risk is managed, contracts are priced and the
portfolios are managed. The second principle states that the
risk adjustment level should make the firm neutral to running
off the obligations or selling them.
At the end of 2022, our margin above actuarial estimates of
5.3% equated to a confidence level at the upper end of the
80th to 90th percentile range. At the date of transition to IFRS
17, 1 January 2022, our reserve confidence level was also at
the upper end of this range, with an equivalent margin of 6.4%
above actuarial estimates. Under IFRS 17, we expect the
confidence level on transition to be nearer the middle of this
range. Accordingly, the Group expects the provision for claims
recognised on adoption of IFRS 17 to be lower than IFRS 4
technical provisions, which have historically been near the
upper-end or above the preferred reserve range we will be
using under IFRS 17. This is because under IFRS 17, the level
of reserve margin has been calculated on a ground up basis
with consideration of the compensation we target for each line
of business, in line with IFRS 17 principles.
Reserve releases
Prior year reserve releases in 2022 totalled $132.6m (2021:
$209.8m) which represented 3.7% of earned premium. The
reduction in reserve releases was driven primarily by a
reduction in releases from Cyber Risks and Property Risks.
Once again each of the divisions released reserves off of prior
years in total. MAP Risks saw strong releases across all year
of account totalling $66.2m, while the other four divisions
released off two of the prior years.
Financial review
Group performance continued
The Group is of the view that some of the above metrics
constitute alternative performance measures (APMs). Further
information on our APMs can be found in the key performance
indicators on page 2 and the APM tables on page 232.
Reinsurance purchased
Reinsurance is purchased for a number of reasons:
• to mitigate the impact of natural catastrophes such as
hurricanes, and non-natural catastrophes such as cyber
attacks;
• to enable the Group to put down large lead lines on the
risks we underwrite; and
• to manage capital to lower levels.
The amount the Group spent on reinsurance in 2022 was
$1,392.5m (2021: $1,106.5m). As a percentage of gross
premiums written it increased to 26% from 24% in 2021.
Combined ratio
The combined ratio of an insurance company is a measure of
its operating performance and represents the ratio of its total
costs (including claims and expenses) to total net earned
premium.
A combined ratio under 100% indicates an underwriting profit.
Consistent delivery of operating performance across the
market cycle is clearly a key objective for an insurer. Beazley’s
combined ratio improved in 2022 to 89% (2021: 93%).
Claims
2022 proved to be a year of several market events, including
Hurricane Ian and the war in Ukraine. Despite this our claims
ratio for 2022 reduced to 54% (2021: 58%), with our estimate
for the war in Ukraine remaining unchanged since our 2022
interim report. Our expectation of losses for Hurricane Ian
remains at $120m net of reinsurance.
Reserve margin
Beazley has a consistent reserving philosophy, with initial
reserves being set to include risk margins that may be
released over time as and when any uncertainty reduces.
Historically these margins have given rise to held reserves
within the range of 5-10% above our actuarial estimates,
which themselves include some margin for uncertainty. The
margin held above the actuarial estimate was 5.3% at the end
of 2022 (2021: 6.4%). Reserve monitoring is performed at a
quarterly ‘peer review’, which involves a challenge process
contrasting the claims reserves of underwriters and claim
managers, who make detailed claim-by-claim assessments,
and the actuarial team, who provide statistical analysis. This
process allows early identification of areas where claims
reserves may need adjustment. During years where we
experience large losses we tend to see the margin we monitor
being lowered as often we hold the same estimates within
both the actuarial and held reserve estimates.
With the move to IFRS 17 from IFRS 4, we have taken the
opportunity to revisit our reserving strategy. What is currently
held under IFRS 4 will change under IFRS 17. The main
changes will be how we will set and disclose the level of
60
Beazley | Annual report 2022
www.beazley.com
Financial yearSurplus in net held assets:reservesWhole account reserve strength within our 5-10% target range (%)040608101214161820220510
Prior year reserve adjustments
Cyber Risks
Digital
MAP Risks
Property Risks
Specialty Risks
Total
Releases as a percentage of net earned premium
2018
$m
17.5
22.5
27.3
(23.5)
71.2
115.0
5.5%
2019
$m
51.1
23.4
10.4
(47.2)
(28.2)
9.5
0.4%
2020
$m
54.5
31.9
14.4
25.1
(32.8)
93.1
3.5%
2021
$m
26.3
39.7
63.0
59.1
21.7
209.8
6.7%
2022
$m
8.0
15.5
66.2
14.7
28.2
132.6
3.7 %
5 year
average
$m
31.5
26.6
36.3
5.6
12.0
112.0
4.0 %
Acquisition costs and administrative expenses
Business acquisition costs and administrative expenses
increased during 2022 to $1,255.8m from $1,104.8m in
2021. The breakdown of these costs is shown below.
Brokerage costs are the premium commissions paid to
insurance intermediaries for providing business. As a
percentage of net earned premiums they have increased to
23% in the current year (2021: 22%). Brokerage costs are
deferred and expensed over the life of the associated
premiums in accordance with the Group’s accounting policy.
Other acquisition costs comprise costs that have been
identified as being directly related to underwriting activity (e.g.
underwriters’ salaries and Lloyd’s box rental). These costs are
also deferred in line with premium earning patterns.
Brokerage costs
Other acquisition costs
Total acquisition costs
Administrative expenses
Total acquisition costs and
administrative expenses
2022
$m
825.0
127.1
952.1
303.7
2021
$m
707.5
114.3
821.8
283.0
1,255.8
1,104.8
Beazley focuses on improving our expense ratio during times
of strong growth. Given our increased spend in 2022 on our
infrastructure, plus the world fully opening again after
COVID-19 restrictions, it is pleasing that we maintained a flat
expense ratio of 35% compared to 2021.
Foreign exchange
The majority of Beazley’s business is transacted in US dollars,
which is the currency we have reported in since 2010 and the
currency in which we aim to hold the company’s net assets.
Changes in the US dollar exchange rate with sterling, the
Canadian dollar and the euro do have an impact as we receive
premiums in those currencies and a material number of our
staff receive their salary in sterling. Beazley’s foreign
exchange loss taken through the statement of profit or loss in
2022 was $24.0m (2021: $7.2m loss). The higher than
average loss was driven primarily by the revaluation of our
non-monetary items, such as deferred acquisition costs and
unearned premium reserve, back to historic rates. From 2023,
this revaluation of our non-monetary items will no longer take
place as IFRS 17 mandates that all insurance items are now
treated as monetary.
Investment performance
Recent rapid growth in our financial assets continued in 2022
as the business grew significantly and the value of our
investments, cash and cash equivalents increased to
$8,998.1m at year end (2021: $7,875.3m). We generated an
investment return of $(179.7)m, or (2.1)% (2021: $116.4m,
1.6%) on these assets during the year.
Inflation became the key consideration for financial markets in
2022, as remaining supply-chain pressures arising from the
COVID-19 pandemic were exacerbated by the war in Ukraine,
affecting energy and food costs. Earlier expectations that
higher inflation would be temporary were revised and central
banks became increasingly aggressive in raising interest rates
as inflation accelerated. Unusually, both Sovereign bonds and
risk assets saw significant losses, as yields rose and
economic growth forecasts declined.
US Treasury yields at shorter maturities increased by more
than four percentage points during 2022; the biggest increase
in more than half a century. We acted to reduce portfolio
duration for much of the period, which helped to reduce the
adverse impact of rising yields, but our fixed income
investments still generated a loss of 3.0%. Global equities
lost more than 18% in 2022 and our equity portfolio, which
reflects our responsible investment objectives, saw modestly
greater losses. However, equities make up less than 3% of
our portfolio and all of our other capital growth investments
achieved positive returns. Our hedge funds, in particular,
proved resilient in the difficult market conditions, returning
more than 7% in a year when the hedge fund universe
recorded losses. Overall, our capital growth investments
returned a small gain, of 0.3%. As part of our responsible
investment initiative we have committed to build an ‘impact’
portfolio, of up to $100m, targeting investment opportunities
which have measurable social or environmental benefits. We
made our first such investment in the fourth quarter of 2022,
in a private equity fund supporting the creation of renewable
energy capacity in Europe. We expect to make further
investments throughout 2023.
www.beazley.com
Beazley | Annual report 2022
61
Financial review
Group performance continued
The unrealised investment loss in 2022 is significant,
notwithstanding some recovery in the fourth quarter, as yields
stabilised. However, losses were mostly the result of rising
yields, which have also acted to reduce the present value of
our Solvency II liabilities, such that our capital position has
not been materially affected. Bond yields are now much higher
than they were a year ago (our fixed income portfolio yield at
31 December 2022 was 4.7%), suggesting that future
investment returns may be better than we have seen for some
years. However, many of the factors that drove financial
market volatility in 2022, including rampant inflation and rising
interest rates, remain unresolved, such that investment
returns are likely to remain volatile.
The table below details the breakdown of our portfolio by asset class:
Cash and cash equivalents
Fixed and floating rate debt securities
– Government issued
– Corporate bonds
– Investment grade
– High yield
Syndicate loans
Derivative financial instruments
Core portfolio
Equity funds
Hedge funds
Illiquid credit assets
Total capital growth assets
Total
Comparison of return by major asset class:
Core portfolio
Capital growth assets
Overall return
Tax
Beazley is liable to corporation tax in a number of
jurisdictions, notably the UK, the US and Ireland. Beazley’s
effective tax rate is thus a composite tax rate mainly driven
by the Irish, UK and US tax rates. The weighted average of
the statutory tax rates for the year was 21.2% (2021:
17.2%). The tax rate of 21.2% is higher than last year due
to this year’s composition of profits and losses across the
Group.
31 Dec 2022
$m
652.5
31 Dec 2021
%
7.3
$m
591.8
%
7.5
5,006.3
55.6 4,008.1
50.9
2,050.5
308.7
32.5
34.7
8,085.2
159.4
530.6
222.9
912.9
8,998.1
3.4
0.4
0.4
22.8 1,861.9
402.3
37.9
7.6
89.9 6,909.6
209.6
478.2
277.9
965.7
100.0 7,875.3
1.8
5.9
2.4
10.1
23.6
5.1
0.5
0.1
87.7
2.7
6.1
3.5
12.3
100.0
31 Dec 2022
31 Dec 2021
$m
(182.8)
3.1
(179.7)
%
(2.4)
0.3
(2.1)
$m
7.2
109.2
116.4
%
0.1
11.9
1.6
The effective tax rate has decreased in 2022 to 15.8%
(2021: 16.4%). The decrease has been a result of
favourable prior year tax adjustments in 2022.
62
Beazley | Annual report 2022
www.beazley.com
Comparison of returns - major assets classes ($m)3.1(182.8)109.27.220222021Capital growth portfolioCore portfolio-200-150-100-50050100150200Beazley group funds ($m)4,8905,0535,8516,6727,8758,998Group funds including funds at Lloyd'sSyndicates 2623, 3623 and 3622201720182019202020212022010002000300040005000600070008000900010000
Financial review
Balance sheet management
Summary statement of financial position
Intangible assets
Reinsurance assets
Insurance receivables
Other assets
Financial assets at fair value and cash and cash equivalents
Total assets
Insurance liabilities
Financial liabilities
Other liabilities
Total liabilities
Net assets
Net assets per share (cents)
Net tangible assets per share (cents)
Net assets per share (pence)
Net tangible assets per share (pence)
Number of shares1
1 Excludes shares held in the employee share trust and treasury shares.
Intangible assets
Intangible assets consist of goodwill on acquisitions of
$62.0m (2021: $62.0m), purchased syndicate capacity of
$13.7m (2021: $10.7m), US admitted licences of $9.3m
(2021: $9.3m) and capitalised expenditure on IT projects of
$43.8m (2021: $41.1m).
Reinsurance assets
Reinsurance assets represent recoveries from reinsurers in
respect of incurred claims of $2,487.4m (2021: $1,829.4m),
and the unearned reinsurance premiums reserve of $799.2m
(2021: $557.0m). The reinsurance receivables from
reinsurers are split between recoveries on claims paid or
notified of $420.6m (2021: $371.4m), and an actuarial
estimate of recoveries on claims that have not yet been
reported of $2,066.8m (2021: $1,458.0m).
The Group’s exposure to reinsurers is managed through:
• minimising risk through selection of reinsurers who meet
strict financial criteria (e.g. minimum net assets, minimum
‘A’ rating by S&P). These criteria vary by type of business
(short vs medium tail);
• timely calculation and issuance of reinsurance collection
notes from our ceded reinsurance team; and
• regular monitoring of the outstanding debtor position by our
Reinsurance Security Committee and Credit Control
Committee. We continue to provide against impairment of
reinsurance recoveries and at the end of 2022 our provision
in respect of reinsurance recoveries totalled $29.3m (2021:
$11.5m). The increase is driven by a provision made
against reinsurance on our Cyber book.
2021
Movement
2022
$m
128.8
3,286.6
1,811.7
873.8
8,998.1
15,099.0
10,354.2
562.5
1,608.8
12,525.5
2,573.5
386.7c
367.4c
$m
123.5
2,386.4
1,696.1
726.1
7,875.3
12,807.4
8,871.8
554.7
1,250.1
10,676.6
2,130.8
351.6c
331.2c
315.6p
299.8p
665.4m
265.8p
250.4p
606.1m
%
4
38
7
20
14
18
17
1
29
17
21
10
11
19
20
10
Insurance receivables
Insurance receivables are amounts receivable from brokers in
respect of premiums written. The balance at 31 December
2022 was $1,811.7m (2021: $1,696.1m). The amount of
estimated future premium that remains in insurance
receivables relating to years of account that are more than
three years developed at 31 December 2022 is $29.8m
(2021: $15.4m).
Insurance liabilities
Insurance liabilities of $10,354.2m (2021: $8,871.8m)
consist of two main elements, being the unearned premium
reserve (UPR) and gross insurance claims liabilities. Our UPR
has increased by 20% to $2,971.7m (2021:$2,472.7m). The
majority of the UPR balance relates to current year premiums
that have been deferred and will be earned in future periods.
Current indicators are that the business is profitable.
Gross insurance claims reserves are made up of claims which
have been notified to us but not yet paid of $1,758.4m
(2021: $1,627.5m), and an estimate of claims incurred but
not yet reported (IBNR) of $5,624.1m (2021: $4,771.7m).
These are estimated as part of the quarterly reserving process
involving the underwriters and Group Actuary. Gross insurance
claims reserves have increased 15% from 2021 to
$7,382.5m (2021: $6,399.1m).
www.beazley.com
Beazley | Annual report 2022
63
Financial review
Balance sheet management
continued
Financial liabilities
Financial liabilities comprise borrowings and derivative
financial liabilities. The Group utilises two long-term debt
facilities:
• in November 2016, Beazley Insurance dac issued $250m of
5.875% subordinated tier 2 notes due in 2026; and
• in September 2019, Beazley Insurance dac issued $300m
of 5.5% subordinated tier 2 notes due in 2029.
A syndicated short-term banking facility led by Lloyds Banking
Group plc provides potential borrowings up to $450m. Under
the facility $450m may be drawn as letters of credit to
support underwriting at Lloyd’s, and up to $225m may be
advanced as cash under a revolving facility. The cost of the
facility is based on a commitment fee of 0.4725% per annum,
and any amounts drawn are charged at a margin of 1.35% per
annum.
The cash element of the facility will expire on 23 July 2024,
whilst letters of credit issued under the facility can be used to
provide support for the 2021, 2022 and 2023 underwriting
years. In 2022 $225m has been placed as a letter of credit
as Funds at Lloyd’s (FAL).
Other assets
Other assets are analysed separately in the notes to the
financial statements. The items included comprise:
• deferred acquisition costs of $550.1m (2021: $477.8m);
and
• deferred tax assets available for use against future taxes
payable of $35.2m (2021: $16.3m).
Judgement is required in determining the policy for deferring
acquisition costs. Beazley’s policy assumes that variable
reward paid to underwriters relates to prior years’ business
and is not an acquisition cost. As a result, the quantum of
costs classified as acquisition is towards the lower end of the
possible range seen across the insurance market. Costs
identified as related to acquisition are then deferred in line
with premium earnings.
Capital structure
Capital structure
Beazley aims to hold capital in excess of regulatory
requirements in order to be best placed to swiftly take
advantage of growth opportunities arising outside of our
business plan, as well as to provide additional protection
against downside events.
The Group actively seeks to manage its capital structure. Our
preferred use of capital is to deploy it on opportunities to
underwrite profitably.
Beazley has a number of requirements for capital at a Group
and subsidiary level. Capital is primarily required to support
underwriting at Lloyd’s, in the US and through our European
branches and is subject to prudential regulation by local
regulators (the Prudential Regulation Authority, Lloyd’s, the
Central Bank of Ireland, and the US state level supervisors).
Beazley is subject to the capital adequacy requirements of the
European Union (EU) Solvency II regime (SII). We comply with
all relevant SII requirements.
Further capital requirements come from rating agencies which
provide ratings for Beazley Insurance Company, Inc and
Beazley Insurance dac. We aim to manage our capital levels
to obtain the ratings necessary to trade with our preferred
client base.
Beazley holds a level of capital over and above its regulatory
requirements. The amount of surplus capital held is
considered on an ongoing basis in light of the current
regulatory framework, opportunities for organic or acquisitive
growth and a desire to maximise returns for investors.
In November 2022 we raised $404m of new capital through a
non-pre-emptive share issuance. The decision to raise this
additional equity was taken following the market dislocation
across the Property market. We see this as an opportunity to
expand our Property and Reinsurance books, whilst also
enabling further growth within our Cyber Risks and Specialty
Risks books, net of reinsurance.
Shareholders’ funds
Tier 2 subordinated debt (2026)
Tier 2 subordinated debt (2029)
Drawdown of letter of credit
2022
2021
$m
2,573.5
249.4
298.6
225.0
3,346.5
$m
2,130.8
249.1
298.3
225.0
2,903.2
During 2022 the equity raise further strengthened our capital
base which will enable us to deliver our underwriting plan. Our
funding comes from a mixture of our own equity alongside
$548.0m ($550.0m gross of capitalised borrowing costs) of
tier 2 subordinated debt. We also have a banking facility of
$450m (31 December 2021: $450m) of which, $225m has
been utilised and placed as a letter of credit at Lloyd’s to
support our Funds at Lloyd’s (FAL).
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The following table sets out the Group’s capital requirement
selected for our internal measure of the Group’s capital
surplus position:
Lloyd’s economic capital
requirement (ECR)
Capital for US insurance companies
2022
$m
2021
$m
2,577.1 2,225.3
180.9
247.8
2,758.0 2,473.1
The final Lloyd’s economic capital requirement (ECR) at year
end 2022, as confirmed by Lloyd’s, reflects the business we
expect to write through to the end of 2023 as per our
business plan which is targeting net growth of upwards of
20%. Furthermore, rather than taking a one year view of this
business, it assumes that all risks run to ultimate. Finally,
Lloyd's apply a 35% uplift to this number. These three factors
make the ECR requirement considerably more onerous than
the standard Solvency II measure which considers a one year
time horizon and contains no uplift.
In general we expect our capital requirement to grow broadly
in line with the net written premiums in our business plan,
which in the short term should be double digit growth;
however, premium growth due to rate change has a more
limited impact on the capital requirement, as the amount of
risk stays broadly the same.
At Beazley we aim to hold excess capital over the Lloyd’s ECR
and US capital requirement, expressed as a percentage of
Lloyd’s ECR, and have a preferred range of 15-25%. Given the
stringent nature of the Lloyd’s ECR as noted above, our Group
surplus capital ratio is not directly comparable to the standard
Solvency II capital ratio which is based on a one year time
horizon.
At 31 December 2022, we have surplus capital (on a Solvency
II basis) of 44%, above our current preferred range of 15% to
25% of ECR. Following payment of the proposed interim
dividend of 13.5p, this surplus reduces to 40%.
In addition to the surplus above, we have two further capital
levers which may be called upon. Firstly, the remaining
undrawn banking facility of $225m may be utilised and is not
included within the capital stack used in the capital surplus
calculation. Secondly, we continue to use reinsurance as a
tool to manage our capital position.
To ensure capital efficiency is maintained for our operations in
the US, we continue to use a captive arrangement through
Beazley NewCo Captive Company, Inc. that we set up in 2020.
Both tier 2 subordinated debt issuances issued by Beazley
Insurance dac in 2016 and 2019 were assigned and maintain
an Insurer Financial Strength (IFS) rating of ‘A+’ by Fitch.
Solvency II
The Solvency II regime came into force on 1 January 2016.
Beazley continue to provide quarterly Solvency II pillar 3
reporting to both Lloyd’s for the Beazley managed syndicates
and the Central Bank of Ireland and the Prudential Regulation
Authority for Beazley Insurance dac and Beazley plc.
Under Solvency II requirements, the Group is required to
produce a Solvency Capital Requirement (SCR) which sets out
the amount of capital that is required to reflect the risks
contained within the business. Lloyd’s reviews the syndicates’
SCRs to ensure that SCRs are consistent across the market.
The current SCR has been established using our Solvency II
approved internal model approved by Central Bank of Ireland
(CBI) which has been run within the regime as prescribed by
Lloyd’s. In order to perform the capital assessment:
• we use sophisticated mathematical models that reflect the
key risks in the business allowing for probability of
occurrence, impact if they do occur, and interaction between
risk types. A key focus of these models is to understand the
risk posed to individual teams, and to the business as a
whole, of a possible deterioration in the underwriting cycle;
and
• the internal model process is embedded so that teams can
see the direct and objective link between underwriting
decisions and the capital allocated to each team. This gives
a consistent and comprehensive picture of the risk/ reward
profile of the business and allows teams to focus on
strategies that improve return on capital.
IFRS 17
The implementation of the IFRS 17: Insurance Contracts
standard came into force for accounting periods commencing
on 1 January 2023. Applying this standard has been a major
undertaking and involved a multi-functional project over the
past six years.
Since the start of 2023, we have been accounting under IFRS
17 for insurance contracts at a Group level. The expected
impact on equity at the date of transition, 1 January 2022, is
an increase of at least 2% of equity. This increase is primarily
driven by discounting, alongside a reduction in reserves held
on the balance sheet. As discussed on page 60, these
reserve reductions are driven by the different approach to
calculating the reserve margin between IFRS 4 and IFRS 17,
moving to a confidence level led approach. It is important to
note that interest rates have increased since the date of
transition, so the discounting effect on more recent balance
sheet dates is expected to be more significant at other dates.
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Financial review
Capital structure continued
• Syndicate 3623 – corporate body regulated by Lloyd’s
through which the Group underwrites its personal accident,
BICI reinsurance business and, from 2018, Market Facilities
business;
• Syndicate 5623 – corporate body regulated by Lloyd’s
through which the Group underwrites across a diverse mix
of classes;
• Syndicate 4321 - a Lloyd's syndicate in a box focussing on
writing business on a consortium basis led by syndicate
2623/623 based on ESG scores of insureds;
• Beazley America Insurance Company, Inc. (BAIC) –
insurance company regulated in the US. In the process of
obtaining licenses to write insurance business in all 50
states;
• Beazley Insurance Company, Inc. (BICI) – insurance
company regulated in the US. Licensed to write insurance
business in all 50 states;
• Beazley USA Services, Inc. (BUSA) – service company based
in Farmington, Connecticut. Underwrites business on behalf
of Beazley syndicates, 2623 and 623, BICI and BAIC; and
• Beazley NewCo Captive Company, Inc. – provides internal
reinsurance to BICI on older accident years.
Group structure
The Group operates across Europe, Asia, Canada and the US
through a variety of legal entities and structures. As at 31
December 2022, the main entities within the legal entity
structure are as follows:
• Beazley plc – Group holding company, listed on the London
Stock Exchange;
• Beazley Ireland Holdings plc – intermediate holding
company;
• Beazley Underwriting Limited – corporate member at Lloyd’s
writing business through syndicates 2623, 3622 and 3623;
• Beazley Furlonge Limited – managing agency for the seven
syndicates managed by the Group 623, 2623, 3622, 3623,
6107, 5623 and 4321;
• Beazley Insurance dac – insurance company based in
Ireland that accepts non-life reinsurance premiums ceded
by the corporate member Beazley Underwriting Limited, and
also writes business directly from Europe;
• Syndicate 2623 – corporate body regulated by Lloyd’s
through which the Group underwrites its general insurance
business excluding accident, life and facilities. Business is
written in parallel with syndicate 623;
• Syndicate 623 – corporate body regulated by Lloyd’s which
has its capital supplied by third party names;
• Syndicate 6107 – special purpose syndicate writing
reinsurance business, and from 2017 cyber, on behalf of
third party names;
• Syndicate 3622 – corporate body regulated by Lloyd’s
through which the Group underwrites its life insurance and
reinsurance business;
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Risk management
and compliance
In a year of geopolitical instability, our risk
management and compliance functions
supported our business, and ultimately our
clients, successfully through challenging
times.
Risk management oversight
and framework
The Beazley plc Board delegates direct oversight of the risk
management function and framework to its Audit and Risk
Committee, and the primary regulated subsidiary Boards and
their Audit and Risk Committees. The Board delegates
executive oversight of the risk management function and
framework to the Executive Committee, which fulfils this
responsibility primarily through its Risk and Regulatory
Committee.
Beazley takes an enterprise-wide approach to managing risk.
The risk management framework establishes the approach to
identifying, measuring, mitigating, monitoring, and reporting on
key risks. The risk management framework supports the
Group strategy and objectives.
Beazley leverages the ‘three lines of defence’ model, in which
the risk management function is part of the second line of
defence. Ongoing communication and collaboration across the
three lines of defence ensures that the Group identifies and
manages risks effectively.
A suite of risk management reports support senior
management and The Board in discharging their oversight and
decision-making responsibilities. The risk reports include
updates on risk appetite, risk profiles, stress and scenario
testing, reverse stress testing, emerging and heightened
risks, a report to the Remuneration Committee, and the Own
Risk and Solvency Assessment (ORSA) report.
The Board approved the Group risk appetite statements during
2022 and received updates on monitoring against risk
appetite throughout the year.
Risk management
We pride ourselves on understanding the drivers of risk;
supporting and challenging management on managing
those risks for the Group and its clients. Whilst we
managed the challenges that growth can bring, we
remain mindful of emerging risks as well as regulatory and
legal changes. The risk function continues to engage in
key strategic projects to provide second line challenge
and ensure the risk management framework adapts
accordingly.
During the year, we made refinements to the risk
management framework including our approach to
articulating and monitoring risk appetite. This work will
continue during 2023 to ensure the framework adapts to
the Group risk profile and continues to embed a strong
risk culture. We have continued working with our
colleagues across the first and second lines of defence to
ensure effective risk management practices remain
embedded in business processes. Ultimately, this will
help ensure achievement of the Group’s strategic
objectives.
Our approach to managing the risks arising from climate
change are set out within the TCFD section of this report.
The latest report to The Board confirmed that the control
environment identified no significant failings or
weaknesses in key processes and that Beazley plc was
operating within risk appetite as at 31 December 2022,
with the systems having been in place for the entirety of
2022.
The business operated a control environment which supported
mitigating risks to stay within risk appetite. The risk
management function reviewed and challenged the control
environment through various risk management activities
throughout the year. In addition, the risk management function
worked with the capital model and exposure management
teams, particularly in relation to validation of the internal
model, preparing the ORSA, monitoring risk appetite and
through the business planning process. These teams provided
regular reports to the Underwriting Governance Committee
which the Chief Risk Officer chairs.
The risk management plan considers, among other inputs, the
inherent and residual risk scores for each risk event. The risk
management function also includes results from internal
audits into its risk assessment process. The internal audit
function considers the risk management framework in its audit
universe to derive a risk-based audit plan.
In 2022, the Group's approach to identifying, managing and
mitigating emerging risks was enhanced to include inputs from
the business, post-risk incident lessons learned and industry
thought leaders. The approach considers the potential
materiality and likelihood of impacts which helps prioritise
emerging risks which the Group monitors or undertakes
focused work on. Key emerging risks in 2022 included
geopolitical risks, the macroeconomic environment (e.g.
inflation, global insurance market trends) and ESG. The Board
carried out a robust assessment of the Group's emerging and
principal risks.
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Risk management
and compliance continued
Principal risks the Group faces
Below summarises the principal risks the Group faces, the
control environment, governance and oversight that mitigate
these risks.
Key to below table:
▲ Within risk appetite
► Trending outside of risk appetite
▼ Outside of risk appetite
Principal risks and summary descriptions
Insurance ▲
The risk arising from inherent uncertainties about the occurrence,
amount and timing of insurance premium, and claims liabilities.
This includes risk from underwriting such as market cycle,
catastrophe, reinsurance and reserves.
• Market cycle: potential systematic mispricing of medium- or long-
tailed business that does not support revenue to invest and
cover future claims;
• Catastrophe: one or more large events caused by nature (e.g.
hurricane, windstorm, earthquake and/or wildfire) or mankind
(e.g. coordinated cyber-attack, global pandemic, losses linked to
an economic crisis, an act of terrorism or an act of war and/or a
political event) impacting a number of policies, and therefore
giving rise to multiple losses;
• Reinsurance arrangements: reinsurance may not be available or
purchases not made to support the business (i.e.-mismatch);
and
• Reserving: reserves may not be sufficiently established to reflect
the ultimate paid losses.
Market (asset)▲
The value of investments may be adversely impacted by financial
market movements of values of investments, interest rates,
exchange rates, or external market forces. Expected asset returns
may not align to risk and capital requirements.
Credit ▲
This risk of failure of another party to perform its financial or
contractual obligations in a timely manner. Exposure to credit risk
from reinsurers, brokers, and coverholders, of which the
reinsurance asset was the largest exposure for the Group.
Group ▲
The risk of an occurrence in one area of the Group, which adversely
affects another area in the Group, resulting in financial loss and/or
reputational damage. This also includes a deterioration in culture
which leads to inappropriate behaviour, actions and/or decisions
including dilution of culture or negative impact on the Group brand.
Liquidity ▲
Investments and/or other assets are not available or adequate in
order to settle financial obligations when they fall due.
Regulatory and legal ▲
Non-compliance with regulatory and legal requirements, failing to
operate in line with the relevant regulatory framework in the
territories where the Group operates leading to being unable to
underwrite, manage claims, fines, etc.
Mitigation and monitoring
Beazley used a range of techniques to mitigate insurance risks including
pricing tools, analysis of macro trends and claim frequency- including
alignment with pricing and ensured exposure was not overly
concentrated in any one area, especially those with higher risk.
The strategic approach to exposure management and a comprehensive
internal and external reinsurance programme helped to reduce volatility
of profits in addition to managing net exposure by the transfer of risk.
The prudent and comprehensive approach to reserving helped ensure
that claims covered by the policy wording were paid, delivering the right
outcome to clients. High calibre claims and underwriting professionals
deliver expert service to insureds and claims handling. The Underwriting
Committee oversaw these risks.
Beazley operated a conservative investment strategy with a view to
limiting investment losses that would impact the company’s financial
result. Beazley mitigated this risk by carrying out asset liability matching
as per the investment constraints specified in the investment strategy.
More detail on climate related risks and mitigations impacting the
investment strategy can be found in the TCFD report. The Investment
Committee oversaw the investment strategy and its implementation.
Beazley traded with strategic reinsurance partners over the long term
that support Beazley through the cycle despite catastrophic claim
events. The Group did not have significant concentration to reinsurers,
ensuring these partners meet internal approval criteria overseen by the
Reinsurance Security Committee. Credit risk arising from brokers (non-
payment of premiums or claims) and coverholders being low, has relied
on robust due diligence processes and ongoing monitoring of aged debt
and financial status.
Group risk culture was centred on principles of transparency,
accountability, and awareness. This expected outcome continued to help
maintain a strong risk culture that supported the embedding of risk
management within Beazley, such that it makes a difference and was
overseen by The Board. An effective risk culture supported strong risk
management, encouraged sound risk taking, created an awareness of
risks and emerging risks. The Executive Committee and The Board
oversaw this risk.
By managing liquidity Beazley maximised flexibility in the management of
financial assets, including investment strategy, without incurring
unacceptable liquidity risks over any time horizon; and in doing so
helped to ensure that clients and creditors were financially protected.
The Group periodically assessed the liquidity position of Beazley and
each entity, and this was overseen by the Audit and Risk Committee.
This included a benchmarking view from a third-party assessment.
The control environment supports the nature, exposure scale and
complexity of the business with oversight from the Risk and Regulatory
Committee. The Group maintains a trusting and transparent relationship
with regulators, ensuring coordinated communication and the following
of robust processes, policies and procedures in the business. In
addition, key staff, particularly those who held defined roles with
regulatory requirements, were experienced and maintained regular
dialogue with regulators. Beazley horizon scans for regulatory and legal
matters and considers their potential impacts on the business.
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Principal risks and summary descriptions
Operational ▲
Failures of people, processes and systems or the impact of an
external event on operations (e.g. a cyber-attack having a
detrimental impact on operations), including transformation and
change related risks.
Mitigation and monitoring
We attract and nurture talented colleagues who champion diversity of
thought, creating a culture of empowerment, collaboration and
innovation to build an environment of employee wellbeing. The Group
employs high calibre, motivated, loyal, and productive people with
sufficient competence to perform their required duties.
Strategic ▲
Events or decisions that potentially stop the Group from achieving
its goals or danger of the Group strategic choices being incorrect,
or not responding effectively to changing environments in a timely
manner leading to inadequate profitability, insufficient capital,
financial loss or reputational damage.
Enterprise ▲
Pervasive risks impacting multiple areas of the Group (e.g. conduct,
reputation, ESG, concentration and/or viability) occurring through
real or perceived action, or lack of action taken, by a regulatory
body, market and/or third-party used by the business. A negative
change to Beazley’s reputation would have a detrimental impact to
Group profitability and public perception.
The Group invests in technology and re-engineering processes to support
the operation of these activities which are overseen by the Operations
Committee. Beazley has policies and procedures across the organisation
which ensure effective and efficient operations and drive productivity and
quality across people, processes and systems to continue to enable
scalable growth.
The business continuity, and disaster recovery and incident response
plans, help ensure that processes and systems enable our people to
deliver the right outcomes for clients and overall productivity. There were
effective controls in the day-to-day operations around information
security, including cyber resilience, to mitigate the damage that loss of
access to data or the amendment of data can have on the ability to
operate.
Beazley continuously addresses key strategic opportunities and
challenges itself to be the highest performing sustainable specialist
insurer. Beazley commits to ensuring it recognises, understands,
discusses, and develops a plan of action to address any significant
strategic priorities in a timely fashion whilst ensuring continuity of
operational effectiveness and brand reputation.
Beazley creates an environment that attracts, retains and develops high
performing talent with diversity of thought to explore, create and build,
through investing in understanding the complexity of the risks clients
face and deploying expertise where the Group can create value. The
Executive Committee and The Board oversee these risks.
Beazley maintains coverage above regulatory capital to a target level,
ensuring sufficient capital to facilitate meeting the business plan and
strategic objectives in the short, medium and long term.
Beazley aims to strategically create a sustainable business for our
people, partners and planet through its responsible business goals.
Beazley embeds ESG principles and ambitions- it focusses on reducing
its carbon footprint (refer to more detail on climate related risks and
mitigations in the TCFD report), contributing appropriately to its social
environment, and enhancements to governance. Note that while Beazley
considers market practice, it does not necessarily move with every
prevailing market trend.
Being Beazley includes considering the needs of our clients in everything
we do. We deliver the right outcomes to our clients through the product
lifecycle. The conduct review group oversees this risk. We aim to do the
right thing to minimise reputational risk via stakeholder management
and oversight through governance. We carry out periodic analysis to
identify significant areas of concentration risk across our business and
monitor solvency regularly to ensure we are adequately capitalised.
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Risk management
and compliance continued
Viability statement
The Board assesses the viability of the Group within the long-
term plan over a five-year period. A period of five years is
considered short enough to be reasonably assessable, given
the dynamic nature of the business that we underwrite as a
specialist insurer, with the need to adapt capital and solvency
in response to changing markets and emerging opportunities.
However, it is also long enough to reflect the Group risk profile
of a portfolio of diversified short-tailed and medium-tailed
insurance liabilities.
The business planning process tests and demonstrates the
ongoing viability of the business. This includes a base view of
profit and growth so that the reinsurance requirements and
capital surplus can be projected. As a specialist insurer, we
manage several risks as listed above; however the principal
risk that could undermine the business model is insurance
risk. The business plan sets out a view of the emerging risks
that impact this area (e.g. social and economic inflation) and
how the business will respond to these trends. The business
planning process also considers key risks: for example,
natural catastrophe risk was compared to the capital surplus
and the cyber exposure as a share of the total is monitored.
Scenarios were also tested that allow for a range of gross
rates, volume, and reinsurance rates and availability. The
impacts of climate related trends were allowed for in the plan
and The Board has also assessed the impact of climate
change and concluded that it does not lead to unviability.
A range of stresses, scenarios and modelled exposures were
reported by the business throughout the year. These help to
monitor aggregations across our key insurance risk
exposures, such as casualty, cyber and natural catastrophe,
as well as potential reserve deteriorations and investment risk
stresses. The five most material realistic disaster scenarios
relating to our casualty and cyber exposures were reviewed
and approved by The Board. We also considered several
reverse stress tests, which identified extreme scenarios which
could trigger unviability (either through insolvency or a loss of
stakeholder confidence) and the possible mitigations and
actions. Based on our related risk profile, this considered
events such as a natural catastrophe, cyber catastrophe, and
major operational incident (e.g., internal fraud). Much of the
above stress and scenario testing was incorporated into the
annual ORSA that was presented to The Board and
summarised the short-term and longer-term risks to the Group
and the capital implications.
In the unlikely event that capital surplus falls below the
internal 15% threshold, additional capital may be available
from a number of sources. The Group maintains a list of
mitigation options available to improve its position in the
event of liquidity or capital distress. The financial and
corporate actions available to Beazley are monitored on an
ongoing basis. The available mitigation options following an
extreme event include:
• Underwriting action/manage plan growth;
• Stop/delay infrastructure investment;
• Sell off business units;
• Suspension of dividends;
• Additional reinsurance purchases;
• Posting of available unutilised letter of credit as funds at
Lloyd’s; and
• Accessing additional external capital via debt or equity
markets.
The Board has concluded, based on the business plan,
scenario and ORSA reporting, that there is a reasonable
expectation that the Group will be able to continue to operate
and meet its liabilities as they fall due over the five year
period of assessment.
Regulatory compliance
To ensure that we conduct business in accordance with
all applicable laws and regulations we operate a Group-
wide compliance framework designed to consider the
risk, govern decision-making, ensure the best for our
clients and monitor performance. Our compliance
framework consists of processes, policies and controls,
including senior management oversight, training, risk
assessments, monitoring and reporting.
The recent challenging geopolitical environment has
heightened the importance of ensuring compliance with
rapidly changing regulations and laws, such as
sanctions, and ensuring there is a robust anti-financial
crime control environment. We have supported the
business, and our clients, to navigate through this
evolving landscape.
There continues to be top-down commitment of senior
management to ensure a good culture of regulatory
compliance across the Group. This is embedded within our
compliance framework and supported by training, controls,
policies, periodic risk assessments and monitoring. Key areas
of focus within the compliance framework include:
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Culture, controls, training and oversight
A mandatory annual staff training programme covers topics
such as financial crime, underwriting due diligence, conduct,
and information security. We provide training to staff upon
joining Beazley and annually thereafter to ensure that we
continue to operate in a responsible manner and in line with
Group expectations.
Monitoring of regulatory risks provides assurance on the
performance of regulatory controls and enables us to identify
areas for improvement. Through regular reporting of our
monitoring activities, we ensure that senior management
maintain oversight of regulatory risk, including conflicts of
interest across the Group.
Conduct has been a core aspect of our business. We pride
ourselves on knowing our clients well, meeting their needs,
managing our business responsibly and ensuring we transact
only with reputable intermediaries, agents and suppliers.
There is a robust approach to information security and privacy
controls designed to safeguard data and the rights of data
subjects. There were no cases of a data breach that were
material to our clients or the Group during 2022.
Anti-financial crime controls
A key risk for the Group, operating a global organisation is
financial crime. There is no appetite for Beazley being used as
a vehicle for financial crime. As a responsible business, we
adhere to ethical practices and believe in doing the right thing.
We monitor sanctions developments closely and are primed to
respond when changes occur, such as the events in 2022. To
ensure compliance with applicable regimes, the Group
embeds anti-financial crime controls and procedures into its
underwriting, claims, payments, gifts and hospitality
processes, and more widely throughout the business.
Whistleblowing
In line with our values, we promote a culture that encourages
staff to speak up and escalate concerns. In support of this,
we operate a whistleblowing policy and an independent
hotline, managed by Safecall, that allows for anonymous
reporting of concerns without fear of reprisal, harassment,
retaliation or victimisation. We received training from Safecall
to ensure we appropriately handle any concerns raised. All
concerns have been treated with the utmost confidentiality
and in accordance with all applicable legal and regulatory
requirements. Annual reports were presented to The Board on
the effectiveness and operation of our whistleblowing
procedures.
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Governance
Letter from our Chair
Statement of corporate governance
Board of Directors
Governance Framework
Shareholder engagement and investor relations
Board evaluation
Audit and Risk Committee
73
75
77
79
87
88
91
100 Nomination Committee
106 Remuneration Committee
108 Letter from the Chair of our Remuneration Committee
111 Directors' remuneration report
139 Statement of Directors' responsibilities
140 Directors' report
146 Independent auditor's report
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Letter from our Chair
In my statement on pages 8 to 10, I comment on Beazley’s
performance, the uncertain geopolitical and economic
environment and how Beazley’s strategy, business model and
culture add value when things are complex and changing.
The company maintains a robust governance framework,
which helps contribute to the company's long-term strategy,
and I am pleased to confirm that the company has complied
throughout the year with all the principles and provisions of
the 2018 UK Corporate Governance Code. In particular, the
work of the Nomination Committee has enabled an orderly and
smooth transition of succession following David Roberts’
stepping down as Chair of The Board on 21 October 2022 as
a result of his appointment as Chair of the Court of the Bank
of England. The Board remains highly engaged in fulfilling its
principal tasks of leading the company and overseeing the
governance of the Group and ensuring its long-term
sustainable success.
Board changes
The Board takes seriously its responsibility for and oversight
of effective succession planning for Board and senior
management positions. I succeeded David as Interim Chair
with effect from 21 October 2022 until a Chair was found, to
ensure continuity of good governance across the Group in this
interim period. Bob Stuchbery has taken on the role as Interim
Senior Independent Director and Nicola Hodson is acting as
Interim Chair of the Remuneration Committee.
On 8 February 2023 we announced that Clive Bannister had
joined The Board and would be appointed as Chair with effect
from 25 April 2023. Clive brings a breadth of commercial,
strategic and significant transformational experience to The
Board from both the financial and insurance industries. He
has been serving as Chair of investment and wealth
management provider, Rathbones Group plc, since 2021 and
is the former Group Chief Executive Officer of Phoenix Group
plc. The Board and I are delighted that he has joined Beazley
to lead The Board and company as we implement our
ambitious growth plans in 2023 and beyond. More information
about the search for the new Chair is included in the
Nomination Committee report on page 100.
We have a strong Board of diverse experience, background
and personal skillsets, and there is a good balance of new
and more established directors. The 2022 internal board
performance evaluation concluded that The Board continues
to operate effectively, and that each Director is contributing to
The Board’s overall effectiveness. We report further on the
process and outcomes from The Board and Committee
effectiveness review on page 88.
During 2022, The Board welcomed Cecilia Reyes Leuzinger
and Fiona Muldoon as newly appointed Directors with effect
from 31 May 2022. Cecilia brings a wealth of deep experience
to The Board in banking, risk management, investment and
asset management covering Europe, Asia Pacific and the
Americas. Equally, Fiona augments The Board's strengths
through her extensive leadership experience and senior
finance positions in listed firms, general insurers and at the
Central Bank of Ireland. With these new appointments, I
strongly believe that Beazley’s Board has the breadth and
depth of experience and skills to support the company’s
strategic aims, purpose and values and this has been further
enhanced by the new Board members. I am pleased to report
that The Board is currently well-balanced in terms of gender.
Following Clive Bannister joining The Board in February 2023,
The Board is comprised of 45% women. In addition to David
Roberts stepping down as Chair, Catherine Woods also
stepped down from The Board in March 2022. Catherine was
an extremely dedicated and diligent Director over a six year
period and provided excellent insight in board discussions.
She moved on with the best wishes of the entire Board.
Committee structure
To further support strong governance and evolving
requirements, The Board have agreed to separate the Audit
and Risk Committees from 1 January 2023. Further
information is included in the governance framework on page
79, The Board evaluation report on page 88, and the Audit
and Risk Committee report on page 91.
Risk management and compliance
Beazley’s strong approach to risk management and regulatory
compliance has been especially important through the
turbulent environment in 2022. The Beazley plc Board, with
the support of its Committees, plays a key role in overseeing
Beazley’s risk management framework and has close visibility
of its engagement with regulators. Key emerging risks that The
Board has overseen in 2022 have included geopolitical risks,
the macroeconomic environment (e.g., inflation, global
insurance market trends) and ESG.
www.beazley.com
Beazley | Annual report 2022
73
Remuneration policy
In accordance with the normal three-year cycle, our
shareholders will have an opportunity to vote on a revised
remuneration policy at the 2023 AGM. Over the last 12
months the Remuneration Committee has undertaken a full
review of the policy to ensure that it supports our strategy,
promotes Beazley’s long-term success, and is aligned with our
purpose and shareholder expectations. For more information
on the proposed changes to the policy, please see the
Directors' remuneration report on page 111.
Stakeholder engagement
The Board has continued to identify employees, clients and
broker partners, shareholders and regulators as its key
stakeholders. In addition, we also recognise that Beazley’s
suppliers and the communities in which the Group operates
are important stakeholders to be considered in decision
making. On pages 50 to 57 we discuss how these
stakeholder groups have been considered in key decisions
taken during the year.
Looking ahead
As ever, we welcome any and all engagement with our
shareholders either via our AGM, our presentations throughout
the year and via our website. All directors expect to attend this
year’s AGM, which will again provide an opportunity for all
shareholders to hear more about our performance and to ask
key questions of The Board. Where it is not possible for
directors to attend in person, arrangements will be in place for
these individuals to attend virtually.
I would like to thank all of my colleagues on The Board for
their contributions during the year.
Christine LaSala
Interim Chair
Letter from our Chair
continued
Culture and our people
At Beazley we define our culture by our values and brand:
being bold, striving for better and doing the right thing. They
inspire the way we work, from how we engage with our
stakeholders and colleagues, to how we design our
workspaces, treat our customers and behave as a responsible
business. Keeping and renewing our strong culture is key for
Beazley in achieving its purpose of helping our clients and
people to explore, create and build in a complex and uncertain
world.
We are proud of our culture, it resonates with our people, and
it always scores very highly in our employee engagement
surveys. The Board monitors culture through various
mechanisms including: the annual employee engagement and
leadership surveys, turnover statistics, whistleblowing and
grievance data, feedback from leavers, periodic internal audit
reviews, and routine board reporting. The Board is very
focused on helping to promote an open culture and
maintaining regular engagement with the workforce. This is a
key focus of the director with responsibility for bringing the
employee voice to The Board. Fiona Muldoon succeeded Bob
Stuchbery in this role in November 2022. The stakeholder
engagement report on page 50 provides further information on
how Beazley’s culture supports the interactions with all of its
stakeholders, and how The Board oversees stakeholder
engagement and considers it in decision making.
The findings of the 2022 employee engagement survey will be
assessed by The Board in early 2023. A brief overview is
included in the stakeholder engagement report on page 50.
Inclusion and Diversity
The Board is committed to promoting inclusion and diversity in
all its forms and is pleased to have met the Parker Review
recommendations and other targets in relation to Board
diversity. However, we recognise our work in this area is never
done. To make more impactful progress in this area, Beazley
updated its global diversity policy and introduced a Board
diversity policy in January 2022, which details a set of pledges
aimed at building a diverse, inclusive environment that
operates zero tolerance to discrimination or harassment and
fully supports and celebrates differences. These policies are
aligned to each other and to the Company's strategy.
We also recognise that aspiring to have a diverse workforce is
not enough. We remain committed to our race and ethnicity
diversity goals to have at least 25% of the global workforce
consisting of people of colour. We also committed to reaching
at least 45% female representation in senior leadership. Both
of these targets were set for the end of 2023. We have
already met the race target and are on track to meet the
gender target. More information on Beazley’s inclusion and
diversity initiatives can be found in the responsible business
report and the Nomination Committee report.
74
Beazley | Annual report 2022
www.beazley.com
Statement of corporate governance
How have we applied the principles of the Corporate Governance Code?
We are pleased to confirm that the company has applied all the principles and complied with the provisions set out in the 2018
UK Corporate Governance Code (the ‘Code’) throughout the year ended 31 December 2022. The Code can be viewed on the
www.frc.org.uk website. The governance report describes how The Board and its Committees have applied the main principles
of the Code and complied with its detailed provisions.
Application of UK Corporate Governance Code Principles
Code Provision and Application
Board leadership and company purpose
A
The role of The Board
Our Board is comprised of individuals with a wide range of experience, skills and backgrounds which we believe
strongly supports Beazley’s strategic vision and success. The Board is strengthened by its robust governance
framework which enables directors to discharge their duties effectively in promoting the long-term sustainable
success of the company and strong performance. The Board is committed to frequent and open communication
with both shareholders and stakeholders and this is at the forefront of agenda planning throughout the year.
B
Purpose, Values, Strategy and Culture
Beazley’s purpose, culture and values centre around being bold, striving for better and doing the right thing. This is
reflected in the business model of the organisation, including how we engage with our stakeholders and
colleagues, and how we treat our customers and behave as a responsible business. The Board reviews strategy
and culture throughout the year via reports it receives from the Group Head of Strategy and the Group Head of
Culture & People. Reporting includes topics such as strategy and business plans, employee engagement and
leadership surveys (which include cultural metrics) and the employee voice of The Board updates.
Internal audit periodically review culture as part of their audits. In addition to their regular reporting, an analysis of
their findings in relation to culture was included in the internal audit annual report to the Audit and Risk Committee
during 2022.
Investing in and rewarding our people
We aim to create a company-wide culture of learning in line with our values of striving for better and doing the right
thing for our people. Supported by our workforce policies and practices, we empower our people to be the best they
can be and develop their career at Beazley.
There is a wide range of resources available through the Beazley learning management system, including access to
training and learning materials. Employees are supported to gain relevant professional qualifications, and we give
individuals the opportunity to both receive mentoring, and to provide mentoring to colleagues.
We support our managers in encouraging the development of their teams through the formal appraisal process and
in their ongoing conversations. Job opportunities are advertised internally, and we encourage employees to apply
for different or more senior roles as part of their career progression.
We offer our employees an attractive remuneration and benefits package, which recognises their efforts and
achievements. Our smart working approach also offers an agile and flexible approach to how, when and where
people can work and prioritises talent over traditional working practices.
See further information
Board of Directors (page 77)
Governance framework (page 79)
Stakeholder engagement (page 50)
Our purpose (page 3)
Our business model (page 4)
Statement of the Chair (page 8)
Chief Executive Officer's statement
(page 11)
Stakeholder engagement report (page
50)
Directors' remuneration report (page
111)
Resources and controls
The Board ensures that the necessary resources are in place to support the business model and for the
organisation to meet its objectives and measure performance against these. Beazley has established an Audit and
Risk Committee (separated into two different committees from 1 January 2023) and operates a three lines of
defence model which allows for a strong governance framework of internal controls and managing risk.
Risk management and compliance
(page 67)
Governance framework (page 79)
Audit and Risk Committee (page 91)
Shareholder and stakeholder engagement
The Board is committed to open and regular communication and engagement with shareholders and other
stakeholders.
Workforce policies and practices
The Board and its Executive Committee have ultimate responsibility for overseeing the company’s compliance with
the Beazley code of conduct and upkeep of whistleblowing procedures and other employee policies and ensuring
they are in line with strategy and culture.
Division of responsibilities
F
The role of the Chair
Christine LaSala (and prior to that David Roberts) leads The Board and facilitates constructive and open debate
between The Board and management. The Board is responsible for the overall effectiveness of itself and its
Committees, for agreeing and shaping the culture of the organisation and ensuring high standards of corporate
governance. The chair reviews the performance of Non-Executive Directors and the Senior Independent Director
leads a review of the Chair. The Nomination Committee reviews the performance of the Executive Directors.
Stakeholder engagement (page 50)
Stakeholder engagement and investor
relations (page 87)
Stakeholder engagement: our people
(page 50)
Whistleblowing (page 71)
Non-financial information statement
(page 26)
Governance framework (page 79)
Board evaluation (page 88)
Nomination Committee (page 100)
G
H
I
Clive Bannister will be appointed as the new Chair on 25 April 2023.
Board composition and division of responsibilities
The Board comprises eleven directors including the Chair: two Executive Directors and nine independent Non-
Executive Directors, one of whom is the Senior Independent Director. None of the Non-Executive Directors have
served on The Board for more than nine years. The Board considers all of the Non-Executive Directors to be
independent. The Chair was deemed independent on appointment.
Board of Directors (page 77)
Governance framework (page 79)
Role of the Non-Executive Directors
Non-Executive Directors are required to attest on appointment that they are able to allocate sufficient time to
discharge their duties effectively and all have done so. The Nomination Committee is responsible for monitoring
and reviewing each Non-Executive Director’s commitments. All Directors receive information in a regular and timely
fashion to enable them to provide challenge, guidance and advice and to hold management to account.
Governance framework: The Board
(page 81)
Training, information and support
(page 85)
Nomination Committee (page 100)
Ensuring the Board functions effectively and efficiently
The Company Secretary works with the Chair, the Chairs of the Committees and the Chief Executive Officer to
ensure that The Board has the policies, information, time and resources it needs in order to function effectively and
efficiently. There is a detailed programme of training for the Directors throughout the year. If a Director requires
professional advice in the furtherance of discharging their duties they are authorised to seek advice from
independent advisors at the company's expense.
Training, information, and support
(page 85)
www.beazley.com
Beazley | Annual report 2022
75
C
D
E
Statement of corporate governance
continued
Application of UK Corporate Governance Code Principles
Code Provision and Application
Composition, succession and evaluation
J
Succession planning for The Board
A key remit of the Nomination Committee is reviewing any skills gaps of the Directors and the composition of The
Board (including the diversity of The Board, their cognitive and personal strengths and tenure) to allow for smooth
succession planning. Succession planning processes are well embedded at Beazley and are formal, rigorous and
transparent. Where Beazley uses external search consultants, we ensure that consultants are and remain
independent.
K
L
Skills, experience and knowledge of The Board
The Nomination Committee ensures that The Board and its committees have the range of skills, experience and
knowledge necessary to discharge their roles and to support the management team in the execution of the
company’s strategy.
Board evaluation
During the 2022 financial year, The Board undertook an internally facilitated review in line with the UK Corporate
Governance Code guidance. The last externally facilitated board evaluation was conducted in 2021.
Audit, risk and internal control
M Ensuring the independence and effectiveness of the internal and external audit
A key remit of the Audit and Risk Committee is reviewing the effectiveness and quality of the financial and narrative
statements, the audit process and the independence and objectivity of the external auditor. From 2023 onwards,
the responsibilities of this will fall under the separate Audit Committee. The Committee also reviews and monitors
the independence and performance of the internal audit function.
See further information
Nomination Committee (page 100)
Nomination Committee (pages 100)
Board evaluation (page 88)
Audit and Risk Committee (page 91)
N
O
Fair, balanced and understandable assessment
The Board and the Audit and Risk Committee consider the annual report and ensure that it presents a fair,
balanced, and understandable assessment of the company’s position and prospects. The Board receives a report
from management to assist with making this assessment.
Fair, balanced and understandable
assessment (page 95)
Audit and Risk Committee (page 91)
Risk management and internal controls
The Board and the Risk Committee (previously the Audit and Risk Committee) are responsible for reviewing the
effectiveness of the risk management activities from a strategic and operational perspective. These activities are
designed to identify and manage the risk of failure to achieve business objectives or to successfully deliver our
business strategy. An annual review of the internal controls is undertaken by the internal audit function.
Risk management and compliance
(page 67).
Audit and Risk Committee (page 91)
Remuneration
P
Designing remuneration policies
The Remuneration Committee is responsible for determining remuneration policies and practices which support the
strategy and promote the long-term sustainable success of the company. The remuneration policy is being put
forward for shareholder approval at the 2023 AGM and there has been significant shareholder engagement on the
proposals.
Remuneration Committee (page 106)
Directors’ remuneration report (page
111)
Q
R
Executive remuneration
We have benefited from open and constructive shareholder engagement which leads to the proposals being put
forward in our remuneration policy for shareholder approval at the 2023 AGM. We continue to ensure that executive
remuneration is fit for purpose and aligned with our long-term strategy.
Remuneration Committee (page 106)
Directors’ remuneration report (page
111)
Remuneration outcomes and independent judgement
The Remuneration Committee determines remuneration outcomes for the Directors and senior management. It
exercises independent judgement and discretion around individual performance and the wider circumstances. No
individual is involved in determining their own pay.
Remuneration Committee (page 106)
Directors’ remuneration report (page
111)
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Beazley | Annual report 2022
www.beazley.com
Board of Directors
The Beazley Board is comprised of individuals with broad skillsets and a range of experience in leadership roles, making them well placed to
oversee the delivery of Beazley’s strategic plans in line with its purpose, vision and values and maintain the long-term success of the company.
The Board strengthened its composition with the appointments of Fiona Muldoon and Cecilia Reyes Leuzinger in 2022.
On 8 February 2023, it was announced that Clive Bannister had been appointed as Chair Designate and as a Non-Executive Director with
immediate effect. As stated in the interim Chair's letter, it is intended that Clive will take up the role of Chair at the conclusion of the
Company's AGM on 25 April 2023.
1. Christine LaSala
Interim Chair and
independent Non-Executive
Director
Appointed: 1 July 2016
Experience: Christine became the
Interim Chair of The Board with effect
from 21 October 2022. She was the
Senior Independent Director prior to
this interim appointment and chaired
the Remuneration Committee from
March 2021 to October 2022. Based
in New York, she was previously chair
of Willis Towers Watson North America.
She has over 45 years of
management, client leadership and
financial experience in the insurance
industry including work as an
underwriter and 27 years as an
insurance broker, leading large
business units and working with
corporate and public institution clients.
Christine’s experience includes board
and leadership roles at Johnson &
Higgins and Marsh and 10 years as
Chief Executive Officer of the WTC
Captive Insurance Company.
Committee: NC (Interim Chair), RC
Skills: insurance, distribution, strategy,
risk management, client leadership,
regulatory, governance and talent and
leadership development
2. Clive Bannister
Independent Non-Executive
Director and Chair Designate
Appointed: 8 February 2023
Experience: Clive was appointed as a
non-executive director on 8 February
2023 and will take up the role of Chair
at the conclusion of the company's
AGM on 25 April 2023. He will also
join and Chair the Nomination
Committee following the AGM. Clive is
currently the Chair of Rathbones Group
plc and the Museum of London. Clive
has extensive leadership and strategy
experience, having previously been the
CEO of Phoenix Group plc from 2011
until retiring in March 2020. Clive's
experience at Phoenix Group, at which
he led the transformation of the Group
and progression to the FTSE 100
brings considerable transformational
experience to The Board. Prior to that
Clive had a long and distinguished
career at HSBC Group, including
leadership roles in private banking and
insurance. He has previously held a
number of non-executive directorships
as well as his current chair positions.
Committee: Will join NC as Chair from
25 April 2023
Skills: strategy, transformation,
mergers and acquisitions, commerce,
banking and insurance, leadership
and governance
3. Adrian Cox
Chief Executive Officer
4. Sally Lake
Group Finance Director
Appointed: 6 December 2010*
Experience: Adrian was appointed as
Chief Executive Officer in April 2021.
He began his career at Gen Re in 1993
writing short tail facultative reinsurance
before moving to the treaty department
in 1997, where he wrote both short
and long tail business specialising in
financial lines. He joined the Specialty
Lines division at Beazley in 2001
where he performed a variety of roles
including underwriting manager,
building the long tail treaty account,
managing the private enterprise teams
and the large risk teams before taking
responsibility for Specialty Lines in
2008. He took on the role of Chief
Underwriting Officer in January 2019.
Adrian was also appointed to The
Board of Beazley Furlonge Limited in
2008.
Committee: EC, DC
Skills: insurance, management,
international business development,
strategy, leadership and people
management and governance.
Appointed: 23 May 2019
Experience: A Fellow of the Institute of
Actuaries since 2004. Sally joined
Beazley in 2006 initially working with
the Specialty Lines division, the largest
underwriting division, for six years. This
gave her a breadth of exposure to
many aspects of the business at
Beazley, especially focusing on claims
analytics and reserving. In 2012 Sally
became reserving manager and then
Group Actuary in 2014. As Group
Actuary, Sally covered both pricing and
reserving, as well as capital model
validation. She became Group Finance
Director in May 2019.
Committee: EC, DC
Skills: reserving and actuarial pricing,
capital modelling and management,
leadership and people management,
strategy and governance
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Beazley | Annual report 2022
77
Board of Directors
5. Rajesh Agrawal
Independent Non-Executive
Director
6. Pierre-Olivier Desaulle
Independent Non-Executive
Director
Appointed: 1 August 2021
Experience: Raj is Senior Vice
President and Chief Financial Officer at
Arrow Electronics, Inc which is
headquartered in Centennial, Colorado.
He was appointed to Arrow in
September 2022 following a career at
Western Union spanning from 2006 to
2022. At Western Union, Raj was a
member of the executive team
responsible for leading Western
Union’s global finance organisation,
including financial reporting, financial
planning and analysis, tax, treasury,
internal audit and investor relations as
well as providing guidance on the
Company’s operations and strategic
direction. Raj holds an MBA from
Columbia University.
Committee: AC, RC
Skills: finance, strategy, operations,
international business development
Appointed: 1 January 2021
Experience: Pierre-Olivier has over 25
years of experience as an international
insurance executive, with a focus on
products and distribution innovation.
He joined the Beazley plc Board in
January 2021. Since 2017, he has
been a Non-Executive Director of
Beazley Insurance dac and has chaired
The Board since 2021. He served as
Chief Executive Officer of Hiscox
Europe until 2017 and has held a
number of other executive roles within
the (re)insurance industry including
strategic planning, operations and
systems director at Marsh. With a
background in strategy consulting,
having been at Strategic Planning
Associates (now Oliver Wyman), he
transitioned to insurance helping
Marsh with the integration of a leading
French broker. He is currently the chief
insurance officer of the InsurTech
startup, Pattern.
Committee: RIC, NC
Skills: insurance, reinsurance, strategy,
operations and distribution
9. John Reizenstein
Independent Non-Executive
Director
10. Cecilia Reyes Leuzinger
Independent Non-Executive
Director
Appointed: 10 April 2019
Experience: John has more than 30
years’ experience in financial services,
most recently as Chief Financial Officer
of Direct Line Insurance Group plc,
from which he retired in 2018. Prior to
that he held senior positions in
insurance and banking at Co-operative
Financial Services and in investment
banking at Goldman Sachs and UBS. In
addition to the Beazley plc Board, John
is also a non-executive Director of
Beazley Furlonge Limited and chairs its
Audit Committee. He is a Non-
Executive Director of Scottish Widows,
a member of the Takeover Panel, chair
of Farm Africa and a trustee of
Nightingale Hammerson.
Committee: AC (Chair), RIC, NC
Skills: finance, strategy, leadership,
investment and mergers and
acquisitions
Appointed: 31 May 2022
Experience: Cecilia has more than 30
years’ experience in banking, asset
management and insurance covering
Europe, Asia Pacific and the Americas
with a focus on investment
management and risk.Cecilia spent 17
years with Zurich Insurance Group,
latterly as its group chief risk officer,
leading the global risk function. Prior to
that she was its group chief investment
officer and spent eight years on the
Group executive committee while
holding these positions. Prior to that
Cecilia spent her career at ING
Barings, ING Asset Management and
Credit Suisse Group in various senior
roles. Cecilia is a member of the
Supervisory Board of NN Group NV.
Committee: AC, RIC, RC
Skills: risk management, insurance
investment management, strategy,
leadership and management,
responsible investment strategy
7. Nicola Hodson
Non-Executive Director
Appointed: 10 April 2019
Experience: In January 2023, Nicola
was appointed as the Chief Executive
officer of IBM, UK and Ireland. Nicola
was previously Vice President Field
Transformation, for Microsoft Global
Sales and Marketing and prior to this
chief operating officer for Microsoft UK.
She is also a Non-Executive Director on
The Board of Drax Group plc and is
chair of its Remuneration Committee.
Nicola was formerly a Non-Executive
Director at Ofgem, a board member at
the UK Council for Child Internet Safety
and at the Child Exploitation and
Online Protection Group.
Committee: RIC, RC (Interim Chair)
Skills: strategy, leadership and
management, business and digital
transformation, Information
Technology, and sales and marketing
8. Fiona Muldoon
Independent Non-Executive
Director
Appointed: 31 May 2022
Experience: Fiona has over 30 years’
experience in the insurance industry.
Fiona was the CEO of FBD Holdings
plc, a listed general insurer in Ireland,
from 2015 to 2020. Prior to that Fiona
was Director of Credit Institutions and
Insurance Supervision at the Central
Bank of Ireland, the Irish regulator.
Fiona spent 17 years of her career with
XL group in various progressively
senior finance and general
management positions, in Dublin,
London, and Bermuda. Fiona is
currently an independent Non-Executive
Director of the Bank of Ireland group,
where she is a Director on the Group
Board and on the board of New Ireland
Life Assurance, its wholly owned life
insurance subsidiary.
Committee: AC, RIC
Skills: insurance, strategy, stakeholder
management, governance, finance,
capital management and leadership
11. Robert Stuchbery
Independent Non-Executive
Director and interim Senior
Independent Director
Appointed: 11 August 2016
Experience: Bob was previously the
president of international operations of
The Hanover Group until he retired
from the Group in May 2016. He brings
extensive Lloyd’s experience, having
been Chief Executive Officer of Chaucer
until 2015 and having held numerous
management roles at the company for
over 25 years, He has a deep
knowledge of the Lloyd’s market and
distribution and operational strategies.
In addition to The Beazley plc Board,
Bob is also a non-executive Director of
Beazley Furlonge Ltd, and chairs its
risk committee. Bob acted as the
Employee Voice of The Beazley plc
Board until November 2022, and he
took on the role of Interim Senior
independent Director from 21 October
2022. Bob has previously served as a
member of the London Market Group,
was deputy chairman of the Lloyd’s
Market Association Board and is
currently a Liveryman of The Worshipful
Company of Insurers.
Committee: AC, RIC (Chair), RC
Skills: insurance, risk management,
distribution, and strategy
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www.beazley.com
Governance Framework
The company operates through the main Board and a number of
Committees. During 2022, those committees were the Audit and Risk,
Nomination and Remuneration Committees and details of their main
responsibilities and activities in 2022 are set out on pages 91 to
110.
With effect from 1 January 2023, the combined Audit and Risk
Committee has been replaced by separate Audit and Risk
Committees. The Board has also established the Disclosure
Committee with responsibility for matters relating to the control and
disclosure of inside information.
Adrian Cox is the Chief Executive Officer and chairs the Executive
Committee which acts under delegated authority from The Board. The
Executive Committee usually meets monthly and is responsible for
implementing the Group’s strategy and managing all operational
activities of the Group. The governance framework of the main Board
and its Committees is shown in the diagram on page 80.
The roles of the Chair and Chief Executive Officer are separate, with
each having clearly defined responsibilities as set out in the corporate
governance framework diagram. They maintain a close working
relationship to ensure the integrity of The Board’s decision-making
process and the successful delivery of the Group’s strategy. The
Board evaluates the membership of its individual Board Committees
on at least an annual basis, as well as when required during the year.
The Board Committees are governed by terms of reference which
detail the matters delegated to each committee and for which they
have authority to make decisions. The terms of reference for The
Board Committees can be found at www.beazley.com.
www.beazley.com
Beazley | Annual report 2022
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80
Beazley | Annual report 2022
www.beazley.com
Separation of Audit and Risk Committee
On 9 December 2022 The Board approved the proposal to
replace the Audit and Risk Committee with a separate Audit
Committee and Risk Committee from 1 January 2023. This
step was taken to strengthen the Group’s overall approach to
corporate governance and enable each of the new committees
to give greater focus to their areas of responsibility.
The key objectives of the Audit Committee are to assist The
Board of Directors in fulfilling its oversight responsibilities for
the financial reporting process, the system of internal financial
controls and the audit process.
The key objectives of the Risk Committee are to provide
oversight of the Beazley Group’s risk management framework
and processes for monitoring compliance with laws and
regulation. Specific duties of the Risk Committee include
oversight of the Group’s whistleblowing arrangements and
providing assurance to The Board in relation to key Group-wide
transformational projects.
More detail regarding the role of each Committee, including
the terms of reference, is available on the website.
The Board
Beazley plc’s Board consists of Executive and Non-Executive
Directors with responsibility for overseeing the company’s
activities. The Board is responsible for establishing the
company’s purpose, values and strategy, and satisfying itself
that these and its culture are aligned. The Board is required to
ensure that the necessary resources are in place for the
company to meet its objectives and measure performance
against them.
All Directors must act with integrity, lead by example, and
promote the company’s culture. Non-Executive Directors are
required to allow sufficient time to meet their Board
responsibilities and provide constructive challenge, strategic
guidance, offer specialist advice and hold management to
account.
Matters reserved for The Board
The Board has a schedule of matters reserved for its decision.
This includes, inter alia: strategic matters; statutory matters;
matters intended to generate and preserve value over the
longer term; acquisitions and disposals over a certain
quantum; approval of financial statements and dividends;
appointments and terminations of Directors, officers and
auditors; and appointments of committees and setting of their
terms of reference. The Board is responsible for: setting the
company’s values, strategy and purpose; oversight of the
Group’s long-term commercial and sustainable success;
reviewing Group performance against budgets; generation of
long-term shareholder value; approving material contracts;
determining authority levels within which management is
required to operate; overseeing the internal control framework;
reviewing the Group’s annual forecasts; and approving the
Group’s corporate business plans, including capital adequacy
and the Own Risk and Solvency Assessment (ORSA). The
Board is responsible for determining the nature and extent of
the principal risks it is willing to take in pursuing its strategic
objectives. To this end, The Board is responsible for the
capital strategy, including the Group’s Solvency II internal
model. The Board is responsible for climate-related matters
including the company’s own impact on the environment and
climate-related risks. Furthermore, The Board is responsible
for considering how stakeholder interests have been
considered within decision-making processes and to perform
their duties as outlined in Section 172 of the UK Companies
Act 2006. Details of how The Board has put this into practice
are outlined on pages 50 to 57.
Regulated subsidiary Boards
At Beazley we have a strong governance framework which
includes governance of the relationship between the Group
Board and the Boards of our regulated subsidiary Boards.
There are Beazley plc directors on the principal regulated
subsidiary Boards, with four Beazley plc Non-Executive
Directors also serving on the Beazley Furlonge Limited Board.
Pierre-Olivier Desaulle chairs the Beazley Insurance
designated activity company Board and Adrian Cox chairs the
Beazley Insurance Company Inc Board. The links between our
Group Board and principal regulated subsidiary Boards help
ensure effective information flows and collaboration across
the Group. The Board encourages positive and collaborative
relationships between the Boards and further enhancements
are being made to the framework following the board
effectiveness review. For more information see the board
evaluation report on page 88.
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Beazley | Annual report 2022
81
Governance Framework
continued
Board composition
During 2022, The Board was headed by the Non-Executive
Chair David Roberts, who was independent on appointment,
until his resignation on 21 October 2022. Following this,
Christine LaSala, who was independent on appointment to
The Beazley plc Board, was appointed as Interim Chair and
has led The Board whilst the recruitment process for a new
Chair was being conducted. In addition to the Chair, at 31
December 2022, The Board consisted of seven independent
Non-Executive Directors. Prior to David’s resignation, there
were eight independent Non-Executive Directors in addition to
the Chair. Christine LaSala was the Senior Independent Non-
Executive Director until her appointment as interim Chair on
21 October 2022. Robert Stuchbery was appointed as the
Interim Senior Independent Director on 21 October 2022. The
Board also consists of two Executive Directors, Adrian Cox
who is Chief Executive Officer and Sally Lake who is the Group
Finance Director. The Non-Executive Directors, who have been
appointed for specified terms and are subject to annual
election or re-election by the shareholders, are considered by
The Board to be independent of management and free of any
relationship which could materially interfere with the exercise
of their independent judgement.
On 8 February 2023, the new Chair Designate Clive Bannister
was announced. Following this appointment there are nine
independent Non-Executive Directors including the Chair
Designate, who was independent on appointment.
The Senior Independent Director will, if required, deputise for
the Chair and their role is to act as a sounding board for the
Chair and as an intermediary for other directors. They are
available to talk to shareholders if they have any issues or
concerns or if there are any unresolved matters that
shareholders believe should be brought to their attention.
On 25 March 2022, The Board appointed Pierre-Olivier
Desaulle to the Nomination Committee and on 26 April 2022
The Board appointed Raj Agrawal to the Remuneration
Committee. Cecilia Reyes Leuzinger and Fiona Muldoon were
appointed as Non-Executive Directors to The Board and as
members of the Audit and Risk Committee with effect from 31
May 2022. Cecilia Reyes Leuzinger was also appointed to the
Remuneration Committee on the same date.
Following David Roberts standing down as Chair, and until the
new Chair commences the role, Christine La Sala is acting as
Chair of the Nomination Committee. Nicola Hodson is acting
as Interim Chair of the Remuneration Committee. Bob
Stuchbery, as confirmed above, is acting as Interim Senior
Independent Director.
Board information
The Company Secretary, Christine Oldridge, ensures that
board members receive timely and accurate financial and
operational information to enable them to discharge their
duties appropriately. Board papers are circulated digitally,
usually one week in advance of board meetings. Directors also
have access to independent professional advice at the
company’s expense, if they consider this appropriate. During
2022, independent professional advice was sought on
conflicts of interest in relation to proposed group transactions.
In accordance with the Code, The Board has recommended
that all directors should submit themselves for election or re-
election on an annual basis and as such all directors will
stand for election or re-election at the forthcoming AGM.
Biographies of current board members appear in The Board of
Directors section on page 77. The biographies indicate the
high level and wide range of business experience that are
essential to manage a business of this size and complexity.
An established operational and management structure is in
place and the roles and responsibilities of senior executives
and key members of staff are clearly defined.
Board meeting attendance
The full Board meets at least five times each year and more
frequently where business needs require. In 2022, there were
six regular board meetings. The activities of The Board are set
out on pages 83 and 84. During the year, there were also ad
hoc meetings to consider senior management changes, the
conflict in Ukraine and the impact on the Group, the equity
raise and the business plan and scheduled joint meetings of
The Boards and Committees of Beazley plc and other
regulated group subsidiaries to consider updates on strategic
projects of relevance to entities across the Group as well as
various policy updates, risk, compliance and internal audit
assurance plans, and environmental, social and governance
matters.
All the Beazley plc directors also attend an annual strategy
day. All Committees also had additional ad hoc meetings as
required to discuss specific matters. The Chair holds
meetings with the Non-Executive Directors without the
Executive Directors being present.
In addition to its regularly scheduled meetings, The Board met
on an additional seven occasions throughout the year with
nearly full attendance. In total, there were 13 board meetings
throughout 2022. Attendance at the regular board and
committee meetings is set out in the table on page 83.
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Board meeting attendance table
Director
Rajesh K Agrawal1
Adrian P Cox
Pierre-Olivier Desaulle2
Nicola Hodson3
Sally M Lake
Christine LaSala
Fiona Muldoon
A John Reizenstein
Cecilia Reyes Leuzinger
David L Roberts4
Robert A Stuchbery
Catherine M Woods5
Board
Audit and Risk Committee
Remuneration Committee
Nomination Committee
No. of
meetings
6
6
6
6
6
6
4
6
4
4
6
1
No.
attended
6
6
6
6
6
6
4
6
4
4
6
1
No. of
meetings
10
–
10
10
–
–
7
10
7
–
10
2
No.
attended
10
–
10
9
–
–
7
10
7
–
10
2
No. of
meetings
4
–
–
6
–
6
–
–
4
–
6
2
No.
attended
3
–
–
6
–
6
–
–
4
–
6
2
No. of
meetings
–
–
3
–
–
4
–
4
–
3
–
1
No.
attended
–
–
3
–
–
4
–
4
–
3
–
1
1 Raj Agrawal was appointed to the Remuneration Committee on 26 April 2022. He was unable to attend the December Remuneration Committee due to a long-
standing scheduling clash.
2 Pierre-Olivier Desaulle was appointed to the Nomination Committee on 25 March 2022.
3 Nicola Hodson was unable to attend the November Audit and Risk Committee due to a long-standing scheduling clash.
4 David Roberts stepped down from The Board and Nomination Committee on 21 October 2022.
5 Catherine Woods stepped down from The Board and Committees on 25 March 2022.
Where a Director joined or stood down from The Board or Board Committee during the year only the number of meetings following appointment or before standing
down are shown.
Board discussions during the year
At each scheduled meeting The Board receives reports from the Chief Executive Officer and Group Finance Director on the
performance and results of the Group and also receives reports from the Chief Underwriting Officer and the Chief Risk Officer
and the Chairs of Board Committees. In addition, The Board receives updates on operational matters, strategy and business
planning, major projects and corporate governance.
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83
Governance Framework
continued
There is an annual schedule of rolling agenda items to ensure that all matters are given due consideration and are reviewed at
the appropriate point in the financial and regulatory cycles. Meetings are structured to ensure that there is sufficient time for
consideration and debate of all matters. During the year, The Board has spent time on the following key areas:
Strategy
• 2023 business plans and budgets
• Medium and long-term plans
• Responsible business strategy, including a net zero strategy and joining the Net Zero Alliance,
United Nations Global Compact initiative and the Terra Carta Sustainable Markets Intiative
• Oversight of key strategic projects
• Equity raise
Performance
• Capital position/allocation and the dividend policy
• 2021 preliminary results and annual report and accounts 2022 interim results and trading updates
• Implementation of IFRS 17
• Business performance reports including underwriting and investments from the Chief Underwriting
Officer and Chief Investment Officer respectively
• Impact of economic and social inflation including on financial performance and actuarial reserving
• Regular dashboard and milestone reports
• Dividend proposals
• Ongoing investment in operational infrastructure
Culture & people
• New corporate brand and strategy
• Share plan rule amendments, including the LTIP, deferred plan and UK SAYE plan
• Talent development and succession planning
• Inclusion and diversity updates
• Employee engagement and staff surveys
• Issues impacting employees, including the cost of living crisis
Governance & risk
• Changes to the composition of The Board, in particular the appointment of a new Chair
• The impact of the war in Ukraine, including the implementation of Russian sanctions
• Board and Committee evaluations
• Cyber Risks including threats to the business from cyber attacks, and review of lessons learned
from attempted attacks
• Review of threats and opportunities to the business model from cyber risks
• Cyber systemic risk adjustments
• Risk management framework, including risk appetite, risk governance and the Own Risk and
Solvency Assessment
• Legal and regulatory compliance including UK Corporate Governance Code, Companies Act and
listed company obligations
Stakeholder engagement
• Engagement with the workforce, including employee voice updates
• Engagement with clients and broker partners
• Engagement with regulators and regulatory correspondence and feedback
• Reports from Investor Relations including shareholder engagement, ongoing shareholder
consultations, investor relations strategy, and share price performance
• Major shareholders and share register analysis
For further information, see:
Financial review (page 58)
Financial review (page 58)
Responsible business (page 21)
Responsible business report (www.beazley.com)
Section 172 statement (page 55)
Directors’ report (page 140)
Capital structure (page 64)
Dividends (page 95)
Interim results (www.beazley.com)
Financial review (page 58)
Chief Executive Officer's statement (page 11)
Chief Underwriting Officer's report (page 13)
Financial review (page 58)
Key performance indicators (page 2)
Dividends (page 95)
Section 172 statement (page 55)
Chief Executive Officer's statement (page 11)
Directors’ remuneration report (page 111)
Nomination Committee (page 100)
Nomination Committee (page 100)
Directors' report (page 140)
Stakeholder engagement (page 50)
Chief Executive Officer's statement (page 11)
Stakeholder engagement (page 50)
Board of Directors (page 77)
Nomination Committee (page 100)
Chief Executive Officer's statement (page 11)
Board evaluation (page 88)
Chief Executive Officer's statement (page 11)
Chief Underwriting Officer's report (page 13)
Risk management & compliance (page 67)
Audit & Risk Committee (page 91)
Statement of corporate governance (page 75)
Stakeholder engagement (page 50)
Section 172 statement (page 55)
Stakeholder engagement (page 50)
Engagement in action: spotlight on the remuneration
policy (page 90)
Shareholder engagement and investor relations (page 87)
Shareholder engagement and investor relations (page 87)
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Training, information and support
New directors receive appropriate induction training when they
join The Board. They are asked to complete a skills and
knowledge assessment and a tailored initial training plan is
developed to ensure the director is capable and comfortable
in discharging their duties. Where appropriate, mentoring is
provided to new directors by an external provider. Annual
training is provided for all directors. The training sessions
include business and industry specific topics and information
on changes to director duties and responsibilities and to legal,
accounting, information security and tax matters. Standard
training modules are regularly reviewed to ensure they meet
best practice and the changing business environment.
Bespoke training will also be provided if requested by any
director.
In 2022, director training included: reinsurance strategy and
economics, IFRS 17, European operating structure and cyber
scenarios. The training sessions include videos sent out in
advance, followed by a live question and answer session
where the directors can discuss specific aspects of interest to
them in detail.
training sessions on how to write effective board reports have
been carried out by the external provider of the board portal
platform and the corporate governance team have also
provided training to relevant authors of Board and Committee
reports. The Board and Committees consider the quality of
reporting at each meeting and feedback is provided to ensure
continuous improvement.
There is an agreed principle that directors may take
independent professional advice if necessary at the
company’s expense, assuming that the expense is
reasonable. This is in addition to the access which every
Director has to the Company Secretary. The Company
Secretary supports the chair to ensure that The Board has the
necessary policies, processes, information, time and the
resources to function effectively and efficiently.
Board performance evaluation
The report on the internal Board evaluation carried out during
2022 and progress against the outcomes of the 2021
externally facilitated evaluation is on page 88.
For topics of key significance, more frequent optional briefings
are held for directors to ensure they have sufficient
information and understanding to discuss and challenge
management. For example, during 2022 a series of briefings
were held on IFRS 17 to provide director with sufficient detail
on the requirements and key judgements which would need to
be made by The Board and Committees upon transition to the
new standard in 2023.
Inclusion and diversity
The Board firmly believes that having an inclusive and diverse
workplace will support us in our ambitions to outperform the
markets in our chosen areas of business. The Board has
continued to meet the ethnic diversity targets set by the
Parker Review. The Board is currently comprised of 45%
women directors.
To enable The Board to function effectively and directors to
discharge their responsibilities, full and timely access is given
to all relevant information. In the case of board meetings, this
consists of a comprehensive set of papers, including regular
business progress reports and discussion documents
regarding specific matters. Directors have access to an
electronic information repository to support their activities.
The terms and conditions of appointment for all the Non-
Executive Directors set out the expected time commitment
and they agree that they have sufficient time to provide what
is expected of them.
During the year, there has been a continued focus on
improving the quality of board reporting to promote better
discussions and further assist decision-making. Refresher
We were pleased to already be meeting the new Listing Rule
requirements that at least one of the chair, senior
independent director, chief executive officer or finance director
roles is held by a woman; that 40% of The Board are women;
and that at least one member of The Board is from a minority
ethnic background (as categorised by the UK Office of
National Statistics). We have voluntarily disclosed this
information for 2022 in the Nomination Committee report.
In addition, we have met the voluntary recommendations of
the FTSE Women Leaders Review, that 40% of senior
leadership positions are held by women by the end of 2025.
Our own goal is 45% representation by the end of 2023, which
we are on target to meet.
The current composition, gender, tenure and diversity of The Board members are set out below.
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85
Governance Framework
continued
We look to set our own stretching diversity targets in line with
our responsible business strategy. During the year The Board
approved a new target to increase the representation of
people of colour in senior leadership roles. More information
is included in the responsible business report on page 21 and
the Nomination Committee report on page 100.
The Board has adopted a global Inclusion and Diversity policy,
which sets out the approach to inclusion and diversity across
the business. In January 2022, The Board also adopted its
own Inclusion and Diversity policy. Diversity of thought is also
championed, and our Board reflects this, with the skills and
experience of the directors set out in the biographies on
pages 77 and 78. There is a mix of tenures on The Board
which brings a fresh perspective as well as a long-term
understanding of the business, how it has grown and its
culture.
The Nomination Committee continually reviews our approach
to diversity and our aim is to promote diversity in the hiring of
new employees and in creating opportunities for individuals to
progress their career within Beazley.
Further details regarding The Board’s approach are included in
the report from the Nomination Committee on page 100. The
responsible business report on page 21 looks at our approach
to inclusion and diversity including how we monitor the targets
set by the business for female and people of colour
representation in senior roles and how we collect data for the
purposes of making these disclosures in accordance with the
Listing Rules.
Audit and internal control
EY were first appointed as the external auditor for the 2019
accounting year. The respective responsibilities of the
Directors and the auditors in connection with the accounts are
explained in the Statement of Directors’ Responsibilities on
page 139 and the Independent Auditor’s Report on page 146.
The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness. However, such a
system can only provide reasonable, not absolute, assurance
against material misstatement or loss. The system is
designed to manage, rather than eliminate, the risk of failure
to achieve business objectives within the risk appetite set by
The Board. The Board confirms that it is comfortable with the
effectiveness of the Group’s risk management and internal
controls (including financial, operational and compliance
controls), which have been in place throughout 2022 and
continue to operate up to the date of approval of the annual
report and accounts. More information is provided in the Audit
and Risk Committee report on page 91.
The Board agrees the overall risk appetite for the Group.
Throughout the year, The Board has monitored performance
against risk appetite in accordance with the risk management
framework, which is itself reviewed and approved by The
Board annually. Key components of the risk management
framework include ongoing assessment and validation of
controls, and taking steps to ensure that controls remain
effective. Ongoing oversight of risk is undertaken via the
Executive Risk and Regulatory Committee, which meets each
month and considers risk KPIs and reviews of specific risk
areas. There is ongoing reporting of risk matters to the Audit
and Risk Committee and Board, via the risk management
team. Risk management also provide The Board with specific
assessments of risk to support key decision-making. Early in
the year, risk management provided a risk assessment for the
Ukraine/Russia conflict, with particular regard to our MAP and
Cyber classes, which identified key themes and areas of focus
as well as recommendations for The Board’s consideration.
The Board also discussed a risk assessment on inflation
(including economic and social inflation) highlighting key
recommendations and the mitigations in place across core
functions. In addition, risk management provided an opinion
on the approach to, and risks around, loss estimates for
Hurricane Ian. Other ongoing assessments throughout the
year included regular reviews of the Group’s modernisation
programme, data management control framework and
economic downturn risk. During the year the risk management
framework and risk appetite statements were reviewed and
refreshed. Further information is provided in the risk
management and compliance report on page 67.
During 2022, the Audit and Risk Committee and Board have
reviewed and provided comment on the Own Risk and
Solvency Assessment (ORSA) report. The ORSA provides a
detailed assessment of the short- and long-term risks faced by
the company to ensure that solvency needs can be met. The
ORSA policy is reviewed and approved annually by The Board.
The Audit and Risk Committee receives regular reports on the
findings of reviews undertaken by internal audit. The
Committee also considered any significant findings raised by
the external auditors during their reviews of the annual and
interim results. Members of the Audit and Risk Committee
could also discuss relevant matters with the internal and
external auditors without members of management being
present.
On 1 January 2023, the Audit and Risk Committee was
replaced by a separate Audit Committee and Risk Committee
to enhance oversight responsibilities and committee
effectiveness. Recommendations for the membership of both
Committees were provided to The Board by the Nomination
Committee.
Further information on the activities of the Audit and Risk
Committee in 2022 is set out in the Audit and Risk Committee
report on page 91 and further information on risk
management at Beazley is set out in the risk management
report on page 67.
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Shareholder engagement and investor relations
The company places great importance on communication with its shareholders. Further information on how we engage with
shareholders is contained in the stakeholder engagement report on page 50. Useful shareholder information is also available in
the investor relations section of the company’s website www.beazley.com.
The company has the authority within its articles of association to communicate with its shareholders using electronic and
website communication and to allow for electronic proxy voting.
Regular dialogue with shareholders is coordinated by the investor relations team. Presentations of the annual and interim
results are made to analysts by the Chief Executive Officer, Group Finance Director and, where appropriate, other members of
senior management. The Head of Investor Relations, senior management and members of The Board meet with institutional
shareholders to discuss relevant matters. The views of shareholders are communicated to The Board via a regular report from
the Head of Investor Relations and through feedback from Directors following meetings.
The company’s shares are listed on the London Stock Exchange. The share price is available from the company’s website.
There are currently 17 analysts publishing research notes on the Group. In addition to research coverage from Numis and JP
Morgan, the company’s joint corporate broker, coverage is provided by Autonomous, Barclays, Berenberg, Bank of America, Citi,
Goldman Sachs, HSBC, Jefferies, Keefe Bruyette & Woods, Morgan Stanley, Panmure Gordon, Peel Hunt, Exane Paribas, RBC,
and UBS.
Analysis of share register
The company’s shareholders at 31 December 2022 are analysed below:
Number of shares held
1-500
501-1,000
1,001-2,000
2,001-5,000
5,001-10,000
10,001-100,000
100,001-1,000,000
1,000,001-999,999,999
Totals
Category of shareholder
Institutional
Retail
Totals
Number of shareholders
120
122
151
223
158
337
229
116
1,456
Percentage of total
shareholders
8.24 %
8.38 %
10.37 %
15.32 %
10.85 %
23.15 %
15.73 %
7.96 %
100.00 %
Number of ordinary
shares
29,835
90,825
223,513
743,296
1,141,481
11,652,650
86,621,234
570,701,186
671,204,020
Number of
ordinary shares
663,021,917
8,182,103
671,204,020
Percentage of
issued share
capital
— %
0.01 %
0.03 %
0.11 %
0.17 %
1.74 %
12.91 %
85.03 %
100.00 %
Percentage of
issued share
capital
98.78 %
1.22 %
100.00 %
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Beazley | Annual report 2022
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Board evaluation
Board and Committee performance evaluation
An evaluation of the performance of the Beazley plc Board and its committees is carried out annually. The evaluation is
designed to assess whether The Board and its Committees are operating effectively and whether the Chair and individual
Directors are making effective contributions. Feedback from the evaluation is also used to formulate action plans for
improvement areas and identify where the composition of The Board and Committees could be enhanced.
An externally facilitated performance evaluation is carried out every three years, and the evaluation is conducted internally in
other years. As an external evaluation was conducted by Clare Chalmers Limited in 2021, the Nomination Committee
determined that it was appropriate for the 2022 performance evaluation to be conducted internally. The external and internal
evaluations complement Beazley’s overall approach to board evaluation.
Beazley’s overall approach to board evaluation
External reviews (every three years)
Internal reviews (other years)
An independent external evaluation firm is appointed
who works with the Chair, the Nomination Committee
and Company Secretary to define the scope of the
evaluation. This scope is designed to build on
Beazley’s experience from previous evaluations,
whilst also enabling the evaluator to use their own
experience and independence to provide insight.
The evaluator will conduct interviews with Directors,
attend board and committee meetings and review
meeting materials to support assessments of the
effectiveness of The Board and its Committees.
On conclusion of their work, the evaluator will
provide a detailed report on their findings, which they
will present to The Board for review and discussion.
The Board will therefore have the opportunity to
challenge any of the findings before an action plan is
agreed. Progress against these actions is monitored
by The Board throughout the year.
This process is undertaken for Beazley plc and other
key Group subsidiaries.
The Chair and Company Secretary meet with Directors individually to obtain their views
on the effectiveness of The Board and each Committee. Directors are encouraged to
share their views openly, and a number of specific questions are asked to each
director to determine overall Board and Committee effectiveness.
The findings from this work are presented to The Board and an action plan is created
to address specific findings. Progress against these actions is monitored by The
Board throughout the year.
The Chair also conducts separate meetings with each Director to solicit their feedback
on board dynamics, review their individual performance and determine any steps to be
taken. The Senior Independent Director conducts this review of the Chair. The findings
from these discussions are considered alongside individual Directors’ skills self-
assessments to identify any areas for individual or collective board training for the
following year.
This process is undertaken for Beazley plc and other key group subsidiaries.
Findings from the 2022 evaluation
Performance of The Board and its Committees
Overall, the 2022 evaluation concluded that The Board and
each of its Committees are operating effectively. The overall
findings were that The Board and Committees have strong
compositions and good diversity of background and
experience; there is an inclusive culture in the board room,
which encourages challenge and contribution from the
Directors; and that the newer Non-Executive Directors have
brought new insights and perspectives which are helpful and
positive. A number of actions were agreed to address specific
observations and support the continued effectiveness of The
Board and Committees, and these actions are set out below.
Specific comments are made in the committee reports on
relevant findings from the evaluation of that Committee.
Chair and individual Director performance
Overall, the evaluation concluded that the Chair and each
Director are operating effectively and contributing to the
effective operation of The Board and Committees. A number of
areas to support Directors’ individual or collective
performance were identified, and action plans have been
formulated. This includes delivery of the 2023 Board
knowledge and training plan.
The 2022 review concluded that the Chair provided support to
the effective operation of The Board through strong leadership
and driving an open and inclusive environment where debate
is encouraged. This feedback was considered by the
Nomination Committee when assessing candidates for the
role as the new Chair of Beazley plc.
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Recommendations and actions from the 2022 Board performance evaluation
Recommendations
Actions
Seek to further improve the efficiency of corporate
governance across Boards and Committees without
impacting effectiveness.
A governance review project is underway to address this recommendation, with input
from Directors and management.
Improve the processes around short- and longer-
term business planning.
Create an integrated scorecard as a more impactful
means of monitoring the performance of businesses
and key programmes.
Ensure meeting agendas are appropriately focussed.
Ensure The Board has appropriate oversight and
understanding of IFRS 17 changes.
Maximise the effectiveness of the overall board
timetable.
The introduction of separate Audit and Risk Committees was strongly supported by
Directors – there will be specific focus on the efficient implementation of these
Committees.
Steps will be taken to improve interactions between short- and longer-term business
plans and how The Board provides input into these plans.
An integrated performance scorecard is being developed for implementation in 2023.
Agenda planning work will seek to ensure meeting agendas have the right focus,
including to allow sufficient time to fully discuss strategic and commercial items.
For the first part of 2023 up to the full implementation of IFRS 17, necessary time will
be devoted by The Board and Audit Committee to understand the commercial and
technical implications of the move to IFRS 17 and determine the key judgements to be
made.
In 2023, we will take steps to improve the overall effectiveness of the board
timetable. This will include consideration of the sequencing of meetings and the use
of in-person/hybrid formats to support the effective operation of The Board and
Committees and encourage free-flowing conversations.
Progress made on action areas from the 2021 external Board performance evaluation
Action areas
Progress
Ensure Non-Executive Directors continue to provide a
creative contribution by stepping back from the detail
in areas where management can provide assurance.
Through 2022, Directors have been focussed on providing the right level of input and
oversight, and avoiding getting into too much detail where this is not needed.
Continuing to improve Board reporting.
Considering sequencing of meetings to streamline
agendas and achieve efficiency between The Board
and Committees, and key subsidiary boards, by
assigning responsibility for oversight of different
topics.
Sharpening The Board’s strategic focus by giving
more attention to a five- and ten-year time horizon
Exploring ways to enhance workforce engagement.
Continuing to lead the Group on ESG matters and
ensuring there is sufficient reporting to subsidiary
Boards to enable them to fulfil their regulatory
responsibilities.
This has been supported by improvements to the quality of board reporting (as
mentioned below). The Executive Committee also received specific training on how to
best manage relationships with The Board.
Following the work commenced in 2021, steps have continued in 2022 to embed
improved reporting to Boards and Committees. At each meeting, views are sought
from Directors on areas where reporting can be further improved. Feedback is then
shared with authors and support and training provided.
A suite of reporting templates and training materials has been made available to all
employees to support in preparing board reports.
Specific focus has been given to the timetable of meetings in 2023 to support
efficiency of operation and decision-making across Boards and Committees.
Work to further drive the efficiency of corporate governance will continue through the
governance review action identified in the 2022 evaluation.
Improving long-term strategy and planning have been key areas of focus in 2022. The
board reviewed specific medium-term and long-term plans in 2022, and approved
steps for their further development and implementation.
In line with previous years, The Board met over a number of days in May to discuss
strategic matters. This included consideration of longer-term market trends,
technological developments, ESG and overall business strategy. The Board will
continue to consider and debate matters of longer-term strategic importance.
A re-launch of the employee voice took place during 2022 and included the
enhancement of board reporting of employee engagement.
Fiona Muldoon was appointed as the employee voice of The Board in November 2022,
and will continue the work with Culture & People and other stakeholders to review the
process and channels for engagement between the workforce and The Board. See the
stakeholder engagement report on page 50 for more information on engagement
channels.
During 2022, the Beazley plc Board’s role in overseeing the Group’s overall approach
to ESG has been embedded. The Board oversees the work of the Responsible
Business Steering Group in embedding best ESG practices across the Group, and
ensuring appropriate reporting to subsidiary Boards.
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Beazley | Annual report 2022
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Engagement in action:
spotlight on the
remuneration policy
In accordance with the Code, our remuneration policy is
subject to a binding vote from shareholders every three years.
The policy was last approved at the 2020 AGM, and the
revised policy will be proposed for approval at the company's
AGM on 25 April 2023.
In advance of presenting the final policy for approval at the
2023 AGM, the remuneration committee conducted an
extensive engagement exercise to ensure that shareholders’
views were addressed. This exercise commenced in October
2022 with the chair of the remuneration committee writing to
the majority of Beazley’s shareholders (who collectively
represented 94% of Beazley’s issued share capital) and the
main proxy advisory agencies to gather shareholder feedback
for consideration in the proposed new policy. Through this
written communication, the committee was able to clearly set
out the key policy changes being considered and how they
would further align executive remuneration pay with Beazley’s
long-term strategy.
We invited shareholders to provide their responses to the
proposals and gave them the opportunity to meet with the
chair of the remuneration committee and members of Beazley
management to further discuss the proposed changes and
provide feedback. Following this, a number of meetings were
held with shareholders and written feedback was also
received. This feedback was discussed by the remuneration
committee, and has resulted in a number of changes being
made to the remuneration policy being presented for approval
at the 2023 AGM, as follows:
• Long-Term Incentive Plan (LTIP) – Around 145 employees
participate in Beazley’s LTIP each year and it represents a
critical tool to incentivise and retain senior talent. Since
2012 the vesting of our LTIP has been wholly based on
growth in net asset value per share (NAVps). NAVps is
Beazley’s central KPI and its use in the LTIP strongly aligns
the interests of participants with our shareholders. LTIPs
are awarded in two tranches with 50% vesting over three
years (subject to an additional two year holding period) and
50% vesting over five years. The five year performance
period is longer than is typically seen in the market.
views of shareholders the remuneration committee agreed
that it would not proceed with this change. Instead, the
committee is proposing an amendment to the policy so that
the entire LTIP is based on performance measured over three
years. This compromise more closely aligns to typical market
practice, taking on board the views of shareholders, and
reduces the impact that a single year has on multiple LTIP
awards.
• ESG in incentives – during 2022 the remuneration
committee has given careful consideration on how Beazley’s
commitment to doing the right thing for our people, partners
and the planet should be reflected in the remuneration
framework. ESG performance forms part of the annual
bonus, and as part of the consultation, the committee
proposed that ESG metrics should be included in the LTIP.
Shareholders gave their strong support for this proposal,
and the committee has taken into account their comments
when setting ESG targets that are suitably stretching,
quantifiable and align with our external commitments.
• Chief Executive Officer salary – Although the Chief Executive
Officer’s salary is not a matter concerning the new policy,
the committee was also keen to discuss this with
shareholders.
The Remuneration Committee recognises the calibre,
experience and track record of Adrian Cox, and his key role
in supporting Beazley to deliver its long-term strategic
priorities. The committee was of the view that Adrian’s
salary did not reflect his particular skills and experience, nor
that it was appropriate for Beazley’s size and complexity.
Accordingly, the committee considered that it would be
appropriate to make an increase for 2023.
A number of shareholders commented that generally they
expect salary increases for executives directors to be in-line
with or below the increases for the workforce, and that this
issue was exacerbated by the current macro-economic
environment. The committee agrees with this principle as
can be seen by the alignment between the Group Finance
Director’s salary increase and the workforce. In addition,
they took into account the recent support provided by
Beazley to the workforce, including one-off payments and
additional salary increases to those employees most likely
impacted by the cost-of-living crisis. Overall, the committee
believes that the proposed salary increase to the Chief
Executive Officer remains appropriate, further information on
which is found on page 122 of the directors’ remuneration
report.
During the consultation we explored the idea of amending
our performance assessment so that NAVps would be
measured over five separate years. The intention being that
this would help to limit the disproportionate impact that
exceptionally good or bad years can have over the five year
performance period. The design included a number of best
practice features including an underpin, so that awards
could be scaled back if cumulative NAVps growth was
negative.
The other proposed changes to the policy were strongly
supported by all shareholders that engaged with the company.
The Remuneration Committee welcomed the opportunity to
engage openly with its shareholders and appreciates the input
of all those who participated in the consultation. Full
information on the proposed changes to the remuneration
policy are available in the Directors’ remuneration report on
page 111.
Based on some shareholder feedback the Committee decided
against the annualised LTIP approach. Taking into account the
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Audit and Risk Committee
Dear shareholder
I am pleased to report on the activities of the Audit and Risk
Committee in 2022 as we supported The Board in overseeing
accurate financial reporting and audit processes, compliance
with laws and regulations and a robust risk management
framework.
Firm foundations in a turbulent time
2022 has been a particularly turbulent time on a global level.
The devastating war in Ukraine, cost of living crisis and effects
of global inflation have further reminded us of our
interconnected world and how impacts of events can be far
reaching. This followed closely after the impacts of Covid-19
and the changes we all needed to make on a personal and
business level.
During this challenging year, the audit and risk committee
helped support Beazley’s resilience through its oversight of
reserving, its role in ensuring the quality and integrity of
financial reporting, and of a robust external audit process and
its ongoing monitoring of the appropriateness of Beazley’s risk
management framework. The committee continued to oversee
risks arising from the war in Ukraine and its secondary effects,
including assumptions around inflation and volatility in energy
prices and financial markets.
Preparedness for significant accounting and regulatory
regime changes
2023 will see a number of significant changes to the way we
are required to report and oversee our business. The
implementation of IFRS 17 from 1 January 2023 will represent
a major change to how all insurers account for their business
activities, and has particular impacts on Beazley due to the
range of business we write.
There has been a significant project undertaken across many
functions in Beazley in preparing the business for the changes
under IFRS 17, and I extend my thanks to the team for the
work they have undertaken. During 2022, the Audit and Risk
Committee closely monitored the progress of this project.
Committee members also received training and briefings to
ensure they fully understood the scope of IFRS 17 to support
their discussions with management.
The Committee was also actively involved in reviewing and
debating with management on the key accounting judgements
to be made under IFRS 17. Shareholders will ultimately see
the full impacts of IFRS 17 in our 2023 reporting, starting with
the 2023 half-year results and we are reporting on the
transition to IFRS 17 in the financial review on page 58 and in
note 1 to the financial statements on page 163.
The Committee has also overseen steps being taken across
Beazley in preparedness for changes in US requirements
relating to the oversight, monitoring and governance of
insurance business, under the Model Audit Rule (MAR).
Climate reporting
We discuss throughout this annual report Beazley’s
commitment to doing the right thing and being a responsible
business. In supporting these commitments, the Committee
has overseen further enhancement of Beazley’s reporting of
ESG matters in accordance with the ‘Taskforce on Climate-
Related Financial Disclosures’ (TCFD), and the early adoption
of reporting requirements under the Companies (Strategic
Report) (Climate-related Financial Disclosure) Regulations
2022.
Supporting our shareholders
The Committee carried out an assurance role for The Board in
relation to the successful cUSD400m equity raising in
November 2022. This role involved not only considering
financial assumptions around the capital raising, but also
challenging management to ensure the capital raising was
carried out in the best interests of all stakeholders.
Prior to any decision to pay a dividend, the Audit and Risk
Committee reviews the viability of the business over the long
term. The Audit and Risk Committee was happy to support The
Board’s decision to resume the payment of a dividend
following finalisation of the results for 2021.
Helping Beazley keep ‘different’
The audit and risk committee took a number of steps in 2022
to help support change at Beazley.
During 2022, the committee oversaw a reorganisation of the
Risk Management and Compliance teams to ensure these
functions are best aligned with to the growth of the business.
The committee maintained its strong relationship with
Beazley’s Chief Risk Officer, Rob Anarfi, in supporting the
reorganisation.
The transition to separate Audit and Risk Committees
I’d like to sign off this letter, which I write in my previous role
of chair of the audit and risk committee, by thanking my fellow
committee members. With effect from 1 January 2023, the
Beazley plc Board has taken the decision to create separate
Audit and Risk committees to further enhance Beazley’s
corporate governance framework and enable each Committee
to have greater focus on their respective roles.
On a personal level, I look forward to taking on the role of
Chair of the new Audit Committee. I am also delighted that
Bob Stuchbery has taken on the role to chair the Risk
Committee. Bob and I will continue to work together In our
new capacities.
John Reizenstein
Audit Committee Chair
(previously Audit and Risk Committee Chair)
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Beazley | Annual report 2022
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Audit and Risk Committee
continued
The overall role of the Audit and Risk Committee during 2022
was unchanged from previous years. However, since 1 January
2023 The Board has established separate audit and risk
committees to enable greater focus on the different areas of
responsibility. More information on this decision is provided in
this report. The remainder of this report provides information
on the activities of the Audit Committee during 2022, with
activities already undertaken by the Audit and Risk Committee
specifically highlighted.
The Committee supported The Board of Directors in
overseeing the accuracy of financial reporting, and ensuring
the system of internal control, the audit process and the
company’s processes for compliance with laws and
regulations and internal policies and procedures are robust,
effective and responsive to ever-changing environments.
During 2022, the committee was focused on matters relating
to maintaining the Group’s strong financial performance,
notwithstanding the residual impact of COVID-19 and the
global effects of the Ukraine conflict and related sanctions
monitoring. They also considered the ongoing development of
sustainability and climate change responsibilities, the
monitoring of the consultation by the UK’s Department for
Business, Energy and Industrial Strategy (BEIS) on reforms to
audit and corporate governance and preparing for the
implementation of IFRS 9 and IFRS 17 and the US Model
Audit Rule. In the discharge of their remit, the committee gave
due consideration to all relevant laws and regulations, the
provisions of the UK Corporate Governance Code (‘Code’) and
the requirements of the UK Listing Authority’s Listing,
Prospectus and Disclosure and Transparency Rules (DTRs)
and any other applicable rules, as appropriate.
Committee membership and meetings
During the year, Fiona Muldoon and Cecilia Reyes Leuzinger
were appointed to the Committee and Catherine Woods stood
down. Fiona and Cecilia’s appointments strengthened the
Committee’s ‘recent and relevant financial experience’ and
‘sectoral experience’, as required by the Code and DTRs, both
having gained over 25 years’ experience in the insurance
industry. All Committee members were independent Non-
Executive Directors and details of each member’s relevant
experience are given in their biographies on pages 77 and 78.
Committee meeting attendance table 2022
Director
Rajesh K Agrawal
Pierre-Olivier Desaulle
Nicola Hodson1
Fiona Muldoon
A John Reizenstein
Cecilia Reyes Leuzinger
Robert A Stuchbery
Catherine M Woods2
Audit and Risk Committee
No.
of meetings
10
10
10
7
10
7
10
2
No.
attended
10
10
9
7
10
7
10
2
1 Nicola Hodson was unable to attend the November meeting due to a
long-standing scheduling clash
2 Catherine Woods stepped down from the committee on 25 March 2022
The Committee received regular updates from the audit and
risk committees of the Group’s regulated subsidiaries and
holds a joint meeting of the audit and risk committees of
Beazley plc and other regulated Group entities to consider
policies, the internal audit plans for the forth-coming year and
other matters relevant across entities.
The Audit and Risk Committee was required to meet at least
quarterly, with meetings scheduled at appropriate intervals in
the reporting and audit cycles. Additional meetings were held
as required. In 2022, there were a total of nine scheduled
meetings in addition to the joint meeting.
Only members of the Committee had the right to attend
meetings; however, standing invitations were extended to the
Group Chair, the Senior Independent Director, the Chief
Executive Officer, the Group Finance Director, the Chief Risk
Officer, the Head of Internal Audit and external auditors. The
Chairs of the Audit and Risk Committees of the Group’s
regulated subsidiaries also attended Audit and Risk
Committee meetings during the year as and when appropriate.
The Company Secretary acted as secretary to the committee.
The internal and external auditors attended committee
meetings and periodically met in private with the committee to
discuss matters relating to its remit and issues arising from
their work. The committee also met in private with the Group
Chief Actuary. In addition, the Chair of the Audit and Risk
Committee had regular contact with the external and internal
auditors throughout the year and members of the committee
met individually with regulators when required.
Committee performance evaluation
The Committee reviewed its effectiveness during the year, as
part of The Board evaluation process (see page 88). The
Board confirmed that the committee was effective in its role.
However, due to the business’s growth strategy, the
increasing risk oversight required, and the increasing amount
and complexity of reporting requirements, an action arising
from the review was to consider creating separate audit and
risk committees to ensure strong governance and to allow
sufficient time for oversight of these important matters for The
Board.
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www.beazley.com
At its board meeting on 9 December 2022, The Board
approved the separation of the Beazley plc Audit and Risk
Committee into two separate committees. The Committee
supported the proposal for the dissolving of the Audit and Risk
Committee and the establishment of a separate Audit
Committee and Risk Committee with effect from 1 January
2023. The nomination committee provided recommendations
to The Board for the membership of both committees. Terms
of reference for the separate audit and risk committees were
also approved by The Board and are available on the website.
The Committee had oversight of the closure of actions arising
from the 2021 committee effectiveness review and reviewed
the new actions arising from the 2021 review during the year.
See the board evaluation report on page 88 for more details
on this process.
Responsibilities of the committee
The Committee’s main responsibilities are unchanged from
the prior year and are set out below:
Audit and financial reporting
a) Financial and narrative reporting
• monitor the integrity of the company’s financial and
narrative statements including any disclosures such as the
Task Force on Climate-Related Financial Disclosures (TCFD)
report, interim report, preliminary or other formal
announcement relating to the company’s financial
performance;
• review significant financial reporting judgements contained
in the financial statements;
• review and challenge the consistency of, and any changes
to, significant accounting policies both on a year-on-year
basis and across the company/Group;
• review and monitor the going concern assumption and
viability statement;
• advise The Board on whether, taken as a whole, the annual
report is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
company’s performance, business model and strategy; and
• review other reporting such as the solvency and financial
condition report.
Internal audit
b)
• recommend the appointment, or termination of
appointment, of the head of the internal audit function;
• monitor and review the effectiveness of the Group’s internal
audit function; and
• review and approve the internal audit plan and monitor its
implementation, including consideration of resources.
c) External audit
• review and make recommendations to The Board regarding
the external audit contract, including appointment,
remuneration, and terms of engagement;
• review and oversee the relationship with the external audit,
including their independence, objectivity and the policy on
and level of non-audit services; and
• review and monitor the effectiveness of the external auditor
and the audit process.
d)
Internal control, Risk management and compliance
• review and make recommendations to The Board on the
effectiveness of the internal financial controls and the
internal control and risk management systems, including
oversight of breaches of risk appetite;
• review the risk management and compliance plans and level
of resources to perform the roles effectively and review the
effectiveness of the compliance function;
• review statements in the annual report concerning internal
control, risk management and assessment of principal and
emerging risks;
• review and recommend to The Board the annual Own Risk
and Solvency Assessment (ORSA) report;
• review whistleblowing arrangements in place for raising
concerns, in confidence;
• review procedures in place relating to fraud detection,
prevention of bribery and anti-money laundering; and
• monitor the performance and independence of consulting
actuaries used for the review of insurance reserving.
Committee activities during 2022:
a) Financial and narrative reporting
The Committee reviewed the full and half year results
announcements, the quarterly trading statements, the annual
report including viability and going concern statements to
recommend to The Board for approval. The Committee also
reviewed environmental and sustainability reporting, for
example the TCFD report and Solvency II reporting.The 2022
full year results announcement and annual report were
ultimately recommended to The Board by the Audit
Committee, which commenced its role in 2023.
An important part of the review of financial reporting was to
consider and agree the significant financial estimates and
judgements in relation to the financial statements. The
Committee received reports on these judgements for the full
and half year reports and after discussion with EY, agreed
whether they were appropriate. The table on page 94 sets out
the key accounting estimates and judgements for 2022 and
how these were addressed.
The Committee continued to focus on the Group’s close and
estimation processes generally, and the related controls
carried out by the business and specifically the finance team.
The Audit and Risk Committee remained committed to
ensuring that there were robust controls and oversight over
the close process. During the year and at year end, the
Committee received updates from management on the level of
estimations used in the close process and the controls carried
out to review these estimates retrospectively. The Committee
continued to receive periodic reporting from both the finance
and actuarial functions on our estimation process, and the
related controls, in respect of claims reserves, premium
income estimates and other key financial statement captions.
Based on reporting received and reviewed during the last 12
months, the Audit Committee remains satisfied that the
estimation and control processes deployed by the Group are
appropriate.
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Audit and Risk Committee
continued
Critical financial judgements and estimates for year ended 31 December 2022
Area of focus
How addressed by the committee
Valuation of insurance contract liabilities
As further explained in note 24 to the financial
statements, the Group’s policy is to hold
sufficient provisions, including those to cover
claims which have been ‘incurred but not
reported’ (IBNR) to meet all liabilities as they fall
due. The reserving for these claims represents
the most critical estimate in the Group’s
financial statements.
In 2022, we noted the uncertainty around the impact of the Russia/Ukraine conflict and the rise in inflation, and
cost of living increases on the global economy. Accordingly, the potential that higher inflation and insolvency in
certain corporate sectors will result in increased volatility, as well as greater estimation challenges in respect of
insurance claims, remained a key consideration for 2022.
The Group continued to monitor its exposure to ‘social inflation’ and the potential for higher than average court
settlements. The key areas of exposure are within our healthcare and employment practices lines of businesses
where claims can take many years to finalise. As courts continue to deal with increased litigation, the
uncertainty around the level and acceleration of social inflation remains. Given the outlook for the US and
European economies, reserve loadings for recession, excess economic and social inflation undergo regular
monitoring by the actuarial function for potential management action.
There was continued improvement in frequency measures for ransomware claims frequency on our US Cyber
book for 2022. However, there are indications that these frequency trend reductions are slowing down, and
therefore this remains an area of uncertainty.
The Group also continued to gain more certainty around COVID-19 related claim costs in 2022 as more data
materialised on claims settlements.
The Audit and Risk Committee received regular reports from both the internal Group chief actuary and the
external audit team (including the Senior Accounting Officer), as the output of independent projections are
reviewed at key reporting quarters. In the latter part of the year, the Group Chief Actuary has reported on the
results of the third-quarter reserving process, which the committee considered to be a key control as this
process provides a level of informed independent challenge for the reserve position. To support the year-end
view, the Committee has received a detailed paper in support of the level of margin held within technical
reserves in the Group’s statement of financial position. Management confirmed that they remain satisfied that
the outstanding claims reserves included in the financial statements provide an appropriate margin over
projected ultimate claims costs to allow for the risks and uncertainties within the portfolio, and the Committee
was satisfied that there were no errors or inconsistencies that were material in the context of the financial
statements as a whole.
As in prior years, the committee also considers the report of the external auditor following its re-projection of
reserves using its own methodologies.
On the basis of the information provided by the Group actuary and through the consistent application of
Beazley’s reserving philosophy, the Audit Committee was satisfied that the reserves held on the Group
statement of financial position at 31 December 2022 were appropriate.
Valuation of unquoted and illiquid financial assets
The Board is responsible for setting the Group’s
investment strategy, defining the risk appetite
and overseeing the internal and outsourced
providers via the chief investment officer. The
committee has oversight of the assumptions
and techniques used to value the Group’s
investment portfolio. The valuation of our hard to
value ‘level 3’ investments, particularly our
illiquid credit assets, requires significant
judgement.
Premium estimates
A portion of gross written premiums is based on
the estimated premium income (EPI) of each
contract, which is an underwriters’ estimate of
the ultimate premium expected to be paid over
the life of the contract. Judgement is required in
determining these estimates.
Assessing indicators of impairment of Goodwill
As further explained in Note 12 to the financial
statements, the Group considers annually
whether its Goodwill and other indefinite life
intangible assets require impairment. The
recoverability assessment of these assets
involves consideration of a number of
judgmental assumptions such as future
profitability and premium rates.
The Committee noted that the overall investment strategy was broadly unchanged from prior periods. The
Committee received updates from the Group Finance Director and reviewed reports that confirm that the
investment portfolio was in line with the 2022 Board-approved risk appetite, that carrying values of the portfolio
as at 31 December 2022 were appropriate and that the valuation methodologies applied to each hierarchy level
were consistent with the accounting policies. Committee members were invited to and periodically attended the
Investment Committee.
No misstatements that were material in the context of the financial statements as a whole were identified and
the Audit Committee was satisfied with the approach employed by management in valuing the financial assets
at fair value on the balance sheet at 31 December 2022. Further detail on the valuation of financial assets is
given in note 16.
The Committee received a summary of the processes and controls around EPI and how they had operated
throughout the year. The Committee receives comfort over EPI through managements’ quarterly review process
over these estimates which validate their adequacy and reasonableness.
The Committee received information to enable it to review managements assumptions and inputs into the
analysis of whether there were any indicators of impairment of the Group's Goodwill balance. The Audit
Committee was satisfied with management’s approach in respect of the carrying value of all of the Group’s
intangible assets and there was no impairment of the Group’s intangible assets as at 31 December 2022.
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Area of focus
How addressed by the committee
Other financial reporting issues
The Committee considered a number of other
areas of judgement as part of their review of
the Group’s financial statements, which
whilst less material still warranted review by
the Committee:
Materiality – the Committee considered how management determine and apply materiality in the context of
preparing the financial statements.
IFRS 17 Disclosure - the Committee reviewed and approved management's approach to disclosing the potential
impact of IFRS 17 on the Group's financial statements.
Accounting for employee share schemes – the Committee reviewed an overview of the assumptions and
calculation methodology for determining the fair value of shares which are included as part of employee
remuneration.
Accounting for defined benefit pension scheme – the Committee reviewed a summary of the third-party actuarial
valuation of the defined benefit pension scheme liability. The Committee also reviewed the accounting
treatment for the purchase of insurance policies by the scheme trustees during the year.
Recoverability of insurance and reinsurance receivables – the Committee reviewed management’s methodology
in assessing the recoverability of insurance reinsurance receivables.
Taxation – The Board and Committee receive regular updates from the Group Head of Tax with regard to taxation
matters.
Equity raise – the Committee reviewed and agreed the accounting treatment and disclosure of the Group’s
equity raise in November 2022.
Going concern and viability
Assessing the viability and going concern statements was a
key activity of the Committee. During key reporting periods,
management set out for the Committee evidence for the basis
of preparation adopted in the financial statements and any
statements around the future viability of the Group.
The Committee reviewed detailed projections of future cash
flows, profit forecasts and capital requirements under various
scenarios, including scenarios stressed in terms of claims
frequency and liquidity. In 2022, we considered the Group’s
capital position with regards to the Group’s issuance of new
equity of approximately USD400m. This additional capital will
support the growth of our Property business and the retention
of more of the business in our Cyber and Specialty Risk
divisions.
The Committee also considered the appropriateness of
management’s viability statement and the period over which
this analysis is performed. The Committee was satisfied by
the level of analysis presented during the year and the related
approach taken and statements made in the Group’s key
external reporting.
Dividends
During the year the Committee also reviewed the
appropriateness of reinstating the dividend. It was decided
that the dividend would be reassessed at the year end when
the full year result was available. In February 2023, the Audit
Committee considered the full year result and the declaration
of a 13.5p interim dividend.
Fair, balanced, and understandable assessment
It is a key requirement of the Group’s financial statements to
be fair, balanced, and understandable. The Audit Committee
applied the same due diligence approach adopted in previous
years to assess this requirement under the Code. The annual
report is prepared following a well-documented internal
process that is performed in parallel with the processes
undertaken by the external auditor. The Audit Committee has
reviewed management’s assessment as a part of the formal
annual report governance process. Following its review, the
Audit Committee is satisfied that the 2022 annual report is
fair, balanced and understandable, and provides the
information necessary for shareholders and other
stakeholders to assess the company’s position and
performance, business model and strategy, and has advised
The Board accordingly.
Solvency II reporting
The Committee reviewed and approved the Group’s 2021
solvency and financial condition report and regular supervisory
report as well as approving the Solvency II policy
documentation for the Group.
ESG reporting
During the year, the Committee has considered the quality of
ESG reporting as contained in the Responsible Business and
TCFD reports. This topic will remain an area of ongoing focus
for the plc audit committee as reporting standards and climate
change metrics develop and as Beazley’s Responsible
Business Strategy is further embedded. The Committee
received updates from the external auditor on their review of
TCFD reporting, which is performed by their specialist
sustainability reporting team. Management commissioned the
external auditor to carry out additional ‘pre-assurance’
procedures over the TCFD report. This included peer analysis
of disclosures, scrutiny of metrics and substantiation of
qualitative statements.
At the joint meeting of committees in November, the Chief
Underwriting Officer reported on the licensing of three new
Climate Change models to augment to Group’s understanding
and estimation of the impact of climate change on the
business we write. The Group also continued to hire personnel
who strengthened the Group's oversight of Climate change,
and will look to continue this in 2023.
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Audit and Risk Committee
continued
Monitoring forthcoming regulatory changes
The committee received updates on:
• preparedness for forthcoming key accounting and regulatory
changes, including IFRS 17 and changes which may occur
depending on the outcome of the UK Government's
consultation on reforms to audit and corporate governance.
The committee notes that management have mobilised a
project to consider the impact of these reforms and that
more clarity is expected during 2023; and
• monitoring of key reporting and regulatory updates,
including updates on accounting standards, changes in tax
legislation and changes in regulatory requirements. This
included the Model Audit Rule and Lloyd's new risk based
approach.
IFRS 17
The Committee received detailed reports on the IFRS 17
project, including key implications and judgments as well as
progress towards implementation. As well as reports from the
finance team, they also received reports from EY. Information
shared included the proposed risk adjustment methodology as
well as other assumptions and decisions required with the
introduction of IFRS 17. Several Board deep dive training
sessions were carried out during the year in relation to IFRS
17. The Committee have also concluded on the IAS 8
disclosures included in these financial statements.
External audit
One of the committee’s most important responsibilities is
managing the relationship with the Group’s external auditor,
Ernst & Young LLP (‘EY’) on behalf of The Board and having
oversight of the external audit process.
During the year, the Committee:
• Reviewed the findings from EY’s audit of the 2021 Group
Annual report and accounts and the Group’s Solvency II
Solvency and Financial Condition Report.
• Reviewed EY’s Audit Plan Audit plan for the 2022 year end
audit. The committee noted that the plan and scoping was
consistent with previous audits but responds to the Group’s
increased size and complexity. EY also set out in this plan
their proposed approach and timings with regard to the
audit work over IFRS 17.
• Reviewed the findings of EY’s review of the Group’s Interim
report in July 2022. This predominantly focused on EY’s
assessment of management’s approach to estimating
exposure to the conflict in Ukraine and the review
procedures over the interim report and key judgemental
balances such as the valuation of hard to value investments
and intangible assets.
• Oversaw the change in role of the head of compliance to
also cover risk, and associated changes in the compliance
function.
• Reviewed EY’s findings coming out of their interim audit
work ahead of the year end. This work predominantly
focused on the testing of controls over processes from
which financial information is derived, in addition to a
detailed actuarial review of our Q3 reserving position. The
actuarial review included a deep dive on management’s
treatment of inflation within our reserves, as well as
benchmarking losses to natural catastrophes such as
Hurricane Ian in the year.
• Reviewed EY’s Improvement Ideas report which they issue
in consultation with management following the conclusion of
the 2021 year end audit across all group entities. This
report sets out suggested improvements to controls and
processes which will further enhance the integrity of the
financial reporting process.
• Reviewed and agreed EY’s audit fee for the 2022 year end.
A comprehensive paper was set out by EY explaining their
proposed increase in fee and benchmarking the Group’s fee
to similar audits. The significant increase in the audit fee
this year reflects both changes in scope, the costs of
operational separation and inflationary considerations.
• Received an update from EY on the implementation of
operational separation of its audit practice in line with the
FRC’s principles for Operational Separation. The committee
noted that this had limited practical impact on the Group’s
audit, although the requirement for arm’s length rate cards
for certain specialists and other structural changes to the
audit fee as a result of separation contributed to the
increase in the Group’s audit fees.
• Were briefed by EY on their global plan to separate their
audit and consulting units into two separate businesses.
The committee will continue to monitor developments in this
area, with a focus on ensuring that the effectiveness and
quality of the audit remains high.
• Reviewed management’s assessment of the effectiveness
of the external audit process and EY’s response to the
FRC’s Audit Quality Inspection and Supervision Report which
was issued in June 2022.
The Committee regularly meet EY without management
present to facilitate open and transparent discussion, and the
Audit Committee Chair and Committee members meet the
lead audit partner outside of committee meeting on a regular
basis.
i) Assessing the effectiveness of the external auditor
The Committee placed great emphasis on ensuring there are
high standards of quality and effectiveness in the external
audit process.
Audit quality and effectiveness was assessed throughout the
year, with a focus on strong audit governance and the quality
of the team, including the provision of technical and industry
knowledge and the independence, objectivity and level of
professional scepticism exercised by the external auditor. The
Committee’s activities in assessing the effectiveness of the
audit included the following activities:
• reviewing the quality and scope of the audit planning and its
responsiveness to changes in the business and identified
risk;
• an assessment and review of the audit team, where
feedback from various stakeholders is conducted through
survey and discussions;
• reviewing the results of the annual survey on the
effectiveness of the external audit process conducted by
management. Feedback was requested in the form of a
questionnaire circulated to non-executive directors and
management across the Group, including in the US, Ireland
and Singapore. The survey focused on five areas; Audit
Quality, Forward Looking & Insightful; Efficiency & Audit
Delivery; ‘No surprises’ and Service Quality & Audit Team
Engagement. Responses also covered EY’s professional
scepticism and from non-executive directors the extent to
which EY challenged management. The overall results of the
survey were favourable, concluding the external audit
process to be effective and the challenge provided to be
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robust. The survey also highlighted areas proposed by
management where EY and management could work
together to improve the audit process; and reviewing the
FRC’s Audit Quality Inspection and Supervision Report for
EY. Overall, the FRC concluded that EY had made progress
on previous findings raised and had sought to make
improvements in relation to audit execution and firm-wide
procedures, although the committee noted that overall EY’s
results had deteriorated compared to prior reviews. The
Committee also noted that this predominantly related to
EY’s non-listed audits and that the 2019 audit of the Group
had been subject to review by the FRC with no significant
findings raised.
After taking all of the above into account, the Committee
concluded that the external audit process was effective.
ii) Non-audit services and independence of the external auditor
The Audit and Risk Committee’s responsibility to monitor and
review the objectivity and independence of the external auditor
was supported by a policy in relation to the provision of non-
audit services by the auditor. The committee regarded the
independence of the External Auditor as of the utmost
importance in safeguarding the integrity of the external audit
process.
During 2022, our non-audit services policy was reviewed by
the committee. The objective is to ensure that the provision of
such services does not impair the external auditor’s
objectivity. The policy specifically disallows certain activities
from being provided by the auditor, such as bookkeeping and
accounting services, internal actuarial services and executive
remuneration services. The policy requires consideration and
pre-approval for all other material services. Permissible non-
audit services are all closely related to the audit and/or
required by law or regulation.
The Committee reviewed the terms of such proposed
appointments to ensure they have been robustly justified. The
committee receives a report from the external auditors setting
out all non-audit services undertaken, so that it could monitor
the types of services being provided, and the fees incurred for
that work.
In the year, fees for audit and audit related services were
$6.2m (2021:$3.8m). Fees for non-audit and assurance
services for 2022 were $0.7m (2021:$0.6m) and included
work related to the accounts and regulatory reporting of the
syndicates managed by Beazley, which would commonly be
carried out by the external auditor. None of the non-audit
services provided are considered by the audit and risk
committee to affect the auditor’s independence or objectivity.
The committee received an overview from EY of the policies
and procedures in place to safeguard auditor objectivity and
independence. These include annual confirmation by all EY
professionals of compliance with independence policies and
procedures and wider processes and systems to monitor
potential threats to auditor independence throughout the year.
EY gave the annual confirmation of their independence to the
Committee, confirming in particular that no partners or staff
held any financial interests in the Beazley Group and that their
ethics and independence policies are consistent with the
requirements of the FRC’s ethical standard.
Having taken into account the following factors, the
Committee concluded that EY was independent from the
Group throughout the year and to the date of their audit
report:
• non-audit services provided by EY were in compliance with
the Group’s non-audit policy and the requirements of the
FRC’s ethical standard;
• EY had complied with the FRC’s requirements around
rotation of the audit partner and senior members of the
audit team;
• the Group has not employed members of the EY audit team
or any EY partners during the year; and that
• EY have confirmed compliance of their staff and partners
with EY’s internal policies and processes around
independence, in particular that no partners or staff held
financial interests in the Group.
iii) Auditor Tenure and reappointment
The 2022 year end audit has been EY’s fourth consecutive
year end as the Group’s auditor, following their appointment in
2019 following a comprehensive tender process. The Group is
required to put the audit out to a competitive tender process
at least every ten years. It is anticipated that the next
competitive tender will be conducted prior to the
commencement of the 2029 audit. Following the conclusion of
the 2022 year end audit, the current audit partner, Stuart
Wilson, will have served as senior statutory auditor for four
years. In line with UK regulation the audit engagement partner
must rotate after their fifth year leading the audit, and thus a
new lead audit partner will be required for the 2024 audit. It is
expected that a successor will be identified in 2023.
The Group has complied with the UK Competition & Markets
Authority’s Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order 2014
throughout the year. There are no contractual obligations
which restrict the Group’s choice of auditor. EY have indicated
their willingness to be reappointed as the Group’s auditor and
the Audit Committee has recommended to The Board that they
be reappointed.
Internal audit
During 2022, the Group’s internal audit function reported
directly, and was accountable, to the committee and the head
of internal audit had direct access to the committee chair. The
committee reviewed the effectiveness of the function and
remained satisfied that the internal audit function had
sufficient resources during the year to undertake its duties.
During 2022, the Committee:
• considered the results of all internal audit reports, and the
findings and themes emerging from them;
• considered the annual report from internal audit, which
included: analysis of the delivery of the audit plan;
significant findings and overdue actions; the control
environment and risk management framework and risk
management culture; control environment; and
whistleblowing.
• monitored the implementation of the 2022 internal audit
plan;
• considered the internal audit approach to monitoring change
portfolio risk including the Group’s modernisation
programme;
• reviewed the proposal for internal audit’s approach to the
monitoring of external assurance across the Group;
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Audit and Risk Committee
continued
• reviewed and approved the basis for internal audit planning.
This included reviewing and approving the Group’s risk-
based audit universe and the internal audit plan, and
reviewing other business developments which could also
potentially be the subject of internal audit work in the
coming year. It also included challenging the frequency of
audits in certain areas of the business and the balance
between thematic reviews and full end-to-end audits;
• reviewed and approved the internal audit charter;
• reviewed and approved the internal audit budget for 2023;
and
• monitored the timely implementation of agreed
management actions and reviewed the status of the same.
Overall, the internal audit function was able to report that, in
the context of the agreed audit universe and plans, none of
the work indicated that the Group was operating outside of its
agreed risk appetite.
The effectiveness of internal audit was monitored by the Audit
and Risk Committee, through agreeing plans and performance
monitoring. External Quality Assurance reviews are also
undertaken every five years (unless it is agreed by the
committee that a review is required earlier). The last external
review was completed in November 2019. The Committee was
satisfied that the internal audit function remained effective.
Internal controls
The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness. However, as part of
this process the Audit and Risk Committee was responsible
for reviewing the effectiveness of financial controls and
internal controls and risk management framework.
Each year an independent and objective opinion is provided by
the Internal Audit function regarding the design and operating
effectiveness of the system of internal controls covering the
integrity of the Group’s financial statements and reports,
compliance with laws and regulations, and corporate policies
and the effective management of risks faced by the Group in
executing its strategic and tactical operating plans. In 2022
this also included the Model Audit Rule assessment.
The review includes an assessment of the Control Maturity
Grading framework, which enables Internal Audit to formulate
a strategic view on the maturity of the Group’s control
environment. The review has concluded that the Group’s
overall systems of controls are designed appropriately and are
operating effectively.
Internal Audit also noted that de-risking and simplification of
the Group’s processes is planned for 2023 as part of the
Group’s modernisation and has implemented a process to
monitor change portfolio risk.
The Committee discussed the report prepared by Internal
Audit and were satisfied that the Group’s system of internal
control and risk management framework continues to operate
effectively.
Risk management and compliance
Risk
To assist The Board, the Committee, supported by the risk
committees of the regulated subsidiary Boards, received and
reviewed reports from the risk management function focusing
on the following areas:
Regular reporting
• risk appetite: the Committee has monitored the actual risk
profile against risk appetite throughout 2022 and the Risk
Committee can confirm that Beazley plc has been operating
within risk appetite as at 31 December 2022. The
Committee has also reviewed the proposed enhancements
to the 2023 risk appetite statements and to the risk
appetite framework;
• risk assessment: the Committee has performed a review of
the Group’s risk profile to assess its coverage of the
universe of risk and ensure that major underlying risks are
visible and are being monitored;
• risk profiles: the Committee reviewed risk profiles, which
are focused risk assessments of specific topics. In 2022,
the Committee considered an assessment of inflation risk.
Risk management also provided an opinion on the approach
to, and risks around, estimates for Hurricane Ian in relation
to the Q32022 interim management statement which was
deemed reasonable and consistent with the approach for
previous natural catastrophe losses;
• emerging risk: the Committee specifically considered areas
of emerging risk via separate reports and through the Own
Risk and Solvency Assessment (ORSA). In addition, the
Committee requested that EY provide a schedule of key
external topics relevant to the Group for 2022 relevant to
the changing economic landscape. This resulted in EY
providing presentations on ‘Economic Trends impacting
underwriting and claims’ and ‘Leading Practices for Risk and
Internal Audit functions’;
• oversight of the control environment: the Committee
received regular risk management and second line
assurance reports which provided commentary on the
status of the control environment. These included entries
from the risk incidents log. This was supplemented by an
annual Chief Risk Officer opinion on the performance of the
enterprise risk management framework;
• reverse stress testing: the Committee received the results
of the reverse stress testing exercise, which explores what
would have to happen for the Group to be unviable and has
been able to provide assurance to The Board that this work
has been performed with the appropriate level of depth and
expertise;
• heightened risk: the Committee considered the heightened
risk register half-yearly. A risk is considered heightened if
the likelihood or the impact of occurrence is higher than
usual;
• oversight of the internal model: the Committee and the risk
committees of the subsidiary Board reviewed regular reports
associated with the internal model. These have included a
standing report on internal model output, and a validation
report featuring both internal and independent validation
and themed reviews - for example, on the approach used to
aggregate risk in individual entities which consolidate up to
the Group level. These assessments have supported The
Boards’ use of the internal model;
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• ORSA: the committee received ORSA reports and reviewed
them before recommending them to The Board.
Transactional ORSA reports were produced to support half-
year and full-year financial reporting for the Group. A
transactional ORSA was considered at the April meeting of
the Committee which identified the Ukraine conflict and
inflation as key risk areas with judgements and estimations
relevant to the 2022 half-year result. The uncertainty around
potential losses was particularly related to our Marine and
PAC and Cyber classes. This resulted in the additional
measures being implemented which included the
application of a specific uncertainty provision to the booked
reserves for the Ukraine conflict, that Specialty Risk
exposures be explicitly considered, and that horizon
scanning be performed to consider exposures and losses
should the conflict escalate;
• risk function: the committee oversaw and monitored the
During 2022, the committee:
• reviewed and approved the annual compliance plan,
including the compliance monitoring programme;
• monitored the implementation of the 2022 compliance plan;
• received updates on the appointment of the new group head
of compliance and other changes to the resourcing of the
compliance function. The committee also received updates
on the structure and effectiveness of the company’s
compliance function;
• received updates on the structure and effectiveness of the
company’s risk management function;
• reviewed changes in the regulatory environment applicable
to Beazley;
• received updates on relationships with key Group
regulators, and oversight of regulatory requests as well as
providing oversight of responses to regulators in relation to
corporate developments;
planning of new hires into the risk function;
• reviewed updates from the money laundering reporting
officer on the adequacy and effectiveness of the company’s
anti-money laundering systems and controls;
• provided oversight of the progress of the business in
addressing identified enhancements to compliance
requirements;
• approved the Group policies and controls in respect of anti-
bribery and corruption and anti-fraud; and
• received updates on the framework, training and policy put
in place regarding whistleblowing and monitored the
implementation of Safecall, an independent whistleblowing
hotline.
In reviewing the effectiveness of the risk and compliance
functions the Audit and Risk Committee remained satisfied
that the risk and compliance functions had sufficient
resources during the year and into 2023 to undertake its
duties.
In addition, the Risk Committee and/or Boards of the Group’s
regulated subsidiaries received more locally-focused reports
which were specific to those entities.
• capital: the committee approved the Group solvency capital
requirement (SCR); and
• culture: the Committee received observations on risk
culture as part of the various risk reports presented.
Other topics discussed in 2022
• Climate change modelling: the committee received an
update on the three additional climate change models
licensed by Beazley in 2022; the RMS US Hurricane Climate
Change Model, the RMS US Wildfire base model and the
RMS US Flood base model. The models will provide a vital
tool in helping us to understand and estimate the impacts
of climate change on the business we write. In 2023, it is
intended that a Natural Catastrophe Research Lead will be
hired by our Exposure Management team to help deepen
our knowledge of the potential impacts of climate change.
• Strategic projects: the Committee considered of progress
updates for the Group’s modernisation programme and
measures implemented to mitigate any risks arising from
the project;
• Conflict in Ukraine: the Committee considered of regular
updates on the continued adequacy of loss estimates in
connection with the war in Ukraine against the changing
landscape of the conflict
• Inflation: the Committee obtained assurance from
management on the process for monitoring reserve loadings
for recession and excess economic and social inflation in
response to the changing economic environment.
Compliance
The Chief Risk Officer, who oversees the compliance function,
had direct access to the committee members and attended all
committee meetings.
To assist The Board, the Committee received reports and
updates from the compliance function on various issues
including, but not limited to, regulatory developments, routine
and non-routine interactions with the Group’s regulators and
any significant instances of non- compliance with regulatory or
internal compliance requirements.
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99
Nomination Committee
“I have enjoyed leading the Nomination
Committee’s activities since October,
including the search for a new Chair. I am
delighted that our search has concluded with
the appointment of Clive Bannister who is
aligned with our commitment to creating a
respectful and inclusive workplace where our
people can thrive.”
The Board has delegated responsibility to the Nomination
Committee for oversight of the leadership needs of the
organisation including Board composition and effectiveness,
succession planning for The Board and senior executives,
oversight of appointments of new Directors and senior
executives and other related regulatory and governance
matters. The Committee’s role is to ensure that The Board, its
Committees, and the executive leadership team have the right
skills and capabilities, which promote diversity of thought and
approach to successfully oversee and implement the
company’s strategy.
Committee membership and meetings
The Nomination Committee is chaired by Christine LaSala on
an interim basis, and also comprises John Reizenstein and
Pierre-Olivier Desaulle. Until 21 October 2022, the Committee
was chaired by David Roberts with Christine LaSala, John
Reizenstein and Pierre-Olivier Desaulle as members. Pierre-
Olivier Desaulle was appointed on 25 March 2022, following
the resignation of Catherine Woods on the same date.
In 2022, there were four scheduled meetings and additional
ad hoc meetings and approvals, reflecting the workload of the
Committee during the year. This included the appointment of
new Directors, commencing a search for a new Chair and
approving interim arrangements. The activities of the
Committee during 2022 are set out below. Only members of
the Committee have the right to attend meetings; however,
other individuals, such as the Chief Executive Officer, Group
Head of Culture and People, representatives from other
Boards or Committees, and external advisers, may be invited
to attend for all or part of any meeting where this is beneficial
to assist the Committee with fulfilling its responsibilities.
Committee meeting attendance table 2022
Director
Pierre-Olivier Desaulle1
Christine LaSala
A John Reizenstein
David L Roberts2
Catherine M Woods3
Nomination Committee
No. of
meetings
3
4
4
3
1
No.
attended
3
4
4
3
1
1 Pierre-Olivier Desaulle was appointed to the Nomination Committee on 25
March 2022.
2 David Roberts stepped down from The Board and Nomination Committee on
21 October 2022.
3 Catherine Woods stepped down from The Board and Committees on 25
March 2022.
Where a Director joined or stood down from The Board or Board Committee
during the year only the number of meetings following appointment or before
standing down are shown.
Responsibilities of the Committee
The full responsibilities of the Nomination Committee are set
out in its terms of reference, which are available on the
company’s website.
The Committee’s main responsibilities are to:
• regularly review the structure, size and composition
(including the skills, knowledge, experience and diversity)
required by The Board compared to its current and projected
position;
• give full consideration to succession planning for Executive
and Non-Executive Directors and in particular for the key
roles of Chair and Chief Executive Officer, senior executives
and any other member of the senior management that it is
relevant to consider, whilst ensuring a diverse pipeline of
talent;
• ensure the Directors have the required skills and
competencies and receive an appropriate induction
programme;
• review annually the time required from Non-Executive
Directors;
• review the results of The Board performance evaluation
process that relate to the composition and skills and
competencies of The Board and ensure an appropriate
response to development needs;
• recommend to The Board appointments to the role of Senior
Independent Director and Chair as well as membership of
Board Committees;
• regularly review legislative, regulatory and corporate
governance developments and make recommendations to
The Board as necessary; and
• recommend, if appropriate, all Directors for election or re-
election by shareholders under the annual re-election
provisions of the UK Corporate Governance Code, having
due regard to their performance and their ability to continue
to contribute to the overall long-term success of The Board.
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Key Committee activities during 2022
Effectiveness and
performance
Activities
• Reviewed the actions from the 2021 effectiveness reviews.
• Reviewed the knowledge, skills and training assessment for
the Beazley plc and regulated subsidiary Boards, and
determined whether the Boards continued to have the right mix
of skills and experience.
• Reviewed the plans for and outcomes of the 2022
effectiveness review for the Beazley plc Board, Committees,
and key regulated subsidiary Boards and Committees.
More information?
Board evaluation (page 88).
Succession planning
• Reviewed Beazley plc and subsidiary board renewals and
Governance
appointments, including succession planning.
• Committee appointments and changes to membership.
• Reviewed and recommended the appointment of two new
independent Non-Executive Directors.
• Commenced the search for a new Chair and carried out
planning associated with the departure of previous Chair.
• Reviewed executive performance and succession planning,
including a review of the diversity of the talent pipeline.
• Considered the composition of the separate Audit and Risk
Committees, which became effective from 1 January 2023.
• Reviewed diversity commitments and targets set by Beazley.
• Reviewed policies including Inclusion and Diversity policies for
The Board and the Group.
• Reviewed the Committee's terms of reference.
• Approved a change of non-executive director responsible for
employee voice in the board room, in accordance with the
Corporate Governance Code.
• Approved interim governance arrangements until new Chair
was selected and appointed.
More information on succession
planning and the process for
appointing new Directors is
included below.
More information on the
composition of the separate
Audit Committee and Risk
Committee is included on page
91.
More information on Inclusion
and Diversity is included below
and in the Responsible Business
report on page 21.
More information on the
‘employee voice’ is included in
the stakeholder engagement
report on page 50.
Board and Committee performance evaluation
The Committee reviewed its effectiveness during the year, as
part of the annual board evaluation process. The Board
confirmed that the Committee is effective in fulfilling its role.
The Committee also had a role in overseeing the evaluation
process for The Board and its Committees, and for the Boards
of key subsidiaries, which took part in the board and
committee evaluation process and in making
recommendations to the Boards.
In order to fulfil its responsibility to ensure The Board and its
Committees remain effective, the committee spent time
reviewing the actions from the 2021 board effectiveness
review, which was carried out by an external provider, Clare
Chalmers Limited. In addition, the Committee reviewed and
approved the plans for the 2022 internal board effectiveness
review for The Board, its Committees and for two of the
principal regulated subsidiary Boards and their Committees.
The Committee received a report on the outcomes of the
internal review for all Boards and Committees and discussed
common themes and key areas of focus in 2023.
More information on the board evaluation process is provided
on page 88.
The Committee is responsible for evaluating the independence
of all Non-Executive Directors and undertakes an annual
review of each Non-Executive Director’s other interests. The
Board, on the recommendation of the committee, is satisfied
that each Non-Executive Director serving at the end of the year
remains independent and continues to have sufficient time to
discharge their responsibilities to the company.
Board knowledge and skills assessment
The Board and Committee recognise the importance of a
diverse and effective team with a broad mix of skills and
experience. As part of each annual board evaluation, Non-
Executive and Executive Directors carry out a self-assessment
of their knowledge against a wide range of skills and
competencies. For each area, the Directors assess whether
they have considerable knowledge, a base level of knowledge
necessary to contribute to discussions, or no knowledge. The
Committee receives a report on the self-assessments
completed, including information for each Director, to enable
them to assess whether each Director and The Board
collectively have the right mix of skills and experience. The
Chair also considers this information in the performance
evaluations of the Directors, along with other relevant
information and feedback. The self-assessment helps identify
any areas where training would be useful to develop
knowledge and skills either for Directors individually or for The
Board as a whole, and a training plan for each year is
developed. For some skills, which are dynamic and changing,
the Directors’ knowledge is augmented by external or internal
experts who ensure The Board has the right, up to date,
expertise to challenge effectively. The balance of skills and
experience on The Board is also a core part of Director
succession planning.
Based on the information received in 2022, the Committee
was satisfied that each of the Directors and The Board
remained effective and high-performing and that they had the
right mix skills and experience to challenge and support the
delivery of the strategy.
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Nomination Committee
continued
Succession planning
Throughout 2022, the Committee carried out its key
responsibilities of ensuring that plans are in place for an
orderly succession to The Board, subsidiary Boards and wider
senior management positions and ensuring the continued
strong executive talent pipeline within the Group, which is a
key pillar of our strategy.
The Board and Committee believe that a regular refresh of
board membership is beneficial to a progressive, strong,
diverse, responsible and balanced leadership and therefore
the Committee regularly considered updates to the structure,
size and composition of The Board and its Committees. The
Committee receives reports which include information on the
composition of the Group and regulated subsidiary Boards,
the tenure of each of the Directors, and other information for
succession planning purposes.
The Committee reviews succession plans for the Executive
Committee members annually as well as reviewing their
performance against objectives. The succession plans for
other senior roles (such as executive committee direct
reports) or regulatory roles are also reviewed annually. The
reporting includes information regarding potential successors
for each role in the short, medium and longer term as well as
emergency cover, including whether roles could likely be filled
internally or externally. The reporting assists with proactively
planning for future roles as well as with developing and
progressing our internal talent. The talent pipeline review also
covers cross team succession opportunities. The succession
plans are linked to the Inclusion and Diversity strategy and
policy, to ensure that all areas of the business are
contributing to succession planning and development of talent
is taking place. The progress towards meeting and/or
exceeding externally and internally set diversity targets is
reviewed.
For vacancies at both board and executive leadership level,
external search agencies are often utilised. Any internal
candidates are incorporated into the process run by the
appointed external agency. All external agencies are made
aware of our Inclusion and Diversity policy and long and short
lists are designed to ensure there is a diverse selection of
candidates put forward.
During 2022, the Committee spent time focused on Board
succession planning and the appointment of new Board
members, including the appointment of Fiona Muldoon and
Cecilia Reyes Leuzinger in May 2022 and the search for a new
Chair following the resignation of David Roberts in October
2022. On 8 February 2023, following recommendation from
the Committee, The Board approved the appointment of Clive
Bannister as Chair Designate and an Independent Non-
Executive Director of Beazley plc. Clive will commence his role
as Chair with effect from the conclusion of the company’s
2023 AGM. He will also become Chair of the Nomination
Committee at the same point.
Since the year end, Nicola Hodson has been appointed Chief
Executive of IBM in the UK and Ireland and has joined their UK
subsidiary Boards. Nicola previously held a senior global
leadership role at Microsoft, and was able to balance well the
commitments of this role to her responsibilities as a non-
executive director of Beazley. The nomination committee
believes that this ability does not change with Nicola’s new
executive role, and is happy to support her proposed re-
election as a Beazley non-executive director. However, the
committee will keep the situation under close review to ensure
that Nicola remains able to commit the time and dedication
required as a director of Beazley.
Appointment of new Non-Executive Directors
• The Committee, led by David Roberts, spent time in April
reviewing the short list and recommended appointments for
independent Non-Executive Directors to replace Catherine
Woods who stepped down from The Board on 25 March
2022 at the conclusion of the AGM.
• An independent external search consultancy, Hedley May,
was engaged to help with the appointment of a new
independent Non-Executive Director to replace Catherine
Woods. The company and its Directors have no other
connection with Hedley May.
• A detailed role description was prepared which included
focus on skills and experience, and a diverse candidate list
was requested.
• The Committee was pleased with the diverse and
experienced candidates available and the Committee
therefore decided to recommend two of the four short-listed
candidates for appointment as two other Non-Executive
Directors would be reaching the end of their second three-
year term in 2023. Fiona Muldoon and Cecilia Reyes
Leuzinger were appointed in May 2022.
• Fiona Muldoon was recommended because of her vast
leadership experience in the insurance industry as well as
having recent experience as a public company CEO and
having spent time working for the Central Bank of Ireland.
Cecilia Reyes Leuzinger was recommended because of her
insurance, risk and investment management experience to
add more in-depth investments experience to The Board.
Both candidates had styles which would complement but
also bring fresh challenge and diversity of opinion to The
Board. Both Directors were assessed to have sufficient time
to fulfil the responsibilities of the role.
• Following appointment, an induction programme is arranged
to onboard new Directors. This includes: meetings with key
individuals across the organisation; board procedures and
governance; corporate communications; compliance
training; meetings with key external parties such as the
auditors and regulators where relevant; and deep dives to
aid understanding of strategy and the different divisions
within the business.
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Chair succession
In July 2022, David Roberts announced that he was to be appointed as Chair of the Court of the Bank of England in the
autumn. The appointment date was unknown at that time. The Board, led by the Nomination Committee began a process to
ensure that plans were in place to ensure an orderly transition of the role of Chair and to commence a rigorous selection
procedure for a new Chair of Beazley plc.
The process was led by Christine LaSala, notwithstanding that she was Interim Chair of the Company during the process.
Robert Stuchbery, the interim Senior Independent Director also provided key support to the process. David Roberts was not
involved in the process prior to his resignation on 1 October 2022.
Stage 1:
Interim arrangements
The Committee determined that interim arrangements should be put into place, based on
emergency succession plans previously developed, while the search for a new Chair commenced.
In October, David’s resignation was confirmed, and the interim arrangements, as set out in the
announcement on 21 July 2022, explained in the corporate governance report were put in place.
Stage 2:
Appointment of search
agency
Stage 3:
Role specification
Stage 4: initial interviews
Stage 5: final interview
panel
Stage 6: selection
David Roberts spent time providing an induction and handing over responsibilities to Christine
LaSala prior to his departure to ensure an orderly transition.
It was agreed that Christine LaSala (initially as Senior Independent Director) would lead the
search, with support from Robert Stuchbery and George Blunden, a Non-Executive Director of
Beazley Furlonge Limited. In September, the Committee (excluding David Roberts) considered
information regarding the process for appointing a new Chair, including the appointment of an
independent external consultancy to lead the search. A review of executive search agencies,
including presentations to a panel, was undertaken to identify a firm with the right level of
expertise and cultural fit. Russell Reynolds was selected following the process. Russell Reynolds
has no other connection with the company or its directors.
To develop the role specification, Christine LaSala led chair specification workshops with
Directors to draw out the key skills, competencies, experience and character attributes required
in the new Chair and to help ensure that the new Chair would be a good fit for Beazley’s growth
ambitions culture and taking into consideration Beazley’s opportunities and challenges over the
next five years. Relevant policies such as the Inclusion and Diversity Policy requirements were
incorporated, with the nomination committee having responsibility under the board inclusion and
diversity policy for ensuring appointments are made based on objective criteria with due regard to
diversity. A key specification for the role was a candidate who demonstrated commitment to
inclusion, equity and diversity with evidence of leadership in this regard.
A timetable was drawn up with Russell Reynolds and a comprehensive external search process
was undertaken.
Russell Reynolds reviewed a wide range of diverse candidates which resulted in a long list of
candidates which were assessed initially, 37.5% of whom were women. Christine LaSala, Bob
Stuchbery and George Blunden carried out initial interviews with eight of these candidates, two of
which were women. Four candidates were put forward for second stage interviews with the Chief
Executive Officer.
The Committee appointed a panel of independent Non-Executive Directors to conduct third stage
interviews, with two candidates, one man and one woman, put forward.
Following the process, Clive Bannister was considered by the Committee to be the most suitable
candidate for the role due to his valuable experience and credentials as a Chair, his extensive
executive career at HSBC group and Phoenix Group plc, and his wealth of experience including
strategic, commercial, and significant transformational skills leading the turnaround and
significant growth of Phoenix Group plc as its Chief Executive Officer. Interviews with Clive also
demonstrated that he would be a good fit for Beazley and showing the right balance of challenge
and support needed by a Chair. In addition, the Committee noted that as chair of Rathbones
Group plc, Clive had made a number of board appointments to strengthen The Board and improve
its diversity.
The Committee were also satisfied that Clive Bannister has capacity to dedicate sufficient time to
Beazley.
Clive Bannister was appointed as an independent Non-Executive Director of Beazley plc with
effect from 8 February 2023. He will commence his duties as Chair and Chair of the Nomination
Committee from the close of the AGM on 25 April 2023. At this time, all other Directors fulfilling
interim roles will revert to their original duties.
www.beazley.com
Beazley | Annual report 2022
103
Nomination Committee
continued
Inclusion and diversity
Beazley’s inclusion and diversity policy is largely unchanged
from previous years. In January 2022, The Board adopted its
own inclusion and diversity policy which is aligned to that of
the Group. Both policies are available on the company’s
website (www.beazley.com/en-sg/who-we-are/inclusion-
diversity).
The Beazley inclusion and diversity policy sets out our
commitment to recruit, retain and develop people with diverse
backgrounds and experiences to thrive at all levels of our
business, in a truly inclusive environment that has zero
tolerance for discrimination or harassment and fully supports
and celebrates differences. These differences could include
but are not limited to age, disability, gender, gender
reassignment, marital status, pregnancy and maternity, race,
nationality or ethnic origin, religion or religious beliefs,
sexuality, socio-economic group or working pattern.
We want our workforce to reflect the diversity of our customers
and the communities where we work around the world;
however, we know that simply aspiring to have a diverse
workforce is not enough. We continue to set measurable
targets at an organisational level and clear objectives at an
individual level as we work to become a truly diverse and
inclusive organisation where everyone is able to contribute
their best work and develop fully.
The Board's inclusion and diversity policy sets out the
commitment of The Board to using its position and influence
to create a truly inclusive environment and confirms The
Board's view that diversity is central to our strategy by
contributing to enhanced risk management and improved
business performance, bringing about richness of challenge,
debate and innovation. The Board commits to continue to be
in line with, or in betterment of, guidelines and regulations for
gender or racial diversity set out in the Parker Review and the
FTSE Women Leaders review. While accepting there will be
natural fluctuations in balance due to the size of The Board,
The Board aims to reflect the company’s public targets
regarding gender and race and ethnicity in its own
composition.
The Board's inclusion and diversity policy also applies to The
Board's key committees. The Committee takes into account
diversity considerations when appointing Directors to Board
committees.
As at 31 December 2022, The Board has exceeded the
targets set out by the Parker Review and the FTSE Women
Leaders Review, now incorporated into the Listing Rules
following the FCA’s consultation on Diversity and Inclusion on
company Boards and Executive Committees. In relation to the
changes to the Listing Rules (which will be effective for the
year ended 31 December 2023 for the Company and are
voluntarily disclosed) The Board has achieved the following:
• At least 40% of the individuals on The Board are women: as
at 31 December 2022, 50% of our Board were women,
compared with 40% at 31 December 2021. Following the
appointment of Clive Bannister on 8 February 2023, 45% of
our Board are women.
• At least one of the senior board positions (Chair, CEO, SID,
or CFO) is held by a woman: Sally Lake is our Finance
Director and Christine LaSala is our Interim Chair (and was
and will return to being our Senior Independent Director
following the conclusion of the AGM on 25 April 2023.
• At least one member of The Board is from a non-white
ethnic minority background: Raj Agrawal and Cecilia Reyes
Leuzinger are from a non-white ethnic minority backgrounds.
The Committee is satisfied that the focus on inclusion and
diversity by The Board and executive leadership team and the
company’s diversity strategy, underpinned by bold targets
mean that any risks around continuing to meet externally set
targets for Board diversity are mitigated. The diversity of The
Board in terms of gender and ethnic background is also set
out on page 85.
The Committee has agreed targets for gender diversity for the
senior leadership, which have been monitored by the
Committee during the year. The Committee monitors the
diversity of the workforce through reporting as well as through
the succession planning activities for the Executive
Committee. During the year we have continued to embed the
strategy for gender equality to help us reach our target of 45%
female representation in senior leadership roles by the end of
2023. At the end of 2022, 43% of the senior leadership team
were women.
In 2020, the Committee agreed targets for increasing the
representation of people of colour in the Beazley workforce to
at least 25% by the end of 2023, with a quarter being black
people. We are pleased that this was achieved during 2022
and had increased from 23% at the end of 2021, and we are
on track for 25% of this group to be black people by the end of
2023.
The Committee has continued to review broader targets for
the Group’s race and ethnicity strategy to ensure that these
remain progressive. At the end of 2022, we introduced a new
target to improve the representation of people of colour in
leadership roles by 6% points from 11% to 17% by the end of
2027.
For more information on our inclusion and diversity activities,
including our strategy, objectives and outcomes, please see
our responsible business report on page 21.
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Collection of diversity data
As required by the Listing Rules, the approach taken by the company with regards to the collection of diversity data is the same
for the directors, senior management and employees. Data is held securely on our human resources system and is only
accessible by a select number of employees for reporting at aggregate level. We ask new joiners, where we are able in
accordance with local legal requirements, for their diversity information and then periodically ask employees to check that the
data we hold about them is still correct. We also analyse diversity data through our employee survey, reward and recognition
processes, talent mapping system and through our appraisal systems.
Gender and ethnicity of the Beazley plc Board in accordance with the Listing Rules
The following information has been disclosed voluntarily by the company for the year ended 31 December 2022. Numerical data
on gender identity or sex of the individuals on The Board and executive management as at 31 December 2022, as required by
Listing Rule 9.8.6(10):
Men
Women
Not specified/prefer not to say
Number of board
members
5
5
–
Percentage of The
Board
50%
50%
–
Number of senior
positions on The
Board (CEO, CFO, SID
and Chair)
2
2
–
Number in executive
management
8
6
–
Percentage of
executive
management
57%
43%
–
Numerical data on ethnic background of the individuals on The Board and executive management as at 31 December 2022, as
required by Listing Rule 9.8.6(10):
Number of board
members
Percentage of The
Board
Number of senior
positions on The
Board (CEO, CFO, SID
and Chair)
Number in executive
management
Percentage of
executive
management
White British or other White (including
minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/ prefer not to say
8
–
2
–
–
–
80%
–
20%
–
–
–
4
–
–
–
–
–
13
–
–
1
–
–
93%
–
–
7%
–
–
Numerical data regarding gender of senior leadership and employees in accordance with the Companies Act 2006
The numerical data about the number of persons of each sex who were directors of the company, senior managers of the
company (other than directors) and company employees, as required by section 414(8) of the Companies Act 2006, as at 31
December 2022 is disclosed in the Responsible Business section on page 25. In the data, senior managers includes the
members of the Executive Committee (excluding Directors of Beazley plc), the Company Secretary and directors of subsidiary
undertakings, as required by the Companies Act 2006.
Gender balance of senior management in accordance with the Corporate Governance Code (the 'Code')
The gender balance of those in senior management and their direct reports is comprised of 57% men and 43% women with a
total population of 129 people. This group comprises the executive committee members, the Company Secretary and their
direct reports, as required by the Code.
However, historically Beazley has used the population of its Strategy and Performance Group and Extended Long-term
Investment Plan leadership groups to monitor and track the inclusion and diversity of its leadership population. These groups
drive both Beazley’s strategy and business plan; and whilst it comprises 129 leaders from across the business, the population
is slightly different to the Code’s definition of senior management. The gender balance of Beazley’s senior management is the
same when compared to the Code definition of senior management.
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Beazley | Annual report 2022
105
Remuneration
Committee
The Board has delegated responsibility to the Remuneration
Committee for oversight of the remuneration policies of the
Group to support our strategy and promote the long-term
success of Beazley for our stakeholders. The Committee’s
role is to ensure that the remuneration policy is designed to
retain and incentivise talented people to deliver our strategy.
The Committee ensures that remuneration is fair, culturally
aligned with our values, promotes effective risk management
and, for senior leadership, is aligned to the long-term success
of Beazley and to shareholder interests.
Attendance at scheduled committee meetings
Director
Rajesh K Agrawal1
Nicola Hodson
Christine LaSala
Cecilia Reyes Leuzinger2
Robert A Stuchbery
Catherine M Woods3
Remuneration committee
No. of
meetings
4
6
6
4
6
2
No.
attended
3
6
6
4
6
2
1 Appointed 26 April 2022. Raj Agrawal was unable to attend the December
remuneration committee due to a long-standing scheduling clash.
2 Appointed 31 May 2022
3 Resigned 25 March 2022
The Remuneration Committee is chaired by Nicola Hodson on
an interim basis, and also comprises Christine LaSala, Robert
Stuchbery, Raj Agrawal and Cecilia Reyes Leuzinger. Until 21
October 2022, the Committee was chaired by Christine LaSala
with Nicola Hodson, Robert Stuchbery, Raj Agrawal and Cecilia
Reyes Leuzinger as members. Christine stepped down as
Chair of the Committee when she was appointed as Interim
Chair of The Board on 21 October 2022, so that she would
have sufficient time to carry out her duties. Raj Agrawal was
appointed to the Committee on 26 April 2022 and Cecilia
Reyes Leuzinger was appointed on 31 May 2022. Catherine
Woods resigned on 25 March 2022.
In 2022, there were six scheduled meetings and two
additional ad hoc meetings and approvals, reflecting the
workload of the Committee during the year. The additional
meetings and approvals were pertaining to the remuneration
policy review and remuneration arrangements for senior hires
within the firm. The activities of the committee during 2022
are set out below. Only members of the committee have the
right to attend meetings; however, other individuals, such as
the Group Head of Culture and People, representatives from
other Boards or Committees, and external advisers, may be
invited to attend for all or part of any meeting where this is
beneficial to assist the Committee with fulfilling its
responsibilities.
Board and Committee performance evaluation
The Committee reviewed its effectiveness during the year, as
part of the annual board evaluation process. The Board
confirmed that the Committee is effective in fulfilling its role.
Responsibilities of the Committee
The full responsibilities of the Remuneration Committee are
set out in its terms of reference, which are available on the
company’s website.
The Committee’s main responsibilities are to:
• Set the remuneration policy for the Group for approval at the
annual general meeting. The objective of such policy shall
be to ensure that members of the executive management of
the company are provided with appropriate incentives to
encourage enhanced performance whilst also promoting
sound and effective risk management, and are, in a fair and
responsible manner, rewarded for their individual
contributions to the success of the company.
• Recommend and where appropriate approve targets for
performance related pay schemes and seek shareholder
approval for any long-term incentive arrangements.
• Recommend and approve the remuneration of the chair of
the company.
• Recommend the remuneration of the Chief Executive
Officer, the other executive directors, the direct reports to
the Chief Executive Officer, the Company Secretary, and
such other members of the executive management as it is
designated to consider. Setting executive remuneration
includes taking into account workforce remuneration and
related policies, and the alignment of incentives and
rewards with culture. No Director or manager shall be
involved in any decisions as to his or her own remuneration.
• Recommending the remuneration policy for all employees
including for key functions and other staff whose
professional activities have a material impact on the Group.
• Review of the design of all share incentive plans for
approval by The Board, and where relevant, the
shareholders.
• Obtain reliable, up-to-date information about remuneration
in other companies.
• Appoint and review the performance of Remuneration
Committee consultants, currently Deloitte LLP.
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Key Committee activities during 2022
Remuneration
policy
Activities
1 Performed a full review of Beazley’s remuneration policy for
approval at the 2023 AGM, including seeking the views of
shareholders regarding the proposals, and ensuring shareholders
received comprehensive information on the rationale for the
proposed changes to the policy, which was of upmost importance
to the committee.
More information?
Directors' remuneration report
(page 111)
Engagement in action: spotlight
on the remuneration policy (page
90)
Remuneration of
Chair, Executives
and other senior
management
1 Approved the remuneration arrangements and bonus awards of the
executive directors, executive leadership team, and other senior
management, including the Company Secretary.
2 Ensured incentives continued to be appropriate to align company
Directors' remuneration report
(page 111)
Remuneration
of the workforce
and shareholders.
3 Considered the salary and bonus awards for 2022 for heads of
control functions and material risk takers.
1 Satisfied itself that the current remuneration structure is
appropriate to attract and retain talented people and took
appropriate action that was necessary throughout the year.
2 Approved specific matters to support the retention of key
employees.
3 Considered the aggregate remuneration approach for the wider
workforce, including consideration of annual compensation
increases in light of inflation and cost of living increases in the
regions in which the company operates, to ensure fair
compensation across the company.
Share plans
1 Approved new all employee share incentive plan for approval at the
2023 AGM.
2 Approved the grant of share awards under the Group’s deferred,
retention and LTIP plans.
Governance
1 Considered the Chief Risk Officer’s report which confirmed that the
design of the remuneration policy promotes appropriate risk
behaviour throughout the organisation. In addition, the analysis
considered the performance of the control environment, profit
related pay targets, calculation of the bonus pool, share awards,
and review of risk metrics for Solvency II purposes.
2 Approved the gender pay gap report.
3 Reviewed the remuneration landscape for FTSE 250 and FTSE 100
companies and guidance from proxy agencies and investors.
Directors' remuneration report
(page 111)
Cost of living - see Chief
Executive Officer's statement
(page 11) and Stakeholder
engagement (page 50)
Directors' remuneration report
(page 111)
Our gender pay gap report is
available on the website
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Beazley | Annual report 2022
107
Letter from the Chair
of our Remuneration
Committee
Dear shareholder
On behalf of The Board, it is my pleasure to present Beazley’s
directors’ remuneration report for the year ended 31
December 2022. This report includes both the annual report
on remuneration and our proposed remuneration policy (pages
111 to 138), for which we will be seeking shareholder
approval at the 2023 AGM.
Performance and reward for FY22
Focus on the wider workforce
2022 presented new and difficult challenges for the workforce
in the form of rising inflation and a cost-of-living crisis. The
remuneration committee is cognisant of these challenges and
fully supports the decisions management have taken to
support employees. In June 2022, those most impacted by
cost-of-living received a one-off payment of up to £3,000 to
help with increasing financial demands. This helped more than
half of the workforce. In addition, at year-end, to recognise the
challenges created by rising inflation, those most impacted
received greater salary increases than those earning at higher
levels, again to support those facing the greatest pressures
from the cost-of-living crisis. Those earning at higher levels
received c.5%, compared to 10% to 20% for those most
impacted. This commitment to ensuring available funding went
to those most impacted has been well received across the
business.
Business performance and incentive out-turns
The resilience of our business strategy and the dedication and
motivation of our team met the continuing challenges and
uncertainty throughout 2022 such as high inflation, energy
price crunch and the continuing tragedy of war in Europe.
Despite these challenges the Group maintained profitability
with a ROE performance of 7%. We achieved a profit of
$191.0m and an impressive 89% combined ratio from strong
underwriting performance which was offset by a reduced
investment performance driven by mark to market losses due
to the volatile interest rate environment. Having carefully
considered the financial performance and personal
achievements for the year, the Remuneration Committee
determined that the executive directors would receive annual
bonuses of 37.5% of maximum in respect of FY22.
Beazley’s Long-Term Incentive Plan (LTIP) vests in two equal
tranches based on net asset value (NAV) growth measured
over a three-year and five-year period. The second tranche of
the 2018 LTIP vested at 14.9% of maximum following NAV
growth per annum of 10.1%. The first tranche of the 2020
LTIP vested at 20.0% of maximum following NAV growth per
annum of 10.5%. The committee is comfortable that
executives have not unduly benefited from windfall gains in
respect of their LTIP awards. In particular the Committee
noted that the 2020 awards were granted in February 2020
prior to the fall in share price resulting from the outbreak of
COVID-19.
The remuneration committee considers that the remuneration
policy operated as intended during 2022 and that the
incentive out-turns are aligned with our pay for performance
culture, accordingly no additional discretion was applied.
Review of the remuneration policy
In accordance with the normal triennial schedule, we are
submitting our remuneration policy for shareholder approval at
the 2023 AGM. During the year the remuneration committee
undertook a detailed review of the policy to ensure that it is fit
to support our strategy to be the highest performing
sustainable Specialty insurer. Following the review, the
committee believes that now is the right time to make some
important changes to ensure that Beazley is appropriately
positioned to retain the talent necessary to continue to deliver
long-term value to our shareholders. However, we are not
proposing any changes to the broad framework or the overall
incentive opportunity.
I would like to thank those shareholders who took the time to
discuss the policy with us during the year. The committee
greatly values the views of our shareholders, and their
invaluable feedback was carefully considered when finalising
our proposals.
Context of the review
The current remuneration framework has operated largely
unchanged since 2012 and has supported Beazley well during
this period. However, Beazley is a much larger and more
complex organisation than it was when the policy was
developed and therefore refinements are necessary to allow
us to continue to flourish going forward. Over the past two
years Beazley has performed exceptionally, and we continue
to execute against our strategy and deliver value to
shareholders, culminating in our recent promotion to the FTSE
100. We have also achieved a number of significant
milestones over the past year, including the streamlining of
our underwriting structure, launching Lloyd’s first dedicated
ESG syndicate and realigning our digital business to be
managed under one segment.
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Incorporation of ESG metrics
The committee is mindful of evolving shareholder views
around the use of relevant and robust ESG metrics in
incentive plans. During our review, the Committee considered
how Beazley’s commitment to doing the right thing for our
people, partners and the planet was reflected in our current
remuneration framework. Our bonus structure already includes
consideration of ESG measures, and the committee
determined that it would be appropriate for executives to be
aligned with our long-term ambitions by incorporating ESG
measures into our LTIP. For 2023 the LTIP will include targets
linked to our carbon reduction, gender and ethnic diversity
goals. These targets will be assessed over three years and
will have a weighting of of 17-20% of the overall LTIP award
and will pay up to a maximum of 50% of salary.
Other changes to policy
From 2023, we intend to increase the CEO shareholding
requirement from 200% to 300% of salary to align with the
LTIP opportunity. We are also proposing refinements to the
policy to ensure that it is aligned with the latest best practice
and shareholder expectations. The post cessation
shareholding guideline will be increased to 100% of the in-
employment guideline for two years following departure. From
2023 the level of bonus deferred into shares will be fixed at
one-third, moving away from the current approach whereby the
portion of bonus deferred varies depending on the outturn. We
also plan to introduce a global share match programme which
we believe further aligns employee experience with that of the
shareholder as well as creating another form of retention.
Reweighting incentives to the long-term
At Beazley, we operate with a genuine long-term focus. In
order to further align executives with shareholders over the
longer term and reward management for the delivery of our
long-term strategic objectives the Committee is proposing a
reweighting between the short-term and long-term incentives.
From 2023, we are proposing a reduction to the bonus
opportunity of 100% of salary and an increase to the LTIP
opportunity of 100% of salary. There is no change to the
overall incentive opportunity.
LTIP performance period
A key feature of the Beazley business model is exposure to
catastrophes within a robust risk management framework.
Because of this, there is an inherent level of volatility in
company performance. We have an established pay-for-
performance culture, a track record of aligning individual
reward with performance and we do not believe in rewarding
failure. During the review of the policy, the remuneration
committee identified that the volatility of our annual results
can have a disproportionate impact on LTIP awards, which is
exacerbated by our longer-than-normal five-year performance
period.
Taking this into account the committee gave consideration to
moving to an annualised approach so that the LTIP is split into
five equal tranches with performance assessed pro-rata in
years one to five. We discussed the proposal with the majority
of our shareholders (top 100) in order to gauge the potential
levels of support. During the consultation process, it became
clear that a significant proportion of shareholders had
reservations due to the atypical nature of the proposal and
there was a preference for a more market-typical approach,
that maintained a longer term performance period.
Based on some shareholder feedback the committee decided
against the annualised LTIP approach. As an alternative, and
aligned with our shareholders’ preference for a more market-
typical approach, the committee is proposing to simplify the
LTIP performance period by removing the five-year
performance element so that the entire award is subject to
cumulative performance measured over a three year period.
We believe that this change is appropriately aligned with the
interests of our shareholders, improves the clarity of the LTIP
and makes it simpler for both participants and investors. The
vesting of awards will continue to be subject to stretching
performance targets and shares will be subject to a two-year
post-vesting holding period. Ultimately the committee believes
that this change, in conjunction with including an ESG metric,
will help to continue to incentivise and retain our high calibre,
experienced executive team.
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Letter from the Chair of our
Remuneration Committee
continued
Remuneration approach for 2023
Review of Executive Directors’ salaries
As part of the policy review, the Remuneration Committee
carefully considered the salary levels for the CEO and Group
Finance Director to ensure that they remained reflective of
their skills and expertise as well as being appropriate for a
company of Beazley’s size and complexity.
The Committee has identified that the CEO’s salary has fallen
out of step with the transformative changes that have taken
place in our recent history. As context, since 2017, CEO pay
has only increased by c.3% per annum and when Adrian Cox
replaced Andrew Horton as CEO, the Committee did not
increase the CEO salary (£525,25k). However, the Committee
were cognisant a review would be required in the near future
to permit Beazley to compete for executive talent globally and
more importantly to recognise that over the last 5 years,
Beazley has grown significantly in terms of scale and
complexity. Our annual market capitalisation to 31 December
2017 was c.£2.45bn. During 2022 our market capitalisation
exceeded £4.5bn, with an annual average of c.£3.25bn (total
growth of more than 300%). Gross written premiums have
more than doubled from $2.1bn to $5.3bn and the number of
Beazley employees has increased two-fold to c.1,900. We are
now Lloyds’ largest syndicate and in 2019 and 2022
respectively we commenced writing business on our Smart
Tracker and ESG syndicates.
Speciality insurance is a global business, and our operations
are increasingly US and European based, with few businesses
in the Speciality insurance domiciled in the UK with the same
scale and scope of Beazley. The Remuneration Committee is
therefore mindful that our talent spans across a global
footprint and the Committee is mindful that other companies
of similar size and scale can offer significantly more attractive
packages. We want to retain our best talent and manage an
effective succession slate over the long term, ensuring that
our remuneration framework remains competitive against
these markets. Although benchmarking is not a primary driver
for decisions around pay, the Committee took into account
market data which showed that the CEO’s salary was below
the market competitive range against all relevant comparator
groups and the other UK-listed Lloyd’s of London underwriters.
The Remuneration Committee believes Adrian Cox has an
exceptional track record of high performance. Having joined
Beazley in 2001, he has served as an Executive Director since
2010 and was appointed as CEO in April 2021. He has
continued to prove himself to be a high calibre executive with
an extensive knowledge of the insurance industry and a
primary driver of Beazley’s success. The Remuneration
Committee are therefore proposing that his salary is increased
to £625,000. On balance, the Committee believes that the
enhancements made to the remuneration policy which is
considered appropriate within the context set out above and
his considerable experience in the industry.
Sally Lake’s salary as Group Finance Director was considered
to be appropriately positioned following the change made last
year in-light of her increased responsibilities. It has therefore
been increased by 5% for 2023, which is in-line with the
approach for senior management and below the average rate
of the workforce.
Non-Executive Director fees
In October 2022 David Roberts stepped down as Chair of The
Board. As announced in February 2023 Clive Bannister will be
appointed as chair with effect from 25 April 2023. Until Clive
Bannister’s official appointment Christine LaSala has been
appointed as Interim Chair of The Board, Robert Stuchbery
has been appointed Interim Senior Independent Director and I
have been appointed Interim Remuneration Committee Chair.
The fees for the three roles have been pro-rated to reflect the
additional responsibilities.
As announced in December 2022, The Board decided to split
the Audit & Risk Committee into two separate committees
from 1 January 2023. The fees for the roles on the new
committees have been set with reference to the
responsibilities and time commitments required and are set
out on page 131. Following the annual fee review, it was
determined that the non-executive director fees should be
increased by 3%, below the general increase for the
workforce.
2023 AGM
At the forthcoming AGM there will be an advisory vote in
respect of the directors’ remuneration and a binding vote on
the proposed new remuneration policy. There will also be a
vote to approve amendments to the LTIP rules. These
amendments are necessary to affect the reweighting and
revised measurement approach set out above. I hope you will
feel able to support these proposals and look forward to your
continued support.
Nicola Hodson
Interim Remuneration Committee Chair
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Directors’ remuneration report
Remuneration in brief
Remuneration policy
When developing the revised remuneration policy and considering its implementation for 2023, the Committee was mindful of a
wide range of factors including guidance from institutional investors, the requirements of Solvency II and the provisions of the
UK Corporate Governance Code. The main aim of Beazley’s remuneration policy is to ensure that management and staff are
remunerated fairly and in such a manner as to facilitate the recruitment, retention and motivation of suitably qualified
personnel. The Committee considers that the policy supports our strategy and promotes the long-term success of Beazley.
The following table summarises how the committee addressed the factors set out in the UK Corporate Governance Code when
determining the remuneration policy:
Factor
Details
Clarity
Remuneration arrangements should be
transparent and promote effective
engagement with shareholders and the
workforce
Simplicity
Remuneration structures should avoid
complexity and their rationale and operation
should be easy to understand
Risk
Remuneration arrangements should ensure
reputational and other risks from excessive
rewards, and behavioural risks that can arise
from target-based incentive plans, are
identified and mitigated
Predictability
The range of possible values of rewards to
individual directors and any other limits or
discretions should be identified and
explained at the time of approving the policy
Proportionality
The link between individual awards, the
delivery of strategy and the long-term
performance of the company should be clear.
Outcomes should not reward poor
performance
Alignment to culture
Incentive schemes should drive behaviours
consistent with company purpose, values
and strategy
At Beazley performance-related remuneration is an essential motivation to management and
staff and is structured to ensure that Executives’ interests are aligned with those of our
shareholders.
We operate a bonus structure that is based on Group profitability and long term performance. A
key principle is that the committee exercises its judgement in determining individual bonus
awards. In recent years we have expanded our disclosure to provide shareholders with further
clarity on the way in which we determine awards.
In determining our remuneration framework the Committee was mindful of avoiding complexity
and making arrangements easy to understand for both participants and our shareholders.
As part of the Policy review we have simplified our approach to bonus deferral so that one-third
of any bonus is deferred into shares for three years and we have also simplified the LTIP
performance period.
We believe reward at Beazley is appropriately balanced in light of risk considerations. The
Committee receives an annual report from the Chief Risk Officer to ensure that our wider
remuneration policy is consistent with, and promotes, effective risk management.
Our framework has a number of features which align remuneration out-turns with risk, including
a five year time horizon on the LTIP, deferral of bonus into shares and personal shareholding
requirements which extend post departure. Further details of the link between risk and
remuneration are set out on page 130.
Page 118 provides four illustrations of the application of our remuneration policy including the
key elements of remuneration: base salary, pension, benefits and incentives. Payments at
Beazley are directly aligned to the Group’s performance and the graph set out on page 127
demonstrates how historic annual bonus out-turns have reflected profit and ROE performance.
Individual remuneration reflects Group objectives but is dependent on the profitability of the
Group and is appropriately balanced against risk considerations. Potential rewards are market-
competitive and the committee is comfortable that the range of potential out-turns are
appropriate and reasonable.
The Remuneration Committee considers that the structure of remuneration packages supports
meritocracy, which is an important part of Beazley’s culture. All employees at Beazley are
eligible to participate in a defined contribution pension plan and a bonus plan. Bonuses are
funded by a pool approach which reflects our commitment to encourage teamwork at every
level, which is one of our key cultural strengths.
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Directors’ remuneration report
Performance in 2022
Beazley returned a profit in 2022 of $191.0m and an impressive 89% combined ratio (2021: $369.2m) through a strong
underwriting performance, offset by a reduced investment performance, driven by mark to market losses as a result of the
volatile interest rate environment. For the fifth year in a row, Beazley achieved double-digit premium growth, with gross
premiums written up by 14% to $5,268.7m (2021: $4,618.9m).
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Profit before tax ($)-50369191Pre-tax profit/(loss)202020212022-100-50050100150200250300350400Net assets per share (c)256.2286.3278.0331.2367.424.223.320.920.419.3TangibleIntangible20182019202020212022050100150200250300350400450Return on equity (%)-3167Post-tax ROE202020212022-505101520Share Price (p)553.33595.50630.73Share price at grantVesting price 630.73p2018 award2020 award0100200300400500600700
Outcomes for 2022 and implementation for 2023
Overview of Policy and implementation for 2022
Overview of Policy changes and implementation for 2023
Base salary
Salaries are set at a level to appropriately recognise responsibilities and to
be broadly market competitive. Salary increases generally reflect our standard
approach to all-employee salary increases across the Group.
Salaries for 2022 were as follows:
• A P Cox
• S M Lake
£525,250
£414,000
Benefits
No change to Policy.
During the year the Committee reviewed A P Cox’s salary and is proposing an
increase above the workforce rate. Further details are provided in the Letter
from the Chair of the Remuneration Committee. S M Lake’s salary is being
increased by 5.0%, below the average rate for the wider workforce.
Salaries for 2023 are as follows:
• A P Cox
• S M Lake
£625,000
£434,700
Benefits include private medical insurance, travel insurance and company car or
monthly car allowance.
No change to Policy.
Pension
Pension allowance of 12.5% of salary, in-line with the rate available to the wider
UK workforce.
No change to Policy.
Annual Bonus
Discretionary annual bonus determined by reference to both financial and
individual performance.
Annual bonuses will continue to be determined by reference to both financial
and individual performance.
The maximum bonus opportunity for executive directors in 2022 was 400% of
salary.
As part of the rebalancing of incentives to the longer-term the maximum bonus
opportunity will be reduced from 400% of salary to 300% of salary.
ROE for year was 7%. Profit before tax was $191.0m. Bonus outcomes were
38% of maximum. 25% of the award will be deferred into shares for three years.
Further details are set out on page 126.
Long-term Incentive Plan (LTIP)
In order to simplify arrangements the level of deferral will be fixed at 33% of any
award. Amounts will be deferred into shares for three years.
Vesting of LTIP awards is subject to stretching net asset value per share
(NAVps) growth targets.
As part of the rebalancing of incentives to the longer-term the maximum LTIP
opportunity will be increased by 100% of salary.
For awards made prior to 2023 50% is subject to NAVps performance over
three years and 50% over five years. The first tranche is subject to a further
two year holding period taking the total time frame for the entire award to five
years.
From 2023, the maximum LTIP opportunity will be:
• A P Cox: 300% of salary
• S M Lake: 250% of salary
Awards vesting
• The first tranche of the 2020 LTIP award vested at 20.0% of maximum
following three year NAVps performance of 10.5% p.a.
• The second tranche of the 2018 LTIP award vested at 14.9% of maximum
following five year NAVps performance of 10.1% p.a.
Awards will continue to be subject to stretching NAVps growth targets. NAVps
performance will continue to be assessed on an cumulative basis, however, the
performance period has been simplified so that performance for the entire
award is measured over three years. A further two year holding period remains
taking the total time frame for the entire award to five years.
Awards granted during the year
In 2022, executive directors received the following grant levels subject to the
usual NAVps performance condition:
From 2023 a portion of the LTIP will be subject to measures linked to our ESG
priorities. A total of 50% of salary for both the CEO and GFD will be based on
ESG metrics. For 2023 the ESG metrics relate to carbon reduction and diversity
& inclusion targets.
• A P Cox: 200% of salary
• S M Lake: 150% of salary
Shareholding guidelines
Further details of the revised LTIP structure and the performance targets are set
out on page 129.
Executive Directors are expected to build up and maintain a shareholding of
200% of salary. A P Cox and S M Lake have exceeded their guideline.
The shareholding guideline for the CEO has been increased to 300% of salary.
The GFD’s shareholding guideline will continue to be 200% of salary.
Executives are expected to maintain 100% of their shareholding requirement
for the first year post-departure and 50% of their shareholding requirement for
the second year post-departure.
In line with best practice, the post-employment guideline has been enhanced so
that executives are expected to maintain 100% of their shareholding
requirement for two years after departure.
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Directors’ remuneration report
Directors’ remuneration policy
This part of the report sets out Beazley’s Directors’
remuneration policy which will be subject to a binding vote at
the 2023 AGM.
Changes to the remuneration policy
The Remuneration Committee followed a robust decision-
making process to determine the new remuneration policy,
including an in-depth review of the current policy taking into
account input from management and our independent
advisors. The Committee also sought the views of the Group’s
major shareholders and took these into account in
determining the final policy.
The key changes between this policy and the policy which was
approved by shareholders at Beazley’s 2020 AGM are as
follows:
• Reweighting of incentives to the long term. In recognition
that shareholders have generally expressed a preference for
longer-term incentives, a reweighting between the bonus
and LTIP maximum opportunities is being proposed. The
maximum annual bonus opportunity will reduce by 100% of
salary for both executive directors and the maximum LTIP
opportunity will increase by 100% of salary. There are no
proposed changes to total incentive opportunities.
• Introduction of ESG to the long-term incentive. Historically
the LTIP award has been assessed against a single metric.
Taking into account the importance of ESG and
shareholders’ preference for the use of multiple measures
the policy has been amended to allow for the introduction of
ESG measures in the LTIP.
• Simplified LTIP performance period. From 2023 LTIP awards
will be measured over a three-year period only. Awards will
continue to be subject to a holding period so that no shares
are released until the end of year five.
• Fixed rate of deferral. From 2023, the level of annual bonus
that is normally deferred into shares for three years will be
fixed at one-third of the bonus.
• Increased shareholding guidelines. The shareholding
guideline for the CEO has been increased from 200% to
300% of salary.
• Enhanced post-employment shareholding guidelines. Our
post-employment shareholding guidelines have been
enhanced. From 2023, executives will be expected to
maintain 100% of their in-employment shareholding
requirement for two years post departure.
Remuneration policy table
The following tables set out descriptions of each component of Director remuneration packages comprised in the Beazley
Directors’ remuneration policy.
Operation
Maximum
Performance conditions
Executive Directors
Element
Base salary
Purpose and link to
strategy
Salaries are set at a
level to appropriately
recognise
responsibilities and to be
broadly market
competitive.
Salaries are normally reviewed annually.
Salaries for 2023 will be as follows:
A P Cox: £625,000
S M Lake: £434,700
None, although performance in role
is taken into account in determining
any salary increase.
None.
There is no maximum salary
opportunity. Any salary increases
will generally reflect our standard
approach to all-employee salary
increases across the Group.
Higher increases may be made in
a range of circumstances where
the Committee considers that a
larger increase is appropriate,
including (but not limited to):
• a new appointment;
• a change in role or adoption of
additional responsibilities;
• development of the individual in
the role;
• increased size, scope or
complexity of the organisation;
and
• alignment to market levels.
There is no overall maximum as
the cost of insurance benefits will
vary depending on the individual’s
circumstances and the cost of
relocation will vary depending upon
the jurisdiction.
The limits on participation in all-
employee share plans reflect the
rules of those plans and any limits
imposed by applicable tax
legislation from time to time.
Benefits
To provide market levels
of benefits.
Relocation
benefits
To support Beazley’s
growth as an
international business.
Benefits include, but are not limited to, a
company car or car allowance, season
ticket, private medical insurance, death in
service benefit and income protection
insurance. Further benefits may be
provided, if the committee considers it
appropriate.
Executive Directors may participate in
Beazley’s all-employee share plans on the
same basis as other employees.
Tax equalisation policies may apply.
Benefits in the event of relocation may
include, but are not limited to, relocation
allowance, housing allowance and school
fees.
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Element
Pension
Purpose and link to
strategy
To provide market levels
of pension provision.
Operation
Maximum
Performance conditions
Current policy is to contribute to a defined
contribution pension plan. An equivalent
cash alternative may be offered.
For defined contribution plans,
maximum company contribution of
12.5% of salary.
None.
Legacy defined benefit pension
arrangements are in place for A P Cox.
Further service accruals ceased on 31
March 2006.
Annual bonus
To link reward to short
term financial
performance and
individual contribution.
Discretionary annual bonus to individuals.
Bonuses are determined by reference to
financial, corporate/strategic and individual
performance.
Additional alignment with
shareholders’ interests
through the operation of
bonus deferral.
One-third of any annual bonus earned by
executive directors will normally be deferred
into shares, with the remainder delivered in
cash. The deferral period will normally be at
least three years.
The maximum pension contribution
for any executive director may be
increased to reflect any increase
in the pension available to the UK
workforce.
Legacy defined benefit pension
arrangements will be honoured.
An individual overall cap of 300%
of salary will apply.
Deferred shares may have dividend
equivalents as described below this table.
In certain circumstances deferred share
awards may be subject to malus provisions
and annual bonus payments may be
subject to clawback, as described below.
Additional amounts may be voluntarily
deferred into the Investment in underwriting
arrangements described below.
Awards of shares with performance
conditions.
Awards of up to 300% of salary in
respect of any financial year.
LTIP
To align the senior
management team’s
interests to the long term
performance of the
Group by linking reward
to performance over the
longer-term.
Investment in
underwriting
To align personal capital
with underwriting
performance.
Awards are normally in the form of nil-cost
options with a ten-year term, but may also
be in the form of a conditional award.
LTIP awards vest over a three-year
performance period. Awards will normally
be subject to an additional holding period
following the date on which the award
vests, up to the fifth year of the award.
LTIP shares may have dividend equivalents,
as described below this table.
In certain circumstances LTIP awards may
be subject to malus and clawback
provisions, as described below.
Under the plan, Executive Directors and
selected staff may voluntarily defer part of
their bonus into an underwriting syndicate.
Capital commitments can be lost if
underwriting performance is poor.
Payments are limited to the
returns on the investment in the
underwriting syndicate.
The plan mirrors investment in an
underwriting syndicate.
The level of capital commitment is
limited by the bonus opportunity.
An incentive pool will be calculated
as a percentage of profit and by
reference to group return on equity,
subject to a minimum return on
equity and risk adjustment.
While bonus awards are determined
by reference to the profit pool, the
bonus plan is discretionary and the
Committee may take into account
any other factors it considers
appropriate.
Individual payouts to executive
directors are discretionary and take
into account broader corporate
objectives, the individual’s
contribution and, where relevant, the
performance of their division.
Solvency II requires that
performance measures for
incentives are based on a
combination of group, business unit
and individual performance.
The Committee may make year-on-
year adjustments to the
performance framework, in particular
to take into account developments
in Solvency II requirements.
Vesting of LTIP awards is dependent
on performance measures selected
by the Committee.
For awards made in 2023, vesting
will be dependent on net asset
value per share (NAVps)
performance against the risk-free
rate of return and ESG performance.
Performance will be measured over
a three-year period.
No more than 25% of the award may
vest for threshold performance.
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Directors’ remuneration report
Directors’ remuneration policy
continued
Shareholding requirements
During employment, the CEO and Group Finance Director are expected to build up and maintain a shareholding of 300% and
200% of salary respectively. Post-employment, executive directors will ordinarily be expected to maintain their shareholding
requirement, or the number of shares owned at departure if lower, for two years post-departure.
Non-Executive Directors
Non-Executive Directors’ fees comprise payment of an annual basic fee and additional fees to reflect specific responsibilities,
where applicable. No Non-Executive Director participates in the Group’s incentive arrangements or pension plan.
Basic fee
Additional fees
Payment of a basic annual fee
Additional fees are paid to reflect additional responsibilities of certain Non-Executive Directors, as follows:
• Senior Independent Director fee
• Audit and Risk Committee Chair fee
• Remuneration Committee Chair fee
• subsidiary Board membership and Chair fee
• membership fee for Non-Executive Directors on the Audit and Risk Committee
• membership fee for Non-Executive Directors on the Remuneration Committee
• fee for Non-Executive Director representing employee voice
Non-Executive Directors may receive additional fees in the future if in the view of The Board this was
considered appropriate, including in circumstances of additional Committees, other Non-Executive Director
positions, or to reflect additional time commitments in appropriate circumstances.
Expenses incurred in the performance of non-executive duties for the company may be reimbursed or paid for
directly by the company, including any tax due on the expenses. Non-Executive Directors do not normally
receive any benefits however these may be provided in the future if in the view of The Board this was
considered appropriate.
Total fees paid to non-executive directors will remain within the limit stated in the Articles of Association.
Notes to the remuneration policy table
Recovery provisions (clawback and malus) apply as follows to
awards granted from 1 January 2020 onwards (provisions
applying to previous awards are described in previous
Directors’ Remuneration Reports).
LTIP award (as the case may be), gross misconduct, factual
error in calculating vesting or award, reputational damage,
material corporate failure, and other similar events.
The Committee may increase the proportion of bonus deferred
into shares at any time.
Malus
Annual bonuses are discretionary and may be reduced or
cancelled before payment. LTIP awards and deferred bonus
awards may be reduced or cancelled in the event of conduct
which justifies summary dismissal, an exceptional
development which has a material adverse impact on the
Company (including extreme financial loss which has a
significant impact on the company’s share price, reputational
damage, material failure of risk management, material
restatement of group accounts, significant sanction from any
regulatory authority, material corporate failure, and other
similar events) or to comply with a law or regulatory
requirement.
Clawback
Annual bonuses paid in cash may be clawed back for up to
three years following payment and LTIP awards may be clawed
back for two years following vesting. Clawback may be applied
in the event of material misstatement of results in respect of
the bonus year or a year in the performance period for the
For future incentive awards the committee may adjust the
performance measures to take into account developments in
Solvency II remuneration requirements, or, in the event of a
significant event or changing business circumstance. Major
shareholders would be consulted prior to any significant
changes.
LTIP and deferred share awards will be operated in
accordance with the rules of the relevant plan. In accordance
with those rules the committee has discretion in the following
areas:
• in the event of a variation of Beazley’s share capital or a
demerger, delisting, special dividend, rights issue or other
similar event, which may, in the committee’s opinion, affect
the current or future value of shares, the number of shares
subject to an award and/or any performance condition
attached to awards, may be adjusted. Awards under
Beazley’s other share plans have similar adjustment
provisions;
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• the Committee may determine that awards may be settled,
in whole or in part, in cash, but would only do so in
exceptional circumstances such as where there is a
regulatory restriction on the delivery of shares;
• the Committee may substitute or amend a performance
condition if one or more events occur which cause the
committee to consider that a substituted or amended
condition would be more appropriate and would not be
materially more or less difficult to satisfy;
• the Committee may in its discretion, adjust the vesting level
of LTIP awards, including to reflect underlying financial or
non-financial performance or if the vesting level would
otherwise not be appropriate in the circumstances;
• the Committee may determine the treatment of awards on a
winding up, a change of control or similar event in
accordance with the rules of the relevant plan; and
• the Committee may determine the basis on which dividend
equivalents will be calculated, which may include notional
reinvestment.
Legacy commitments
The Committee reserves the right to make any remuneration
payments and payments for loss of office (including exercising
any discretions available to it in connection with such
payments) notwithstanding that they are not in line with the
policy set out in this report where the terms of the payment
were agreed (i) before 26 March 2014 AGM (the date
Beazley’s first shareholder-approved Directors’ remuneration
policy came into effect); (ii) before the policy set out in this
report comes into effect, provided that the terms of the
payment were consistent with the shareholder-approved
Directors’ remuneration policy in force at the time they were
agreed or were otherwise approved by shareholders; or (iii) at
a time when the relevant individual was not a Director of
Beazley (or other person to whom this policy applies) and, in
the opinion of the Committee, the payment was not in
consideration for the individual becoming a Director of Beazley
or such other person. For these purposes ‘payments’ includes
the Committee satisfying awards of variable remuneration
and, in relation to an award over shares, the terms of the
payment are ‘agreed’ at the time the award is granted. This
policy applies equally to any individual who is required to be
treated as a Director under the applicable regulations.
Performance measures and targets
The following table provides further detail on why performance measures are chosen and how targets are set.
Incentive plan
Performance measures
Why performance measures were chosen and target setting
Annual bonus
plan
Financial performance
(including profit and
ROE), corporate/
strategic performance
(including risk
adjustment) and
individual
performance
• The Committee believes the approach to the determination of bonuses creates alignment to
shareholders’ interests and ensures that bonuses are affordable, while the ROE targets
increase the performance gearing and the risk adjustment is consistent with and promotes
effective risk management.
• The Committee reviews the bonus pool framework each year to ensure that it remains
appropriate and targets are set taking into account the prevailing environment, interest rates
and expected investment returns, headcount and any other relevant factors.
• A key principle of the process is that the Committee exercises its judgement in determining
individual awards taking into account the individual’s contribution and performance.
Long term
incentive plan
Growth in net asset
value per share
(NAVps)
• Creates alignment to Beazley’s central key performance indicator, and recognises that NAVps is
a key item supporting increases in share price and shareholder returns.
• Vesting of awards requires sustained growth in NAVps over a three-year time period.
• The Committee reviews the NAVps targets periodically to ensure they remain appropriate with
reference to the internal business plan, the external environment and market practice.
• In the event that NAVps were to become unsuitable as a performance measure in the opinion of
the Committee (for example due to a change in accounting standards) the Committee would
substitute a measure which followed broadly similar principles.
ESG measures
• The Committee recognises the importance of ESG to Beazley’s long-term success and believes
the introduction of ESG measures to the LTIP will incentivise the delivery of our ambitions.
• For 2023 the ESG measure will be assessed against three categories relating to carbon
reduction, gender diversity and ethnic diversity. The Committee will review the ESG targets
periodically to ensure they remain appropriate with reference to our long-term ESG priorities and
market practice.
• For 2023, ESG objectives are to be assessed over a three-year performance period.
• The Beazley staff underwriting plan provides for participants to contribute personal capital to
Beazley syndicates. Selected staff are invited to participate through bonus deferral with an
element of cash incentives ‘at risk’ as capital commitments.
Investment in
underwriting
The plan mirrors
investment in an
underwriting syndicate
Differences in policy from broader employee population
The policy for Executive Directors follows the same broad
principles in place for all employees in Beazley. Differences in
policy for executive directors and senior management as
compared to the broader employee population reflect different
market levels for seniority, as well as their group
responsibilities. For example, incentive performance
conditions for Executive Directors and senior management are
more closely aligned to group performance, whereas
underwriters participate in incentive plans linked to the
performance of their business area.
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Directors’ remuneration report
Directors’ remuneration policy
continued
All employees in the Group may participate in a defined
contribution pension plan, and are offered benefits such as
private medical insurance and permanent health insurance.
Beazley also operates all-employee share plans to create staff
alignment and promote a sense of ownership.
Illustrations of application of remuneration policy
The table below sets out an illustration of the operation of the
remuneration policy for the current executive directors in
respect of 2023 and includes base salary, pension, benefits,
and incentives. Other than as regards the fourth scenario
(‘Maximum + share price appreciation’), the illustrations do
not reflect potential share price increases or decreases.
Dividends, dividend equivalents and any deferral of bonus into
the investment in underwriting arrangements are disregarded
for the purposes of these charts.
Assumptions used for the illustrations of the policy
Element
Fixed remuneration
Annual variable remuneration
(cash and deferred shares)
Long-term remuneration (LTIP)
‘Minimum’
‘On-plan’
‘Maximum’
‘Maximum + share price
appreciation’
Base salary
Pension
Benefits
Annual base salary for 2023
12.5% of base salary
Taxable value of annual benefits provided in 2022
0% of maximum
50% of maximum
100% of maximum
100% of maximum
0% vesting
25% vesting
100% vesting
100% vesting +
assumed 50% share
price appreciation
Approach to recruitment remuneration
The Committee would have regard to the following principles
when agreeing the components of a remuneration package
upon the recruitment of a new Director:
• in order to facilitate the future success of the company it is
important that we are able to recruit directors of the calibre
required to deliver our strategic priorities. Although the
company operates in a highly competitive market for
executive talent, the Committee remains conscious of the
need to avoid paying more than is necessary on
recruitment;
• the Committee will, so far as practical, seek to align the
remuneration package for any incoming Executive with the
remuneration policy table set out above;
• on recruitment, salaries will be set to take into account role
and responsibilities. For interim positions a cash
supplement may be paid rather than salary (for example a
Non-Executive Director taking on an executive function on a
short term basis);
• the Committee may, on appointing an Executive Director,
need to ‘buy out’ remuneration arrangements forfeited on
joining the company;
• any buyout would take into account the terms of the
arrangements (e.g. form of award, performance conditions,
timeframe) being forfeited in the previous package. The
form of any award would be determined at the time and the
committee could if necessary make use of LR 9.4.2 of the
Listing Rules (for the purpose of buyout awards only). The
Committee would seek to structure buyout awards to be in
line with Beazley’s remuneration framework so far as
practical. The overriding principle will be that any
replacement buyout awards would be of comparable
commercial value to the awards which had been forfeited;
• all buyout awards would normally be liable to forfeiture or
‘clawback’ on early departure. For Executive Directors early
departure is defined as being within the first two years of
employment;
• the maximum level of variable remuneration which may be
granted in the first year (excluding buyouts) is in line with
the aggregate maximums set out in the policy table. The
Committee retains the flexibility to determine that for the
first year of appointment any annual bonus award will be
subject to such conditions as it may determine; and
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• where an Executive is appointed from within the
organisation, the normal policy of the company is that any
legacy arrangements would be honoured in line with the
original terms and conditions (except that any pension
arrangements will be provided in line with the remuneration
policy table). Similarly, if an Executive Director is appointed
following Beazley’s acquisition of or merger with another
company, legacy terms and conditions would be honoured.
Service contracts and loss of office payment policy
It is company policy that service contracts with Executive
Directors contain notice periods, from the company or
employee, of not more than 12 months. The company may at
its absolute discretion elect to terminate an Executive
Director’s employment by making a payment in lieu of notice
of the individual’s salary for that period. Details of the
Executive Directors’ current contracts are set out on page
132.
Subject to notice requirements, there is no provision in the
service agreements for compensation to be payable on early
termination of the contract. The Committee has discretion to
structure any compensation payments in such a way as it
deems appropriate taking into account the circumstances of
departure. Any payments of compensation will be subject to
negotiation, and the Group policy is to consider whether
mitigation and phasing of payments is appropriate.
The Committee reserves the right to make any other payments
in connection with a Director’s cessation of office or
employment where the payments are made in good faith in
discharge of an existing legal obligation (or by way of damages
for breach of such an obligation) or by way of a settlement of
any claim arising in connection with the cessation of a
Director’s office or employment. Any such payments may
include amounts in respect of accrued leave, paying any fees
for outplacement assistance and/or the Director’s legal or
professional advice fees in connection with his or her
cessation of office or employment.
In the event of a Director’s departure any outstanding share
awards will be treated in accordance with the relevant plan
rules.
The following principles apply for the treatment of remuneration elements following loss of office for a Director:
Remuneration element
Treatment upon loss of office
Bonus
Deferred shares
There is no automatic entitlement to annual bonus. Taking into account the circumstances of leaving, the
Committee retains the discretion to award a bonus in respect of performance in the financial year with appropriate
consideration of time pro-rating.
If a Director ceases office or employment with the Group any unvested awards will lapse unless the individual is a
good leaver.
Good leaver circumstances are cessation by reason of injury, ill-health, permanent disability or retirement (with
the agreement of the employing company) and, if the Committee so determines, redundancy, the sale of the
individual’s employing company or business out of the group, or such other circumstances as the Committee may
determine. In these good leaver circumstances awards may vest in full or be time pro-rated, and be delivered on
cessation or at the normal time.
If a Director dies his or her awards will vest in full.
Staff underwriting
participation plan
LTIP
For leavers, profit results are payable in respect of years of account commencing before cessation. A participant
receives repayment of notional capital invested reduced by any loss result for the relevant year of account.
If a Director ceases office or employment with the group any unvested awards will lapse unless the individual is a
good leaver.
An individual is a good leaver if employment ceases because of death, ill-health, injury, disability, the sale of the
individual’s employing company or business out of the group or for any other reason at the committee’s discretion
(except where a participant is dismissed lawfully without notice). Awards will vest on the normal vesting date,
unless the committee determines that awards should vest at the time the individual ceases employment. Any
applicable holding period will ordinarily continue to apply, although the Committee may bring the holding period to
an end early in exceptional circumstances (for example in the event of termination due to ill health). If the
participant dies awards will vest as soon as practicable after the date of death and the holding period will cease
to apply.
Awards will vest taking into account the satisfaction of any performance condition and, unless the committee
determines otherwise, the period of time that has elapsed since the award was granted until the date of
cessation of employment.
Pension
The Director will be eligible to receive the standard contribution to the defined contribution pension plan during
the notice period, or cash equivalent.
HMRC approved all-
employee plans (or
equivalent overseas
plans)
Recruitment awards
Under the Beazley Furlonge Limited Final Salary Pension Scheme, on early retirement the director receives a
pension which is reduced to reflect early payment in accordance with the rules of the scheme.
Leavers will be treated in accordance with the approved plan rules.
Were a buyout award to be made under LR 9.4.2 (or in other circumstances outside of the existing share plan
rules) then the leaver provisions would be determined at the time of award.
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Consideration of shareholders views
Ahead of the 2023 AGM, the chair of the Remuneration
Committee consulted with Beazley’s largest shareholders and
proxy agencies to discuss the proposed changes to the
remuneration policy. The Committee greatly values feedback
from our shareholders and took their views into account when
finalising the proposals.
A number of the changes made to the remuneration policy
have been made in direct response to feedback received from
shareholders. For example, from 2023 we are fixing the rate
of bonus deferral and have enhanced our post-employment
shareholding requirements to align with evolving market
expectations. We have also responded to shareholders’
preference for the use of multiple measures in the LTIP by
introducing an ESG measure from 2023.
As a Committee, we monitor evolving shareholder views on
Executive remuneration and regularly review guidance from
proxy bodies, as well as from our shareholders. We continue
to value input from our shareholders and are committed to
ensuring an open dialogue.
Minor changes
The Committee may make minor amendments to the policy
set out above (for regulatory, exchange control, tax, or
administrative purposes, or to take account of a change in
legislation) without obtaining shareholder approval for such
amendments.
Directors’ remuneration report
Directors’ remuneration policy
continued
In the event of a change of control or winding up of the
company, treatment of share awards will be in accordance
with the relevant plan rules. In these circumstances unvested
LTIP awards and deferred shares may vest early. The extent to
which unvested LTIP vest would be determined by the
Committee taking into account the satisfaction of any
performance conditions, the period of time that has elapsed
since the award was granted until the date of the event and
any other factors the Committee considers relevant. Deferred
shares will vest to the extent determined by the Committee
taking into account any factors it considers relevant.
Alternatively, the Committee may determine that LTIP awards
or deferred shares may be exchanged for equivalent awards
on such terms as agreed with the acquiring company. If there
is a demerger, delisting or other event which may materially
affect the company’s share price, LTIP awards may vest on
the same basis as for a takeover. In the event of a change of
control or other relevant event during the holding period
applying to an LTIP award, the holding period will come to an
end.
Non-Executive Directors’ fee policy and service contracts
The standard approach for Non-Executive Director appointment
is that the appointment expires at the AGM following the end
of the three year term, notwithstanding the fact that each
Director is subject to annual re-election at each AGM.
Although there is currently no intention to do so, The Board
reserves the right to introduce notice periods for Non-
Executive Directors in the future. Details of the Non-Executive
Directors’ current contracts are set out on pages 131 to 132.
Consideration of conditions elsewhere in the company
As part of the regular cycle, the Committee is informed of pay
and employment conditions of wider employees in the Group
and takes these into account when determining the
remuneration for Executive Directors. While the review
includes various statistics on the outcome of the wider
employee pay review, the review does not currently include
any direct comparison measures between Executive Directors
and wider employee pay. The company does not consult with
employees on executive director remuneration.
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Directors’ remuneration report
Annual remuneration report
This part of the report, the annual remuneration report, sets out the remuneration out-turns for 2022 (and how these relate to
our performance in the year) and details of the operation of our policy for 2023.
The symbol ▪ by a heading indicates that the information in that section has been audited.
Single total figure of remuneration ▪
The tables below set out the single figure of total remuneration for Executive Directors and Non-executive Directors for the
financial years ending 31 December 2022 and 31 December 2021.
Executive Directors
Fixed pay
Pay for performance
£
Adrian P Cox3
Sally M Lake
Salary
2022 525,250
2021 480,625
2022 414,000
2021 390,000
Benefits
19,760
15,083
2,938
2,873
Pension
Total annual
bonus1
Long term
incentives
(LTI)2
787,875 106,663
Total
Total fixed
variable pay
pay
894,538
65,656 610,666
60,078 555,786 1,441,875 102,873 1,544,748
71,190
45,960 462,898
692,190
621,000
33,122 1,203,122
43,323 436,196 1,170,000
Total
remuneration
1,505,204
2,100,534
1,155,088
1,639,318
1 A portion of the 2021 and 2022 bonus awards shown in the table above is deferred into shares for three years. Details of the deferral in respect of 2022 awards
can be found on page 127.
2 The LTI figures for 2022 have been calculated using the average share price in the last three months of 2022 of 630.7p. The share prices at the time LTI awards
were granted were 553.33p for the 2018 award and 595.50p for the 2020 award. The 2022 LTI figures therefore include share appreciation of £8,947 for Adrian
P Cox and £5,018 for Sally M Lake. See page 112 for further details. For 2021, the LTI figures have been restated to reflect the share prices at the date of
vesting of 482.77p for the 2019 award and 485.63p for the 2017 award. The Committee did not exercise any discretion in relation to share price changes.
3 Adrian P Cox was appointed CEO on 1 April 2021. The 2021 figures in the table reflect the period as CUO from 1 January 2021 to 31 March 2021 and his
appointment to CEO effective 1 April 2021 until the end of the financial year.
Non-Executive Directors
Rajesh K Agrawal3, 10
Pierre-Olivier Desaulle
Nicola Hodson6
Christine LaSala4,6
Robert A Stuchbery5, 6, 11
David L Roberts6
A John Reizenstein
Catherine M Woods7
Fiona M Muldoon8, 11
Cecilia Reyes Leuzinger9
2022
plc Board fees
77,547
74,000
81,648
128,476
85,633
193,846
87,500
18,988
44,438
46,505
2022
Subsidiary
Board fees
0
14,322
0
28,560
31,100
48,462
19,600
0
0
0
2022 Total
fees1
77,547
88,322
81,648
157,036
116,733
242,308
107,100
18,988
44,438
46,505
2021 Total
Fees2
29,417
77,388
75,600
119,257
108,080
264,000
101,100
87,665
–
–
1 Other than for the Chair, fees include fees paid to the Chair and members of Board Committees, for the role of Senior independent Director, as well as fees,
where relevant, for membership of the subsidiary Boards of Beazley Furlonge Limited (BFL) and Beazley Insurance dac, the Chair of the BFL Risk Committee and
Beazley Insurance Company, Inc. (BICI).
2 For Christine LaSala, Pierre-Olivier Desaulle and Catherine M Woods the total 2021 fee has not changed but the representation has been amended in order to be
consistent with 2022. Fees are paid in multiple currencies – 2021 fees have been restated using 2022 FX rates of GBP 1 : USD 1.25 and GBP 1 : EUR 1.18.
3 Rajesh K Agrawal joined as a Non-Executive Director of the plc Board with effect 1 August 2021.
4 Christine LaSala became chair of the remuneration committee with effect 27 March 2021.
5 Robert A Stuchbery joined as a Non-Executive Director of the Remuneration Committee with effect 14 April 2021.
6 David Roberts stepped down as chair of the plc Board, with effect 21 October 2022. Until a replacement has been appointed, Christine LaSala is acting as
Interim Chair of The Board plc and Chair of the Nomination Committee, Robert A Stuchbery is acting as Interim Senior independent Director and Nicola Hodson is
acting as Interim Remuneration Committee Chair with effect from 24 October 2022. The fees for the impacted Directors has been amended accordingly to reflect
their new roles and responsibilities.
7 Catherine M Woods stepped down as a Non-Executive Director of the plc Board, with effect 25 March 2022.
8 Fiona M Muldoon joined as a Non-Executive Director of the PLC Board and as a member of the Audit and Risk Committee with effect from 31 May 2022.
9 Cecilia Reyes Leuzinger joined as a Non-Executive Director of the plc Board and as a member of the Audit and Risk Committee and Remuneration Committee with
effect from 31 May 2022.
10Rajesh K Agrawal joined as a Non-Executive Director of the Remuneration Committee with effect 26 April 2022.
11With effect from 24 October 2022 Robert A Stuchbery stepped down as Employee Voice of the plc Board and Fiona M Muldoon took on the role.
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Salary ▪
The Committee reviews salaries annually taking into
consideration any changes in role and responsibilities,
development of the individual in the role, and levels in
comparable positions in similar financial service companies. It
also considers the performance of the Group and the
individual as well as the average salary increase for
employees across the whole Group. Salary reviews take place
in December of each year, with new salaries effective from 1
January.
During the year the Committee reviewed the executive
directors’ salaries and identified that Adrian P Cox’s salary as
CEO had fallen out of step with the transformative changes
that have taken place at Beazley in our recent history. The
Committee recognised that it was in the interests of
shareholders that Adrian’s salary is set at a reasonable level
in order to retain and motivate a CEO of the calibre necessary
to effectively run Beazley and to deliver our long-term strategic
priorities. Therefore the committee has made a step change
to his salary for 2023 increasing it from £525,250 to
£625,000. Further details on the Committee’s rationale are
provided on page 110.
As set out in the Remuneration Committee Chair’s statement,
the committee was cognisant of the cost-of-living challenges
facing the wider workforce in light of inflation levels. Therefore
the salary increase budget was targeted at those experiencing
the greatest pressures. For 2023 the GFD’s salary is being
increased by 5.0%, in-line with the approach for other senior
roles, and considerably below the increases awarded to more
junior staff.
The base salaries for the executive directors in 2022 and 2023 are as set out below:
Adrian P Cox
Sally M Lake
2022
base salary
£
525,250
414,000
2023
base salary
£
625,000
434,700
Increase
%
19.0
5.0
Benefits ▪
Benefits include private medical insurance for the director and their immediate family, income protection insurance, death in
service benefit at four times annual salary, travel insurance, health-club membership, season ticket and the provision of either
a company car or a monthly car allowance.
Pension ▪
Executive directors receive a pension allowance of 12.5% of salary, in-line with the rate available to the majority of the UK
workforce.
Prior to 31 March 2006 the company provided pension entitlements to directors that are defined benefit in nature, based on its
legacy policy under the Beazley Furlonge Limited Final Salary Pension Scheme. Future service accruals ceased on 31 March
2006. Only base salary is pensionable, subject to an earnings cap. The normal retirement age for pension calculation purposes
is 60 years. A spouse’s pension is the equivalent of two-thirds of the member’s pension (before any commutation) payable on
the member’s death after retirement.
Details of the defined benefit entitlements of those who served as directors during the year are as follows:
Accrued benefit
at 31
December
2022
£
16,723
Increase in
accrued
benefit
excluding
inflation (A)
£
0
Increase in
accrued
benefit
including
inflation
£
1,933
Transfer value of
(A) less directors
contribution
£
0
Transfer value
of accrued
benefits at 31
December
2022
£
293,063
Transfer value
less directors
contribution
£
(263,120)
Normal retirement
date
12 Mar 2031
Adrian P Cox
Under the Beazley Furlonge Limited Final Salary Pension Scheme, on early retirement the Director receives a pension which is
reduced to reflect early payment in accordance with the rules of the scheme.
No other pension provisions are made.
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Annual bonus structure ▪
The annual bonus plan is a discretionary plan in which all
employees are eligible to participate. The annual bonus is
funded by a bonus pool. The pool is calculated as a
percentage of profit subject to a minimum group ROE. The size
of the pool as a percentage of profit increases for higher
levels of ROE. This ensures that outcomes are strongly
aligned with shareholders’ interests.
The operation of an annual bonus pool approach reflects
Beazley’s commitment to encourage teamwork at every level,
which, culturally, is one of its key strengths. A broad senior
management team, beyond Executive Directors, participate in
the bonus pool, reinforcing the company’s collegiate culture.
Once the annual bonus pool has been calculated the
committee determines individual allocations taking into
consideration corporate/strategic achievements and individual
achievements. The bonus is discretionary and, rather than
adopting a prescriptive formulaic framework, the Committee
considers wider factors in its deliberations at the end of the
year: for example quality of profit and risk considerations.
In determining awards, the committee will not necessarily
award the bonus pool in aggregate (i.e. the sum of the bonus
awards may be less than the bonus pool).
The approach to the calculation of bonuses is aligned to
shareholders’ interests and ensures that bonuses are
affordable, while the ROE targets increase the performance
gearing. The Committee reviews the bonus pool framework
each year to ensure it remains appropriate, taking into
account the prevailing environment, interest rates and
expected investment returns, headcount and any other
relevant factors.
Annual bonus out-turn for 2022
The process for determining 2022 bonuses is described
below, including full details of the ROE targets underpinning
our bonus approach along with the guideline levels which are
used by the Committee in its determination for each Executive
Director.
Annual bonus pool calculation for 2022
At the beginning of the financial year, the risk-free return (RFR) was set at 0.75% taking into account the yield on US treasuries
of two to five year maturities. This resulted in the following ROE hurdles and guideline bonus awards:
ROE performance hurdles
ROE performance
Guideline/illustrative bonus award as % of maximum
Threshold
0.75%
0%
Maximum
3.75% 10.75% 18.25% 25.75%
100%
12.5%
37.5%
75%
When considering the annual bonus pool outcome, the
Committee takes into account the outcome of the Group’s
ROE/profit. The framework is used by the Committee as a
broad guideline rather than being formulaic and applies to a
broader group of Executives than Board Directors. A key
principle of the process is that the Committee exercises its
judgement in determining individual awards taking into
account the corporate/strategic objectives, individual’s
contribution and performance. In particular, there may be a
diverse spread of returns earned across the various divisions
within the business which will be reflected in bonus out-turns
achieved. The table therefore provides full retrospective
disclosure of all the Group financial targets and corporate/
strategic performance which the Committee considers when
determining the annual bonuses.
When determining annual bonuses an assessment against the
expectation for each element is made with reference to the
following grading system:
Expectation achieved or exceeded
Reasonable outcome against expectation
Expectation not met
These percentages are indicative only and based on broad
corporate results. Within the pool framework bonus out-turns
may be higher or lower taking into account corporate
achievements and individual performance (see next page).
ROE for 2022 was 7% and the overall bonus pool (in which
executive directors as well as other senior employees
participate) was calculated based on this.
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2022 ROE hurdles and guideline bonus awardsGuideline/illustrative bonus award as % of maximum0%3%10%17.5%25%30%0%20%40%60%80%100%
Directors’ remuneration report
Annual remuneration report
continued
Assessment of achievements for 2022
In determining annual bonuses for 2022 the Committee took into account a range of (i) financial, (ii) strategic and (iii) individual
elements as set out below.
(i) Financial performance
Element
Profit before tax
Achievement
$191.0m profit before tax
Gross premiums written growth
Increased by 14%
Net assets per share growth
Achieved a NAVps growth of 10%
Investment performance (portfolio return)
(2.1)% portfolio return
Expense management
Remained at 35%
(ii) Strategic performance
Element
Expectation
Achievement
Responsible business
Wholesale platform
growth
North American
platform growth
European platform
growth
Improve ESG rating as measured across S&P,
Carbon Disclosure Project (CDP) and
Sustainalytics.
Reduce carbon emissions by 40% in 2022 in
line with Responsible Business Strategy.
Ensure the creation of a group-wide human
rights policy, and establish key performance
indicators (KPIs) in order to measure the
effectiveness of our actions and progress in
tackling modern slavery and human rights.
Achieve at least 45% female representation at
Board and Senior Manager level by 2023.
Achieve at least 25% People of Colour
representation of the global workforce by end of
2023.
ESG rating improvement achieved. CDP rating increased
from C to B. S&P score increased from 43 to 48.
55% reduction achieved in 2022.
Human rights policy in place. The development of KPIs is
ongoing as we work to enhance our approach to
responsible procurement.
On track to achieve 2023 target.
Achieved, in advance of deadline.
Increase profitable growth across wholesale
platforms in London, Asia Pac and Miami.
Achieve profitable growth in the US and Canada. Our US domestic insurance company reached a significant
Our Wholesale platform has a strong 2022, with growth of
13%. This platform remains our largest platform.
Build out franchise in Europe.
Culture and people
Maintain high levels of employee engagement.
milestone this year, passing gross premiums written of
$2bn. Overall the North American platform grew 13%.
Our European platform continued to perform well, writing
business both on Lloyd’s paper and through our European
Insurance entity. Growth across the platform was 23%.
Employee engagement score of 85% (8% above the global
average). Turnover has decreased to 10.3% at the end of
2022 from 11.4% at the end of 2021. This is below the
average market benchmark of 12%.
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(iii) Individual performance
While a number of the specific individual objectives of the Executive Directors are considered commercially sensitive, the
following provides details of Executive Director achievements which the Committee took into account.
Executive
Objectives
Achievement
Adrian Cox
(Chief Executive
Officer)
Deliver 2022 underwriting business
plan, GAAP budget and provide
leadership for the modernisation
programme.
• Initial guidance to shareholders for 2022 was a combined ratio of
around 90% and growth in the mid teens; the combined ratio was
better than guidance and growth inline.
• Premium growth of 14% achieved rate change of 14% and expense
Execute on five year plan and
developing into general business
strategy.
ratio of 35%.
• Combined ratio for 2022 of 89% (93% in 2021).
• Modernisation programme on track to deliver significant
improvements to the business.
• Managed budgets and risk appetites proactively through the year to
optimise short and long-term positions for the company.
• The 2022 element of the 5 year plan achieved and well developed
into general business strategy.
• Vision and company strategy well embedded across the business
which will be explained to shareholders at capital markets day in May
2023.
Define three year cyber plan and
associated plans to deliver (capital,
diversification etc).
Continue to embed climate change
decision making into the underwriting
process, further reflecting the financial
risk of climate change within our
pricing.
• Cyber plan written and signed off by The Board.
• Year one of the plan has been delivered as planned.
• Plan forms intrinsic part of future strategy.
Beazley created a Climate Risk Working Group (CRWG) to lead the
delivery of the work required to further embed climate risk into the
underwriting process. This work included:
• Strengthening catastrophe modelling capabilities and developing
forward looking view of risk.
• Improving key peril model calibration in pricing and incorporating
climate loss trends for key perils (US hurricane, US wildfire, US inland
flood) in pricing.
• Developing and introducing a climate change metric on US hurricane
risk into our key property pricing tool.
• Developing a catastrophe optimisation framework and tool. This
framework and tool enables underwriters to optimise the US property
risks portfolio using risk appetite metrics and performance metrics.
• Developing an internal realistic disaster scenario on greenwashing to
assess and quantify the potential impact of greenwashing and
consider actions needed to mitigate this risk.
Additional progression is planned for 2023, with the CRWG set further
objectives to building on the successes delivered in 2022.
• Capital strategy delivered as required, with successful equity raise of
£340.8m.
• Surplus capital remained in preferred range prior to equity raise.
• On track and will be finalised with the appointment of new Chair.
• On track to achieve targets by end 2023.
• Our engagement score, which measures whether colleagues are
willing to go above and beyond for the organisation, was 85%, 1%
lower than 2021. We remain above the global benchmark for both
favourability and engagement. This year our fully engaged category
increased by 5% - meaning that while our overall score hasn’t
increased, for 5% of colleagues their level of engagement has gone
up. Much like last year, we continue to see parity in a majority of our
demographic scores such as gender, ethnicity, age and length of
service.
• Turnover of 10.3% which is better than industry average of 12%.
Effective leadership in relation to
achieving appropriate levels of
capital management for current
operations and future growth.
Finalise and execute new governance
across Boards, executive and
subcommittees.
Deliver inclusion and diversity targets,
focusing on rolling recruitment and
promotion ratios.
Sustain high levels of employee
engagement and inclusivity within the
business and continue to drive ways
of working for a productive workforce.
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Directors’ remuneration report
Annual remuneration report
continued
Executive
Objectives
Achievement
Sally Lake
(Group Finance
Director)
Execution of planning and oversight of
the IFRS 17 and 9 implementation
project for January 2023.
Align long term to strategic decisions
on capital, reinsurance and expenses.
Deliver capital management at
appropriate levels for current
operations and future growth
Chair the Investment Committee and
build a strong Committee that delivers
an investment return for 2022.
Align the investment portfolio below 2
degree world.
Co-sponsor the multi-year
modernisation programme with Chief
Operating Office to deliver greater
efficiencies including the creation of
the disclosure management tool.
Strong ownership of relations with
analysts and rating agencies and
assured participation in investor calls
and presentations.
Achieve a 45% female target within
senior leadership positions by end of
2023.
Effective management of the Finance
transformation programme.
• Delivered IFRS 17 requirements for year end 2022.
• IFRS 17 programme on target for reporting during 2023.
• Equity raise in November 2022 to support opportunity in Property
market.
• Continued focus on expenses aiming to ensure that growth in
business outstrips costs increase, whilst at the same time ensuring
investment in automation and simplification continues across the
Group.
• Equity raise of £340.8m in November 2022 to support opportunity in
Property market.
• Investment loss of $179.7m which was below target investment
return due to changes in the macro economic environment.
• Building on Beazley’s Responsible Investment Policy, Beazley has
commenced the work required to align the investment portfolio to
below a 2 degree world.
• Beazley has established baseline emissions for the apportioned
carbon emissions arising from publicly listed corporate bonds
(investment grade and high yield) and publicly listed equities. We have
also commenced the work required to develop and incorporating
climate data and emissions for sovereign exposures. It is anticipated
these numbers will be incorporated into our annual reporting at the
end of 2023.
• Beazley has also set the objective to align the investment portfolio
with a 1.5 degree pathway by 2028. This work delivered in 2022
enables Beazley to work towards this objective.
• Modernisation programme on track, with key 2022 deliverables
achieved.
• Disclosure management tool implemented.
• Investor roadshows held post half year and year end results.
• Engaged with wider group of investors through the year.
• Feedback collated indicated investors are pleased with the level of
management interaction and overall management performance.
• On target to achieve target by end 2023.
• Finance leadership team has now been in place for the last year and
are working strongly as a leadership team.
• The Finance team employee engagement score moved from 83% in
2021 to 86% in 2022.
• 2022 plans delivered on time and in budget.
Annual bonus awards outcomes for 2022
Within the framework of the annual bonus, in respect of individual performance and achievements, awards are dependent on a
profit pool and minimum level of ROE performance.
Adrian P Cox
Sally M Lake
% of maximum
37.5%
37.5%
% of salary
150%
150%
Bonus value
£787,875
£621,000
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The following graph and table set out the out-turn for 2022 against performance and illustrate the way in which bonuses over
time reflect profit and ROE performance.
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Pre-tax profit/ (loss)
Post-tax ROE
Average Executive Director
bonus as a percentage of
salary
$313m $262m $284m $293m $168m $76m $268m ($50m) $369m $191m
7%
15%
19%
16%
18%
21%
17%
(3%)
5%
9%
c.333% c.294% c.291% c.272% c.150%
c.73% c.212%
c.0% c.300% c.150%
Bonus deferral
A portion of the bonus will generally be deferred into shares for three years. For 2022 the deferral rate was set at 25%.
Deferred shares are generally subject to continued employment.
A portion of bonus may also be deferred under the investment in underwriting plan, and this capital can be lost if underwriting
performance is poor (see investment in underwriting section on page 130 for further details).
The following table sets out the deferred bonus awards made during 2022 in respect of the bonus for 2021:
Individual
Adrian P Cox
Sally M Lake
Type of interest
Basis on which
award is made
Deferred shares Deferred bonus
Deferred shares Deferred bonus
Number of shares
awarded
89,132
72,326
Face value of
shares1
432,500
351,000
% vesting at
threshold
n/a
n/a
1 The face value of shares awarded was calculated using the three day average share price prior to grant, which was 485.3p.
Annual bonus approach for 2023
The annual bonus for 2023 will continue to operate within a similar framework as in previous years, with awards dependent on
a profit pool and minimum level of ROE performance and taking into account individual performance and achievements.
As part of their review of the financial targets for the 2023 annual bonus the Committee noted the potential impact of the
implementation of IFRS 17 which applies from January 2023. The bonus ROE framework set out in this report is based on the
previous accounting standards and, if necessary, may be updated to reflect the new accounting standards. In making any
amendments the committee will ensure that targets are no more or less stretching and that participants do not inadvertently
benefit from the change in accounting standards.
As set out earlier in the Report, the Committee are proposing two key changes to the annual bonus approach for 2023. As part
of the wider rebalancing to the longer-term the maximum annual bonus opportunity will be reduced to 300% of salary and the
level of deferral will be fixed so that one-third of any bonus for 2023 will be deferred into shares for three years.
Long term incentive plan (LTIP) ▪
Under the LTIP Executive Directors, senior management and selected underwriters receive awards of shares subject to the
achievement of stretching performance conditions. As mentioned in the Letter from the Chair of the Remuneration Committee
we are proposing a number of changes to the LTIP as part of the renewal of our Directors’ Remuneration Policy at the 2023
AGM. The proposed changes are explained in more detail at the end of this segment whilst the following sections set out the
details for outstanding LTIP awards granted under our current structure.
LTIP structure for awards granted prior to 2023 ▪
Vesting of awards is based on growth in net asset value per share (NAVps), one of Beazley’s key performance indicators. NAVps
performance is assessed equally over a three year and five year period. In accordance with the UK Corporate Governance Code
the first tranche of LTIP awards is subject to a further two year holding period, taking the total time frame for the entire award to
five years.
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$m%Average Executive Director bonus (% of salary)Pre-tax profit/(loss)Average Executive Director bonus as a percentage of salary2013201420152016201720182019202020212022-50050100150200250300350400-50050100150200250300350400
Directors’ remuneration report
Annual remuneration report
continued
The NAVps performance conditions for all outstanding awards are as follows:
NAVps performance
NAVps growth < risk-free rate +7.5% p.a.
NAVps growth = risk-free rate +7.5% p.a.
NAVps growth = risk-free rate +10% p.a.
NAVps growth = risk-free rate +15% p.a.
% of award
vesting
0 %
10 %
25 %
100 %
The Committee considers the LTIP NAVps growth targets to be very stretching, particularly taking into account that growth must
be over a sustained five year period. Growth in NAVps is calculated taking into account any payment of dividends by the
company. In line with our reporting to shareholders, NAVps is denominated in US dollars.
LTIP outturns in respect of 2022 ▪
The LTIP awards shown in the single total figure of remuneration for 2022 include:
• the second tranche of awards granted on 13 February 2018. These will vest at 14.9%, based on the achievement of the
NAVps growth performance condition over the five years ended 31 December 2022; and
• the first tranche of awards granted on 11 February 2020. These will vest at 20.0%, based on the achievement of the NAVps
growth performance condition over the three years ended 31 December 2022.
The following table summarises the actual NAVps growth achieved over the two performance periods and the resultant vesting
levels:
LTIP award
Second tranche of the 2018 awards
First tranche of the 2020 awards
Performance period
Five years ended 31
December 2022
Three years ended 31
December 2022
NAVps growth
10.1% p.a.
% of award vesting
14.9%
10.5% p.a.
20.0%
The results were independently calculated by Deloitte LLP. The Committee is comfortable that executives have not unduly
benefited from windfall gains in respect of their LTIP awards. In particular the Committee noted that the 2020 awards were
granted in February 2020 prior to the fall in share price resulting from the outbreak of COVID-19.
LTIP awards granted in 2022 ▪
During 2022, LTIP awards with a face value equal to 200% of salary for the CEO and 150% of salary for the GFD were granted to
Executive Directors. These awards are subject to the NAVps performance conditions set out above. The awards were as shown
in the table below:
Individual
Adrian P Cox
Sally M Lake
Type of interest
Nil cost option
(LTIP)
Nil cost option
(LTIP)
Basis on which
award is made
200% of
salary
150% of
salary
Number of
shares
awarded
Face value of
shares1
% vesting at
threshold
Three years (50%)
Five years (50%)
Performance period end
216,464
1,050,500
10% 31/12/2024 31/12/2026
127,962
621,000
10% 31/12/2024 31/12/2026
1 The face value of shares awarded was calculated using the three day average share price prior to grant, which was 485.3p.
LTIP structure for awards granted from 2023 ▪
The LTIP is an important tool in the remuneration framework for incentivizing participants and aligning their interests with those
of our shareholders. During the review of the Remuneration Policy the Committee identified a number of refinements to improve
the effectiveness of the LTIP structure and to reflect evolving market practice.
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Award opportunity for 2023
As part of the wider rebalancing to the longer-term the
maximum LTIP opportunity will be increased by 100% of
salary. LTIP awards with a face value equal to 300% of salary
for the CEO and 250% of salary for the GFD will be granted.
of support. During the consultation process, it became clear
that a significant proportion of shareholders had reservations
due to the atypical nature of the proposal and there was a
preference for a more market-typical approach, that
maintained a longer term performance period.
Performance period
A key feature of the Beazley business model is exposure to
catastrophes within a robust risk management framework.
Because of this, there is an inherent level of volatility in
company performance. Beazley has an established pay-for-
performance culture, a track record of aligning individual
reward with performance and a policy of not rewarding failure.
During the review of the policy, the Remuneration Committee
identified that the volatility of our annual results can have a
disproportionate impact on LTIP awards, which is exacerbated
by our longer-than-normal five-year performance period.
Taking this into account the Committee gave consideration to
moving to an annualised approach so that the LTIP is split into
five equal tranches with performance assessed pro-rata in
years one to five.
This proposal was discussed with the majority of our
shareholders (top 100) in order to gauge the potential levels
Based on the shareholder feedback the Committee decided
against the annualised LTIP approach. As an alternative, and
aligned with our shareholders’ preference for a more market-
typical approach, the Committee is proposing to simplify the
LTIP performance period by removing the five-year
performance element so that the entire award is subject to
cumulative performance measured over a three year period.
The Committee believes that this change is appropriately
aligned with the interests of our shareholders, improves the
clarity of the LTIP and makes it simpler for both participants
and investors. The vesting of awards will continue to be
subject to the stretching performance targets set out below,
and shares will be subject to a two-year post-vesting holding
period. Ultimately the Committee believes that this change, in
conjunction with including an ESG metric, will help to continue
to incentivise and retain our high calibre, experienced
executive team.
NAVps performance1
NAVps growth < risk-free rate +7.5%
NAVps growth = risk-free rate +7.5%
NAVps growth = risk-free rate +10%
NAVps growth = risk-free rate +15%
% of award vesting
0 %
10 %
25 %
100 %
1 As part of their review of the financial targets for the 2023 LTIP awards the Committee noted the potential impact of the implementation of IFRS 17 which applies
from January 2023. The targets set above are based on the previous accounting standards and, if necessary, may be updated to reflect the new accounting
standards. In making any amendments the committee will ensure that targets are no more or less stretching and that participants do not inadvertently benefit
from the change in accounting standards.
Introduction of ESG metrics
Beazley’s aspiration is to be the highest performing
sustainable specialist insurer in the market. We believe that
we must demonstrate our commitment to this and have made
a series of measurable steps to incorporate relevant
environmental, societal and governance (ESG) features into
every aspect of our business. From 2023 we are introducing
ESG metrics into the LTIP in order to incentivise the delivery of
our ambitions over the longer-term. ESG will represent 50% of
salary.
Target
Reduce carbon emissions (Scope 1, 2 & 3) relative to 2019 baseline
Increase female representation at Board and Senior Manager level
Increase People of Colour representation at Board and Senior Manager
level
Weighting
(of ESG element)
One third
One third
One third
Threshold
(10% of max)
TBC1
44 %
13 %
Max
TBC1
45 %
15 %
1 The sustainability team are in the process of finalising the carbon reduction targets for the 2023 LTIP awards. The Committee intends to set stretching,
quantifiable targets which align with our external commitments around carbon reduction. Full details of the targets will be published on the Company’s website
when available.
We understand that we and the business world are on a
complex journey. Whilst we believe that the above metrics are
the most appropriate metrics for the LTIP at this time, we
acknowledge that our ESG strategy will evolve over time, and
we intend to employ alternative metrics in the future where
appropriate and relevant given our priorities.
Dilution
The share plans permit 10% of the company’s issued share
capital to be issued pursuant to awards under the LTIP, SAYE
and option plan in a 10-year period. The company adheres to
a dilution limit of 5% in a 10 year period for executive
schemes.
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Directors’ remuneration report
Annual remuneration report
continued
staff underwriting plan for this purpose since 2004 and
executive directors and other selected staff are invited to
participate through bonus deferral with an element of their
cash incentives ‘at risk’ as capital commitments. These
capital commitments can be lost in full if underwriting
performance is poor.
Investment in underwriting ▪
Traditionally, Lloyd’s underwriters contributed their personal
capital to syndicates in which they worked. With the move to
corporate provision of capital, individual membership of
Lloyd’s has declined significantly. The Committee feels that
having personal capital at risk in the syndicate is an important
part of the remuneration policy and provides a healthy
counterbalance to incentivisation through bonuses and long
term incentive awards. The company has operated the Beazley
The Group funds the capital for the plan. The individual capital
commitment is then funded through individual’s bonus
deferral. The aim is for individuals to fund their capital within
three years.
To date over 300 employees of the Group have committed to
put at risk £15.2m of bonuses to the underwriting results of
syndicate 623. Of the total at risk, £13.0m has already been
deferred from the bonuses awarded.
The following executive directors participated in syndicate 623 through Beazley Staff Underwriting Limited:
Adrian P Cox
Sally M Lake
Total bonuses deferred
£
216,000
54,000
2021 year of accounting
underwriting capacity
400,000
100,000
2022 year of accounting
underwriting capacity
400,000
100,000
2023 year of accounting
underwriting capacity
400,000
250,000
Adrian P Cox has fully funded the capital requirement. Sally M Lake is fully funded for the capital requirement for 2021-2022,
the increase in capital for the 2023 capacity will be funded via future bonus deferral.
Malus and clawback
Recovery provisions (malus and clawback) have applied to incentives for a number of years. Further detail on the recovery
provisions, including the circumstances and timeframe for which they can be applied are set out in the remuneration policy.
Risk and reward at Beazley
The Committee regularly reviews developing remuneration governance in the context of Solvency II remuneration guidance, other
corporate governance developments and institutional shareholders’ guidance. The chief risk officer reports annually to the
remuneration committee on risk and remuneration as part of the regular agenda. The Committee believes the Group is adopting
an approach which is consistent with, and takes account of, the risk profile of the Group.
We believe reward at Beazley is appropriately balanced in light of risk considerations, particularly taking into account the
following features:
Features aligned with risk considerations
Share deferral
LTIP holding period
Shareholding requirements
Investment in underwriting
Underwriters remuneration
aligned with profit received
A portion of bonus is normally deferred into shares for three years. These deferred shares, together with
shares awarded under the LTIP, mean that a significant portion of total remuneration is delivered in the
form of shares deferred for a period of years.
Outstanding LTIP awards vest over a five year period. From 2023 LTIP awards will vest over a three-year
period. Any awards which have a performance period of less than five years are subject to an additional
holding period, following the date on which the award vests, up to the fifth year of the award.
Executive Directors are expected to build up and maintain a shareholding of 300% of salary for the CEO and
200% of salary for the GFD. Executive Directors are also expected to maintain a shareholding post-
departure.
Management and underwriters may defer part of their bonuses into the Beazley staff underwriting plan,
providing alignment with capital providers. Capital commitments can be lost if underwriting performance is
poor.
Under the profit related bonus plan payments are aligned with the timing of profits achieved on the account.
For long tail accounts this may be in excess of six years. If the account deteriorates then payouts are
‘clawed back’ through adjustments to future payments. Since 2012 profit related pay plans may be at risk
of forfeiture or reduction if, in the opinion of the Remuneration Committee, there has been a serious
regulatory breach by the underwriter concerned, including in relation to the Group’s policy on conduct risk.
Malus and clawback provisions Malus and clawback provisions apply to all incentives that Executive Directors participate in.
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Service contracts and payments for loss of office
No loss of office payments have been made in the year.
There is no unexpired term as each of the Executive Directors’ contracts is on a rolling basis.
Non-Executive Directors’ fees
The fees of Non-Executive Directors are determined by The Board and are reviewed annually. When setting fee levels
consideration is given to levels in comparable companies for comparable services and also to the time commitment and
responsibilities of the individual Non-Executive Director. No Non-Executive Director is involved in the determination of their fees.
As announced in February 2023, Clive Bannister will take up the role of Chair of The Board following the AGM on 25 April 2023.
Clive Bannister's fee as Chair of The Board has been set at £325,000 and his fee will not be eligible for an increase until
2026. Following the annual review, the Remuneration Committee determined that the base fees for the Non-Executive Directors
should increase by 3%, below the general increase of the workforce.
As announced in December 2022, The Board approved the proposal to split its Audit and Risk Committee into a separate Audit
Committee and Risk Committee from 1 January 2023. The fee levels have been set taking into account a number of factors,
including the expected time commitments and responsibilities of each role and the current fee structure in place.
Details of the Non-Executive Directors’ fees payable for the plc Board responsibilities are set out below (the fee for the Chair of
The Board is inclusive of subsidiary fees):
Chair of Board fee
Basic fee
Senior independent Director fee
Chair of Audit and Risk Committee fee
Chair of Audit Committee
Chair of Risk Committee
Chair of Remuneration Committee fee
Membership fee for Non-Executive Directors on the Audit and Risk Committee
Membership fee for Non-Executive Directors on the Audit Committee
Membership fee for Non-Executive Directors on the Risk Committee
Membership fee for Non-Executive Directors on the Remuneration Committee
Fee for designated Non-Executive Director representing employee voice
2022 fee
£300,000
£65,000
£11,700
£22,500
–
–
£18,100
£9,000
–
–
£5,200
£5,200
2023 fee
£325,0001
£67,000
£11,700
–
£22,500
£22,500
£18,100
–
£9,000
£9,000
£5,200
£5,200
1 Christine LaSala is currently acting as interim Chair of The Board and receives a pro-rata fee of £300,000 for the period as interim Chair. Clive Bannister will be
appointed Chair of The Board with effect from the AGM on 25 April 2023, the fee has been set at £325,000 for a fixed three-year term.
Beazley operates across Lloyd’s, Europe and the US markets through a variety of legal entities and structures. Non-executive
Directors, in addition to the plc Board, typically sit on either one of our key subsidiary Boards, namely Beazley Furlonge Ltd, our
managing agency at Lloyd’s, or Beazley Insurance dac, our Irish insurance company. Non-Executive Directors may receive
additional fees for sitting on subsidiary Boards. As a result of developments in regulation, the degree of autonomy in the
operation of each Board has increased in recent years, with a consequent increase in time commitment and scope of the role.
No Non-Executive Director participates in the Group’s incentive arrangements or pension plan.
Non-Executive Directors are appointed for fixed terms, normally for three years, and may be reappointed for future terms.
Non-Executive Directors are typically appointed through a selection process that assesses whether the candidate brings the
desired competencies and skills to the Group. The Board has identified several key competencies for Non-Executive
Directors to complement the existing skill-set of the Executive Directors. These competencies may include:
• insurance sector expertise;
• asset management skills;
• public company and corporate governance experience;
• risk management skills;
• finance skills; and
• IT and operations skills.
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Directors’ remuneration report
Annual remuneration report
continued
Non-Executive Directors’ service contracts
Details of the Non-Executive Directors’ terms of appointment are set out below:
Christine LaSala
Robert A Stuchbery
A John Reizenstein
Nicola Hodson
Rajesh K Agrawal
Pierre-Olivier Desaulle
Fiona M Muldoon
Cecilia Reyes Leuzinger
Commencement of employment
1 Jul 2016
11 Aug 2016
10 Apr 2019
10 Apr 2019
1 Aug 2021
1 Jan 2021
31 May 2022
31 May 2022
Expires
AGM 2023
AGM 2023
AGM 2025
AGM 2025
AGM 2025
AGM 2024
AGM 2025
AGM 2025
The standard approach for Non-Executive Director appointments is that the appointment expires at the AGM following the end of
a three year term, notwithstanding the fact that each Non-Executive Director is subject to annual re-election at each AGM.
Approach to remuneration for employees other than directors
The Committee also has oversight of remuneration arrangements elsewhere in the Group. The following tables set out the
additional incentive arrangements for other staff within the organization.
Other incentive arrangements at Beazley (not applicable to executive directors):
Element
Profit related pay plan
Support bonus plan
Objective
To align underwriters’ reward with the
profitability of their account.
To align staff bonuses with individual
performance and achievement of objectives.
Retention shares
To retain key staff
Summary
Profit on the relevant underwriting account as
measured at three years and later.
Participation is limited to staff members not on the
executive or in receipt of profit related pay bonus.
The support bonus pool may be enhanced by a
contribution from the enterprise bonus pool.
Used in certain circumstances. Full vesting
dependent on continued employment over six years.
Underwriter bonus plan – profit related pay plan
Underwriters participate in a profit related pay plan based upon the profitability of their underwriting account. Executive Directors
do not participate in this plan.
The objective of the plan is to align the interests of the Group and the individual through aligning an underwriter’s reward to the
long term profitability of their portfolio. Underwriters who have significant influence over a portfolio may be offered awards under
the plan. There is no automatic eligibility. Profit related pay is awarded irrespective of the results of the Group. Awards are
capped.
This bonus is awarded as cash and is based upon a fixed proportion of profit achieved on the relevant underwriting account as
measured at three years and later. Any movements in prior years are reflected in future year payments as the account develops
after three years. For long-tail accounts the class is still relatively immature at the three-year stage and therefore payments will
be modest. Underwriters may receive further payouts in years four, five and six (and even later) as the account matures.
Therefore each year they could be receiving payouts in relation to multiple underwriting years.
If the account deteriorates as it develops any payouts are ‘clawed back’ through reductions in future profit related pay bonuses.
From 2012 onwards any new profit related pay plans may be at risk of forfeiture or reduction if, in the opinion of the
Remuneration Committee, there has been a serious regulatory breach by the underwriter concerned, including in relation to the
Group’s policy on conduct risk. The Remuneration Committee also have oversight for all materials risk takers who participate in
the profit related pay plan.
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The fixed proportion is calculated based upon profit targets which are set through the business planning process and reviewed
by a Committee formed of Executive Committee members and functional specialists including the Group actuary. Underwriting
risk is taken into account when setting profit targets.
In addition to profit related pay, underwriters are also eligible to receive a discretionary bonus, based upon performance, from
the enterprise bonus pool. A proportion of this bonus may be paid in deferred shares, which vest after three years subject to
continued employment.
Support bonus plan
Employees who are not members of the executive and who do not participate in the underwriters’ profit related pay plan
participate in a discretionary bonus pool. This pool provides employees with a discretionary award of an annual performance
bonus that reflects overall individual performance including meeting annual objectives.
A proportion of this award may also be dependent on the Group’s ROE and therefore allocated from the enterprise bonus pool.
A proportion of this bonus may be paid in deferred shares, which vest after three years subject to continued employment.
UK SAYE
The company operates an HMRC-approved SAYE scheme for the benefit of UK-based employees. The scheme offers a three-
year savings contract period with options being offered at a 20% discount to the share price on grant. Monthly contributions are
made through a payroll deduction on behalf of participating employees. The UK SAYE scheme has been extended to eligible
employees in Singapore, Ireland, Canada, France, Germany and Spain. The Irish SAYE scheme has been approved by the Irish
Revenue. However due to changes in Irish regulations in 2021 it was no longer possible to offer an Irish tax approved SAYE
plan. Instead, eligible Irish employees were invited to participate in the international SAYE plan offering on a non-tax approved
basis. The updated SAYE plan rules were approved at the 2022 AGM.
US SAYE
The Beazley plc savings-related share option plan for US employees permits all eligible US-based employees to purchase shares
of Beazley plc at a discount of up to 15% to the shares’ fair market value. Participants may exercise options after a two-year
period. The plan is compliant with the terms of section 423 of the US Internal Revenue Code and is similar to the SAYE scheme
operated for UK-based Beazley employees.
Retention shares
The retention plan may be used for recruitment or retention purposes. Any awards vest at 25% per annum over years three to
six. In line with policy, existing Executive Directors do not participate in this plan and no Executive Directors have subsisting
legacy awards outstanding.
Annual percentage change in remuneration of directors and employees
2021 -2022
2020 -2021
2019 -2020
Salary
Benefits
Bonus
Salary
Benefits
Bonus
Salary
Benefits
Bonus
All employees
4.5
11.3
-3.5
3.2
11.1
119.3
3.5
-12.8
-30.5
Executive Directors
Adrian P Cox1
3.5
8.8
-45.4
23.2
22.1
n/a
2.6
-7.2
-100
Sally M Lake2
3.5
5.8
-46.9
11.4
9.5
n/a
2.9
15.4
-100
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Directors’ remuneration report
Annual remuneration report
continued
Non-Executive Directors
2021 -20223
2020 -2021
2019 -2020
Christine
LaSala
31.7
n/a
n/a
8.7
n/a
n/a
40.0
n/a
n/a
David L
Roberts3
13.6
n/a
n/a
–
n/a
n/a
2.5
n/a
n/a
Robert A
Stuchbery4
8.0
n/a
n/a
3.5
n/a
n/a
16.6
n/a
n/a
Catherine
M Woods8
2.8
n/a
n/a
-6.0
n/a
n/a
18.1
n/a
n/a
A John
Reizenstein
5.9
n/a
n/a
–
n/a
n/a
2.5
n/a
n/a
Salary
Benefits
Bonus
Salary
Benefits
Bonus
Salary
Benefits
Bonus
Nicola
Hodson
8.0
n/a
n/a
–
n/a
n/a
2.5
n/a
n/a
Pierre-
Olivier
Desaulle
14.1
n/a
n/a
–
n/a
n/a
–
n/a
n/a
Rajesh K
Agrawal5
12.2
n/a
n/a
–
n/a
n/a
–
n/a
n/a
Cecilia
Reyes
Leuzinger6
–
n/a
n/a
–
n/a
n/a
–
n/a
n/a
Fiona M
Muldoon7
–
n/a
n/a
–
n/a
n/a
–
n/a
n/a
Note: Salary and bonus are compared against all employees of the Group. Benefits and pension are compared against all UK employees, reflecting the Group’s
policy that benefits are provided by reference to local market levels.
The average fee increase for 2022 was 3%. During 2021 and 2022 a number of the Non-Executive Directors joined additional Board Committees and therefore
received additional fees. Therefore, for these Non-Executive Directors, the year-on-year comparisons reflect their additional responsibilities and corresponding fees.
1 Adrian Cox was appointed Chief Executive Officer on 1 April 2021. The percentage change figures for 2021 reflect that his salary increased with effect from this date.
2 Sally Lake’s responsibilities as Finance Director were increased as set out earlier in this report. The percentage change figures for 2021 reflect that her salary was increased with effect
from 1 April to recognise the increased responsibilities.
3 David Roberts stepped down as Chair of the PLC Board, with effect 21 October 2022. Christine LaSala is acting Interim Chair of The Board plc and Chair of the Nomination Committee (and
stepping down as Chair of the Remuneration Committee and Senior independent Director), Robert Stuchbery is acting as Interim Senior independent Director and Nicola Hodson is acting as
Interim Remuneration Committee Chair with effect from 24 October 2022. The fees for the impacted Directors has been amended accordingly to reflect their new roles and responsibilities.
4 With effect from 24 October 2022 Robert Stuchbery stepped down as employee voice of the plc Board and Fiona Muldoon took on the role.
5 Rajesh Agrawal joined as a Non-Executive Director of the Remuneration Committee with effect 26 April 2022.
6 Cecilia Reyes Leuzinger joined as a Non-Executive Director of the plc Board, Audit & Risk Committee and Remuneration Committee with effect from 31 May 2022.
7 Fiona Muldoon joined as a Non-Executive Director of the plc Board and Audit & Risk Committee with effect from 31 May 2022.
8 Catherine M Woods stepped down as a Non-Executive Director of the PLC Board with effect from 25 March 2022.
Statement of Directors’ shareholdings and share interests ▪
For the year ending 31 December 2022 the Executive Directors had a shareholding requirement of 200% of salary. The CEO and
GFD have met their shareholding guidelines (see chart below). From 2023 the shareholding requirement for the CEO has
increased to 300% of salary.
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Shareholding versus holding requirement1353%203%Actual holdingHolding requirement 200%A CoxS Lake0%250%500%750%1000%1250%1500%
The table below shows the total number of Directors’ interests in shares as at 31 December 2022 or date of cessation as a
director. As at 27 February 2023, there have been no changes.
Conditional
shares not
subject to
performance
conditions
(deferred shares
and retention
shares)
Nil cost options
subject to
performance
conditions (LTIP
awards)
Options over
shares subject
to savings
contracts (SAYE)
Unexercised nil
cost options
Options
exercised in the
year
134,472
93,736
694,707
398,473
0
6,250
-
-
34,288
10,278
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Number of
shares owned
(including by
connected
persons)
1,126,545
133,281
23,000
0
1,824
53,085
16,251
98,914
88,073
42,698
0
26,086
Name
Adrian P Cox
Sally M Lake
Rajesh K Agrawal
Pierre-Olivier Desaulle
Nicola Hodson
Christine LaSala
A John Reizenstein
David L Roberts1
Robert A Stuchbery
Catherine M Woods2
Fiona M Muldoon3
Cecilia Reyes Leuzinger4
1 David L Roberts stepped down from The Board with effect from 21 October 2022.
2 Catherine M Woods stepped down from The Board at the conclusion of the 2022 AGM.
3 Fiona M Muldoon joined The Board with effect 31 May 2022.
4 Cecilia Reyes Leuzinger joined The Board with effect 31 May 2022.
CEO Pay versus performance
The following graph sets out Beazley’s 10 year total shareholder return performance to 31 December 2022, compared with the
FTSE All Share and FTSE 350 Non-Life Insurance indices. These indices were chosen as comparators as they comprise
companies listed on the same exchange and, in the case of the Non-Life Insurance index, the same sector as Beazley.
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Beazley | Annual report 2022
135
Value of £100 invested on 31 December 2011Total shareholder return performanceBeazleyFTSE All ShareFTSE 350 Non-Life Insurance12131415161718192021220100200300400500600700
Directors’ remuneration report
Annual remuneration report
continued
Year
2013
2014
2015
2016
2017
2018
2019
2020
2021 (D A Horton)1
2021 (A P Cox as CEO)
2022
CEO single figure of
total remuneration
£2,922,392
£3,745,989
£3,711,647
£3,715,146
£3,140,145
£1,524,600
£2,157,018
£631,890
£145,896
£2,100,534
£1,505,204
Annual variable award
(% of maximum
opportunity)
93%
74%
73%
70%
38%
19%
57%
–
–
75%
38%
Long term incentives
vesting (% of maximum
opportunity)
100%
100%
100%
100%
98%
41%
37%
6.6%
–
17.8%
17.5%
1 DA Horton stepped down as CEO on 31 March 2021 and was succeeded by AP Cox. The figures for AP Cox relate to the whole of 2021, including the portion of
the year when he was Chief Underwriting Officer.
Pay ratio data
The following table provides pay ratio data in respect of the CEO’s total remuneration compared to the 25th, median and 75th
percentile UK employees.
Financial year
2022
2021
2020
2019
Method
Option A
Option A
Option A
Option A
25th percentile pay ratio
28:1
39:1
13:1
42:1
Median pay ratio
16:1
21:1
7:1
25:1
75th percentile pay ratio
11:1
14:1
5:1
15:1
The employees used for the purposes of the table above were identified on a full-time equivalent basis as at 31 December
2022. Option A was chosen as it is considered to be the most accurate way of identifying the relevant employees. This captures
all relevant pay and benefits and aligns to how the single figure table is calculated.
The following table provides salary and total remuneration information in respect of the employees at each quartile for 2022.
Element of pay
Salary
Total remuneration
25th percentile employee
£41,700
£53,016
Median employee
£70,268
£93,883
75th percentile employee
£99,598
£142,226
Note: Salary and bonus are compared against all employees of the UK Group.
Pay ratios have decreased this year primarily as a result of group performance being lower than 2021, driven by a downturn in
investment performance due to mark to market losses in a volatile interest rate environment. Thus, reducing variable pay
outturns which are dependent on Group performance.
In-line with our pay-for-performance culture a significant portion of the CEO’s remuneration is variable and dependant on
performance. Therefore there is a direct correlation between Company performance, the CEO’s single figure and the pay ratios.
The Committee is comfortable that the pay ratios for 2022 align to the pay and progression policies for employees and, that the
link between individual awards, the delivery of strategy and the long-term performance of the company through our incentive
schemes drive behaviours consistent with company purpose, values and strategy and appropriately motivate and reward.
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Relative importance of spend on pay
The following table shows the relative spend on pay compared to distributions to shareholders:
2022
2021
Overall expenditure on pay
$302.5m
$287.0m
Shareholder distributions
(dividends in respect of the
year)
$110m
$105m
Directors’ share plan interests ▪
Details of share plan interests of those directors who served during the period are as follows:
Adrian P Cox
Deferred bonus:
LTIP (see notes):
SAYE:
Sally M Lake
Deferred bonus:
LTIP (see notes):
SAYE:
Outstanding
options at 1 Jan
20221
Options
granted Options exercised
Lapsed
unvested
54,160
603,107
4,202
24,840
309,854
6,250
89,132
216,464
0
72,326
127,962
0
8,820
21,266
4,202
3,430
6,848
0
0
103,598
0
0
32,495
0
Outstanding
options at 31
Dec 20222
134,472
694,707
0
93,736
398,473
6,250
Notes to share plan interests table
Deferred bonus
Deferred bonus awards are made in the form of conditional shares that normally vest three years after the date of
award.
Performance conditions: all awards are subject to NAVps performance, with 50% measured over a three year period
and 50% measured over a five year period. NAVps < RFR+7.5% p.a. equates to 0% vesting, NAVps = RFR+7.5% p.a.
equates to 10% vesting, NAVps = RFR+10% p.a. equates to 25% vesting, NAVps = or > RFR+15% p.a. equates to
100% vesting, with straight-line pro-rated vesting between these points.
LTIP awards
LTIP 2017 – 3/5 year
LTIP 2018 – 3/5 year
LTIP 2019 – 3/5 year
LTIP 2020 – 3/5 year
LTIP 2021 – 3/5 year
LTIP 2022 – 3/5 year
Awards were made on 8 February 2017 at a mid-market share price of 434.33p.
Awards expire in February 2027.
Awards were made on 13 February 2018 at a mid-market share price of 553.33p.
Awards expire in February 2028.
Awards were made on 12 February 2019 at a mid-market share price of 510.16p.
Awards expire in February 2029.
Awards were made on 11 February 2020 at a mid-market share price of 595.5p.
Awards expire in February 2030.
Awards were made on 10 February 2021 at a mid-market share price of 367.0p.
Awards expire in February 2031.
Awards were made on 15 February 2022 at a mid-market share price of 485.3p.
Awards expire in February 2032.
Share prices
The market price of Beazley ordinary shares at 31 December 2022 (the last trading day of the year) was 679.5p and the range
during the year was 376.4p to 679.5p.
Remuneration Committee
The Committee consists of only Non-Executive Directors and during the year the members were; Christine LaSala, Catherine M
Woods, Nicola Hodson, Cecilia Reyes Leuzinger, Rajesh K Agrawal and Robert A Stuchbery. The Board views each of the
Committee members as independent.
The Committee considers the individual remuneration packages of the CEO, Executive Directors and Executive Committee
members. It also has oversight of the salary and bonus awards of individuals outside the Executive Committee who either
directly report to Executive Committee members or who have basic salaries over £200,000, as well as the overall bonus pool
and total incentives paid by the Group. The terms of reference of the Committee are available on the company’s website. The
Committee met 8 times during the year. Further information on the key activities of the Committee for 2022 can be found within
the statement of corporate governance on page 87.
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Directors’ remuneration report
Annual remuneration report
continued
During the year the Committee was advised by remuneration consultants from Deloitte LLP. Total fees in relation to Executive
remuneration consulting were £105,000. Deloitte LLP also provided advice in relation to share schemes, tax, internal audit and
compliance support.
Deloitte LLP was appointed by the Committee. Deloitte LLP is a member of the remuneration consultants’ Group and as such
voluntarily operates under a code of conduct in relation to Executive remuneration consulting in the UK. The Committee agrees
each year the protocols under which Deloitte LLP provides advice, to support independence. The Committee is satisfied that the
advice received from Deloitte LLP has been objective and independent.
Input was also received by the committee during the year from the CEO, head of Culture & People, Company Secretary and Chief
Risk Officer. However, no individual plays a part in the determination of their own remuneration.
Engagement with the workforce
As part of the regular cycle, the Committee is informed of pay and employment conditions of wider employees in the Group and
takes these into account when determining the remuneration for Executive Directors.
Statement of shareholder voting
The voting outcomes of the 2019 remuneration policy and 2021 annual remuneration report and remuneration policy were as
follows:
2019 remuneration policy
2021 annual remuneration report
Votes for
373,357,955
434,012,961
% for
90.03%
89.49%
Votes against
41,349,712
50,960,274
% against
9.97%
10.51%
Total votes cast
414,707,667
484,973,235
Votes
withheld
(abstentions)
5,521
65,027
Annual general meeting
At the forthcoming annual general meeting to be held on 25 April 2023, a binding resolution will be proposed to approve the
Directors’ remuneration policy and an advisory resolution will be proposed to approve this annual remuneration report.
I am keen to encourage an ongoing dialogue with shareholders. Accordingly, if you would like to discuss any matter arising from
this report or remuneration issues generally, please email Christine Oldridge at christine.oldridge@beazley.com.
By order of The Board
Nicola Hodson
Interim Remuneration Committee Chair
12 March 2023
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Statement of Directors’ responsibilities
in respect of the annual report and financial statements
The Directors are responsible for preparing the annual
report and the Group financial statements in accordance
with applicable United Kingdom law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
directors have elected to prepare the Group and parent
company financial statements in accordance with UK adopted
International Financial Reporting Standards (IFRSs) in
conformity with the Companies Act 2006.
Under the Financial Conduct Authority’s Disclosure Guidance
and Transparency Rules, Group financial statements are
required to be prepared in accordance with UK adopted IFRSs
and the requirements of the Companies Act 2006.
Under company law the Directors must not approve the Group
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
company and of the profit or loss of the Group and the
company for that period.
In preparing these financial statements the Directors are
required to:
• select suitable accounting policies in accordance with IAS
8 Accounting Policies, Changes in Accounting Estimates
and Errors and then apply them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the Group’s financial
position and financial performance;
• in respect of the Group financial statements, state whether
UK adopted IFRSs and the requirements of the Companies
Act 2006 have been followed, subject to any material
departures disclosed and explained in the financial
statements;
• in respect of the parent company financial statements,
state whether IFRSs in conformity with the Companies Act
have been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern
basis unless it is appropriate to presume that the company
and the Group will not continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
company’s and Group’s transactions and disclose with
reasonable accuracy at any time the financial position of the
company and the Group and enable them to ensure that the
company and the Group financial statements comply with
Section 403 of the Companies Act 2006. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a strategic report, Directors’ report,
Directors’ remuneration report and corporate governance
statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Responsibility statement of the directors in respect of
the annual financial report
Each of the Directors, whose details can be found on pages
77 to 78, to the best of their knowledge confirm that:
• that the consolidated financial statements, prepared in
accordance with UK adopted IFRSs and the requirements
of the Companies Act 2006 give a true and fair view of the
assets, liabilities, financial position and profit of the parent
company and undertakings included in the consolidation
taken as a whole;
• that the annual report, including the strategic report and
the Directors' report, together includes a fair review of the
development and performance of the business and the
position of the company and undertakings included in the
consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
• we consider the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy.
C LaSala
Chair
S M Lake
Group Finance Director
12 March 2023
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Directors’ report
Principal activity
Beazley plc (registered number 09763575) is the ultimate
holding company for the Beazley Group, a global specialist risk
insurance and reinsurance business operating through: its
managed syndicates at Lloyd’s in the UK; Beazley Insurance
Company, Inc. and Beazley American Insurance Company,
Inc., both of which are admitted insurance carriers in the US;
and Beazley Insurance dac, a European insurance company in
Ireland.
Management report
The Directors’ report, together with the strategic report on
pages 1 to 71, serves as the management report for the
purpose of Disclosure, Guidance and Transparency Rule
4.1.8R.
Directors’ responsibilities
The statement of Directors’ responsibilities in respect of the
annual report and financial statements is set out on page
139.
Review of business
A more detailed review of the business for the year and a
summary of future developments are included in the
statement of the Chair, the Chief Executive Officer’s
statement and the financial review.
Results and dividends
The consolidated profit before taxation for the year ended 31
December 2022 amounted to $191.0m (2021: $369.2m).
The directors have approved an interim dividend of 13.5p
(2022: 12.9p) in March 2023.
Future business developments
Information relating to future business developments can be
found in the strategic report.
Going concern and viability statement
The financial review on page 58 contains details of the
financial position of the Group, its cash flows and its
borrowing facilities.
After reviewing the Group’s current and forecast solvency and
liquidity positions, the Directors have a reasonable
expectation that the Group has adequate resources to
continue in operational existence over a period of 12 months
from the date of this report. For this reason, The Board
considers it appropriate for the Group to continue to adopt the
going concern basis in preparing its accounts.
Further information on The Board's assessment of the Group
as a going concern is contained in note 1.2 to the financial
statements on page 167.
In accordance with the UK Corporate Governance Code (the
‘Code’), the directors have assessed the viability of the Group.
The viability statement, which supports the going concern
basis mentioned above, is included in the risk management
section on page 67.
Information to be disclosed under LR9.84R
Information on interest capitalised is shown in note 25 on
page 221. Details of long-term incentive schemes are
provided in the Directors’ remuneration report on page 111.
Details of the allotment for cash of equity securities made
during the period can be found on page 142.
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Equity raise
An allotment was made on 18 November 2022 otherwise than to the holders of the company’s equity shares in proportion to
their holdings of such equity shares and which was not specifically authorised by the company’s shareholders. The details of
the allotment are set out below in accordance with LR 9.8.4R(7) and the most recently published Pre-Emption Group Statement
of Principles (2022).
Transaction
details
In aggregate, the equity raise of 60,959,017 ordinary shares with a nominal value of £3,047,950.85 represented
approximately 9.99% of the company’s issued ordinary share capital.
Settlement for the New Ordinary Shares and Admission took place on or before 8.00 a.m. on 18 November 2022.
Use of proceeds
The proceeds will be used to support organic growth and provide growth capital to fund attractive underwriting
opportunities while maintaining a strong balance sheet that can withstand a range of stress scenarios.
Quantum of
proceeds
Discount
Allocations
The proceeds of the equity raise are not intended to be used for any acquisition or specified capital investment.
In aggregate, the equity raise represents gross proceeds of approximately £350 million and net proceeds of
approximately £340 million.
The Issue Price of 575 pence per share represents a discount of 8% to the closing share price of 625 pence per
share on 15 November 2022.
Soft pre-emption was adhered to in the allocations process. Management was involved in the allocations process,
which was carried out in compliance with the MIFID II Allocation requirements. Allocations made outside of soft pre-
emption were preferentially directed towards existing shareholders in excess of their pro rata, and wall-crossed
accounts.
Consultation
Retail investors
The joint bookrunners undertook a pre-launch wall-crossing process, including consultation with major shareholders,
to the extent reasonably practicable and permitted by law.
The equity raise included a Retail Offer, for a total of 529,036 Retail Offer Shares.
Retail investors, who participated in the Retail Offer, were able to do so at the same Issue Price as all other
investors participating in the Placing and Subscription.
The Retail Offer was made available to existing shareholders and new investors in the UK. Investors had the ability to
participate in this transaction through ISAs and SIPPs, as well as General Investment Accounts (GIAs). This
combination of participation routes meant that, to the extent practicable on the transaction timetable, eligible UK
retail investors (including certificated retail shareholders) had the opportunity to participate in the equity raise
alongside institutional investors.
Allocation preference was given to existing shareholders pursuant to the Retail Offer in keeping with the principle of
soft pre-emption.
Research and development
In the ordinary course of business, the Group develops new
products and services in each of its business divisions and
develops IT solutions to support the business requirements.
Auditor
Ernst & Young LLP (‘EY’) has indicated its willingness to
continue in office. Resolutions to reappoint EY as auditor of
the company and authorise the audit committee to determine
their remuneration will be proposed at the 2023 AGM.
Disclosure of information to auditor
Each of the directors in office at the date of approval of this
Directors’ report confirms that, so far as they are aware, there
is no relevant audit information of which the company’s
auditors are unaware; and each director has taken all the
steps that he or she ought to have taken as a director to
make himself or herself aware of any relevant audit
information and to establish that the company’s auditors are
aware of that information.
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Directors’ report continued
Directors
The Directors of the company who served during 2022 and/or
to the date of this report were as follows:
Adrian Peter Cox
Anthony Jonathan Reizenstein
Catherine Marie Woods
Celia Reyes Leuzinger
Christine LaSala
Clive Bannister
David Lawton Roberts
Fiona Margaret Muldoon
Nicola Hodson
Pierre-Oliver Desaulle
Rajesh Agrawal
Robert Arthur Stuchbery
Sally Michelle Lake
Chief Executive Officer
Non-Executive Director
Non-Executive Director
(resigned 25/03/2022)
Non-Executive Director
(appointed 31/05/2022)
Non-Executive Director
(until 21/10/2022) /
interim Non-Executive
Chair (appointed
21/10/2022)
Non-Executive Director/
Chair Designate
(appointed 08/02/2023)
Non-Executive Chair
(resigned 21/10/2022)
Non-Executive Director
(appointed 31/05/2022)
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Group Finance Director
The Board is complying with the provision on annual re-
election of all Directors in accordance with the Code. The
appointment and replacement of Directors is governed by the
company’s Articles of Association (the ‘Articles’), the Code,
Companies Act 2006 and related legislation. The Articles may
be amended by a special resolution of the shareholders.
Subject to the Articles, Companies Act 2006 and any
directions given by special resolution, the business of the
company will be managed by The Board which may exercise all
the powers of the company.
Further information can be found in the Statement of
Corporate Governance on page 75.
Directors’ indemnities
The company maintains Directors’ and Officers’ Liability
insurance which gives appropriate cover for any legal action
taken against its Directors. The company has also granted
indemnities to each of its Directors to the extent permitted by
law in respect of costs of defending claims against them and
third-party liabilities. A copy of the indemnity is available for
inspection at the company’s registered office during normal
business hours. These provisions, deemed to be ‘qualifying
third-party indemnity provisions’ pursuant to section 234 of
the Companies Act 2006, were in force during the year ended
31 December 2022 for the benefit of the then Directors of the
company and remain in force as at the date of this report for
the current Directors of the company.
Conflicts of interest
The Board has established procedures for the management of
potential and actual conflicts of interest of the Directors in
accordance with the Companies Act 2006 and the Articles of
Association. All Directors are responsible for notifying the
Company Secretary and declaring at each Board meeting any
new actual or potential conflicts of interest. The Directors are
also responsible for declaring any existing conflicts of interest
which are relevant to transactions to be discussed at The
Board meeting. None of the Directors had any significant
contract with the company or with any Group undertaking
during the year.
Substantial shareholdings
As at 28 February 2023, The Board had been notified of, or
was otherwise aware of, the following shareholdings of 3% or
more of the company’s issued ordinary share capital:
Fidelity Management & Research
MFS Investment Management
Wellington Management
BlackRock
Vanguard Group
Platinum Asset Management
Janus Henderson Investors
Number of
ordinary shares
61,369,569
50,528,997
46,244,628
33,600,828
28,252,117
23,134,491
21,558,731
%
9.1
7.5
6.9
5.0
4.2
3.5
3.2
Note: All interests disclosed to the company in accordance
with DTRs can be found in the news and alerts section of our
corporate website: www.beazley.com.
Directors’ interests
The Directors’ interests in shares of the company, for those
Directors in office at the end of the year, including any
interests of a connected person (as defined in the Disclosure,
Guidance and Transparency Rules of the UK’s Financial
Conduct Authority), can be found in the Directors’
Remuneration report on page 111. Details of Directors’
service contracts are given in the Directors’ remuneration
report. The Directors’ biographies are set out in The Board of
Directors’ section of the annual report on pages 77 to 78.
Share capital
As at 31 December 2022, the company’s issued share capital
comprised 671,204,020 ordinary shares, each with a nominal
value of 5p and representing 100% of the total issued share
capital. Details of the movement in ordinary share capital
during the year can be found in note 21 on page 206. There
are no restrictions on the transfer of shares in the company
other than as set out in the Articles of Association and certain
restrictions which may from time to time be imposed by law
and regulations.
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Authority to purchase own shares
On 25 March 2022 shareholders approved an authority, which
will expire on 25 June 2023 or, if earlier, at the conclusion of
the 2023 Annual General Meeting (AGM), for the company to
repurchase up to a maximum of 60,924,299 ordinary shares
(representing approximately 10% of the company’s issued
ordinary share capital at that time).
The Board continues to regard the ability to repurchase issued
shares in suitable circumstances as an important part of the
financial management of the company. A resolution will be
proposed at the 2023 AGM to renew the authority for the
company to purchase its own share capital up to the specified
limits for a further year. More detail of this proposal is given in
the notice of AGM.
Significant agreements – change of control
Details of an agreement to which the company is party that
alters on change of control of the company following a
takeover bid are as follows.
In 2021 we renewed the $450m multi-currency standby letter
of credit and revolving credit facility. Key terms remain
unchanged. The agreement, which is between the company,
other members of the Group and various banks, provides that
if any person or groups of persons acting in concert gains
control of the company or another group obligor, then: (a) the
banks are thereafter not obliged to participate in any new
revolving advances or issue any letter of credit; and (b) the
facility agent may:
(i)
require the Group obligors to repay outstanding revolving
advances made to them together with accrued interest;
and
(ii) ensure that the liabilities under letters of credit are
reduced to zero or otherwise secured by providing cash
collateral in an amount equal to the maximum actual and
contingent liabilities under such letters of credit.
Furthermore, the facility agreement includes a covenant that
no group obligor (other than a wholly owned subsidiary) will,
without prior consent of the banks, amalgamate, merge
(within the meaning of generally accepted accounting
principles in the UK), consolidate or combine by scheme of
arrangement or otherwise with any other corporation or
person. If this covenant should be breached without prior
consent, then the facility agent may: (a) require the Group
obligors to repay outstanding revolving advances made to
them together with accrued interest; (b) ensure that the
liabilities under letters of credit are reduced to zero or
otherwise secured by providing cash collateral in an amount
equal to the maximum actual and contingent liabilities under
such letters of credit; (c) declare that any unutilised portion of
the facility is cancelled; and (d) give a notice of non-extension
to Lloyd’s in respect of any letter of credit.
Annual general meeting
The AGM of the company will be held on 25 April 2023 at
14.30. The notice of the AGM details the business to be put
to shareholders.
Corporate, social and environmental responsibility
The company’s corporate, social and environmental activities
are set out in the statement of the Chair on page 8 and the
Responsible Business section on page 21. During 2022,
Beazley and employees donated over $470,000 to charities,
details of which can be found in the Responsible Business
section.
Employee engagement
We are committed to employee involvement across the
business. We place great emphasis on open and regular
communication, to ensure employees are well informed of
Beazley’s performance and strategy. Active employee
engagement has always been a priority and has become
increasingly important due to our activity based working
policies which allow colleagues to work flexibly and as many of
our teams are based across different locations. During the
year, regular all-employee meetings, Q&As with senior
management and smaller meetings between leadership and
groups of employees have taken place both virtually and in
person.
The Chief Executive Officer provides a periodic general
business update to all employees by email. He also
communicates the key focus areas of the Executive
Committee via a regular podcast and other areas of interest
via regular virtual meetings. The intranet is accessible by all
employees and is a useful source of company information.
During 2022, all employees were invited to participate in
surveys on the business and its culture and on Beazley’s
leadership. The key findings from these surveys and actions to
address these findings are discussed by The Board. Insight
gained through various employee networks and via the day-to-
day engagement of senior management with the workforce
was also shared with The Board. In addition, employee views
have been obtained by the Non-Executive Director nominated
by The Board, this was Bob Stuchbery, for much of 2022 and
was replaced by Fiona Muldoon in November 2022.
Throughout the year, Bob and Fiona have attended a variety of
forums with employees to get direct feedback. Further
information on our employee engagement activities and how
feedback has informed decisions can be found in the
Stakeholder engagement report on page 50.
Employees are able to share financially in Beazley’s success.
Annual bonus payments may be awarded and relate to the
performance of the company, as well as an individual’s own
performance. The company operates a Save As You Earn
scheme to support share ownership amongst employees, and
a long-term incentive plan is offered to senior employees. A
share incentive plan is also to be put to shareholders at the
2023 annual general meeting.
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Directors’ report continued
Inclusion & diversity
Information concerning inclusion and diversity, including
statistics on the number of women in senior leadership roles,
can be found in the Responsible Business section on page 21
and in the Nomination Committee report on page 100.
A key part of Beazley’s strategy is to attract and nurture
talented colleagues who champion diversity of thought. We are
committed to providing equal opportunities irrespective of age,
disability, gender reassignment, marital status, pregnancy and
maternity, race, nationality or ethnic origin, religion or religious
beliefs, sexuality, socio-economic group or working pattern.
We hire people with wide perspectives,
leading to a more dynamic, innovative, and responsive
organisation in touch with the changing world and
marketplace. All applications for employment are objectively
assessed on the basis of the skills and aptitudes of the
applicant in light of the requirements of the role.
It is the policy of the Group that the training, career
development and promotion of disabled persons should, so
far as possible, be identical to that of other employees. In the
event an employee becomes disabled, every effort is made to
ensure that their employment with the Group continues, and
that appropriate support is arranged.
Political donations policy
It is the policy of the Beazley Group that no political donations
are made for and on behalf of the company and its
subsidiaries.
Carbon emissions
The following data is set out to demonstrate compliance with
the Streamlined Energy and Carbon Reporting (SECR)
requirements set out by HM UK Government in the Companies
Act 2006 (strategic report and directors’ report) Regulations
2013 and the Companies (directors’ report) and Limited
Liability Partnerships (energy and carbon report) Regulations
2018.
Methodology
The scope of this reporting differs from the carbon emissions
reported in the metrics section of the TCFD report, in that it
only covers UK-based operations. Global comparisons for
overall energy consumption are also provided for reference.
Data has been collated from a number of sources. For all
travel including car hire, hotels, rail, air and taxi use data has
been provided from our booking agent partners, or through
invoices on our accountancy system. Energy data and
company car details have been sourced from utility bills and
lease agreements, respectively.
Company cars
Fuel economy data has been based on the worst-case fuel
consumption figures cited by the manufacturer. This has
enabled the kWh energy associated with the car to be
calculated. There were seven company cars used across
2022 of which six are current at the end of 2022. Five of
these cars are either hybrids or electric.
Electricity for utilities
UK locations cover our London and Birmingham offices.
Europe locations cover our offices in Dublin, Barcelona, Paris
and Munich. Rest of the World locations cover our presence in
Montreal. US locations cover our offices in New York,
Farmington, Miami, Chicago, Atlanta, Boston, San Francisco,
and Dallas.
Car hire
There was no UK car hire in 2022.
Exclusions
Energy consumption from business travel, with the exception
of company cars, has not been included as Beazley does not
operate the transport in question.
Energy report
Beazley has a total of 2,019.70 FTE staff (including
contractors) as at 1 January 2023, of which are considered in
scope for the global energy consumption reported in the
tables below. Within the UK, Beazley has 1,048.85 FTE
(including contractors). This is the equivalent of 49.5% of our
global workforce.
Company cars
The total estimated kWh equivalent for fuel consumption in
2022 is 38,644.28 kWh.
Energy for heating, cooling and small power
There was no direct gas use within Beazley operations in
2022, with landlords providing heating to our offices.
Energy consumption kWh
2020
2021
Electricity
UK
Europe
USA
Total
1,950,688.05 1,456,414.91
362,193.00
2022
401,331.67
242,077.00
2,708,550.00 2,708,550.00 2,607,072.00
5,038,377.26 4,527,158.00 3,250,481.00
379,139.21
We were able to procure energy from certified renewable
sources for the following locations in 2022:
Office location
London
Dublin
Barcelona
Paris
Energy
consumption
(kWh)
323,420.17
124,496.26
51,892.00
39,410.00
Car hire
There was no in scope energy use related to car hire in 2022.
Globally energy use from car hire was estimated to be
36,130.67.
Overall energy consumption
Within the scope of the SECR, total energy consumption within
the UK was 401,331.67 kWh. This equates to 382.64kWh/
FTE down from 1,640.43kWh/FTE in 2021. This reduction is
primarily due to reduction in office space Beazley held in
2022, when compared to 2021 where there was a period of
cross over between the Group's old and new London offices.
Global energy arising from electricity use from Beazley’s
operations within the same scope was 3,250,481kWh, which
equates to 1,778.79 kWh/FTE.
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For carbon emissions associated with Beazley's operations in
the UK, please see pages 46 and 47 of this report for Scope
1 and Scope 2 emissions.
noted that further energy savings will be achieved through
reducing our business travel, as we are using online
alternatives to undertake many of our business meetings.
Target for 2023
Beazley has set itself a target to reduce normalised CO2
emissions by 50% in 2022. This is against a baseline year of
2019. This target does not allow for the offsetting of these
emissions through recognised schemes. In 2022, our energy
savings will be driven by continued efficiency of our building
operations. Although out of scope for SECR, it should be
Financial instruments
Derivatives are used to manage the Group’s capital position,
details of these derivatives are contained in note 17 to the
financial statements. Disclosure with respect to financial risk
is included in the Risk management and compliance report on
page 67 and in note 2 to the financial statements.
Matters disclosed in the strategic report
The Directors consider the following matters of strategic importance and have chosen to disclose these in the strategic report
to the accounts as permitted by section 414C (11) of the Companies Act 2006:
• Future business developments
• Employee engagement
• How the directors have had regard to the need to foster business
relationships with suppliers, customers and others, and the impact of this
regard on decision making
Chief Executive Officer's statement (page 11)
Chief Underwriting Officer's report (page 13)
Section 172 statement (page 55)
Section 172 statement (page 55)
• Carbon emissions and Streamlined Energy and Carbon Reporting
Responsible business (page 21)
Matters disclosed elsewhere within the annual report
The following matters are disclosed in the notes to the financial statements:
• Financial risk management objectives and policies including credit risk,
liquidity risk
• Details of hedge accounting and derivative financial instruments
• Details of any overseas branches
• Recent developments and post balance sheet events
Note 2 (page 176)
Note 1 (page 163)
Note 31 (page 229)
Note 34 (page 231)
C P Oldridge
Company Secretary
22 Bishopsgate
London
EC2N 4BQ
12 March 2023
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Independent auditor’s report
to the members of Beazley plc
Opinion
In our opinion:
• Beazley plc’s Group financial statements and parent company financial statements (the “financial statements”) give a true
and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2022 and of the Group’s
profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
• the parent company financial statements have been properly prepared in accordance with UK adopted international
accounting standards as applied in accordance with section 408 of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Beazley plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2022 which comprise:
Group
Consolidated statement of profit or loss for the year then ended
31 December 2022
Statement of comprehensive income for the year then ended
Statement of changes in equity for the year then ended
Statement of financial position as at 31 December 2022
Statement of cash flows for the year then ended
Related notes 1 to 34 to the financial statements, including a
summary of significant accounting policies (except for note 2
where it is marked as unaudited).
Parent company
Statement of comprehensive income for the year ended 31 December 2022
Statement of changes in equity for the year then ended
Statement of financial position as at 31 December 2022
Statement of cash flows for the year then ended
Related notes 1 to 34 to the financial statements including a summary of
significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international
accounting standards and as regards the parent company financial statements, as applied in accordance with section 408 of
the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We are independent of the Group and parent in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and we
remain independent of the Group and the parent company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and parent
company’s ability to continue to adopt the going concern basis of accounting involved evaluating the reasonableness of the
Group’s going concern assessment. Beazley’s going concern assessment period used was 12 months from the date the
financial statements were authorised for issue. We verified that The Board approved the forecasts used in management’s
analysis and determined whether management’s going concern period was appropriate. With support from our actuaries, we
challenged and independently stressed the assumptions used by Beazley to develop their forecast, which included liquidity
projections and reviewed the clerical accuracy of Beazley’s base case, as well as assessed the accuracy of management’s
historic forecasts to actual performance. Furthermore, management assessed the Group’s solvency and liquidity position if a
natural catastrophe or cyber catastrophe occurred, including potential mitigation actions that management could take to
maintain viability. We evaluated the reasonableness and timeliness of these mitigating actions that management could put in
place.
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Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group and parent company’s ability to continue as a going concern
for a period of twelve months from the date the financial statements are authorised for issue.
In relation to the Group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to
the Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of two components ((Syndicate 2623 and
Beazley Insurance Company Inc (‘BICI’)) and audit procedures on specific balances for a further six
components (Syndicate 3623, Beazley Insurance dac (‘ BIdac’), Beazley Furlonge Limited (‘BFL’), Beazley
Management Limited (‘BML’), Beazley plc and Beazley Services USA Inc. (‘BUSA’)) and other audit
procedures on group wide processes.
• The components where we performed full or specific audit procedures accounted for 95% of Profit before
tax, 96% of Revenue and 98% of Total assets.
Key Audit
Matters
• Valuation of gross Insurance claims Liabilities and reinsurers’ share of Incurred but not reported (‘IBNR’)
– Actuarial assumptions used in estimating gross IBNR and reinsurers’ share of IBNR, and
– Data
• Measurement of estimated premium income
• Valuation of level 3 financial investments
Materiality
• Overall group materiality of $11.3m (2021: $11.2m) which represents 5% of pre-tax profits on a 5-year
average adjusted for Covid-19 losses and the gain on sale of the Beazley Benefit business. (2021: 5% of
pre-tax profits on a 5-year average adjusted for Covid- 19 losses and the gain on sale of the Beazley
Benefit business).
An overview of the scope of the parent company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial
statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls,
changes to the business environment and other factors when assessing the level of work to be performed at each reporting
component.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, of the 34 legal entities within the Group, we selected eight entities
covering components within UK, Ireland and US which represent the material business units within the Group. Of these entities,
we designated two as full scope components (Syndicate 2623 and Beazley Insurance Company Inc(and six as specific scope
components (Syndicate 3623, Beazley Services USA Inc., Beazley Insurance dac ’), Beazley Furlonge Limited, Beazley
Management Limited and Beazley plc).
Details of the eight reporting components are set out below:
Component
Syndicate 2623
BICI
Syndicate 3623
Beazley Services USA Inc
BIDAC
Beazley Furlonge Limited
Beazley Management Limited
Beazley Plc
Scope
Full
Full
Specific
Specific
Specific
Specific
Specific
Specific
Auditor
EY Component Team (UK)
EY Component Team (New York)
EY Component Team (UK)
EY Component Team (New York)
EY Primary Team
EY Primary Team
EY Primary Team & EY Component Team
(New York)
EY Primary Team
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Auditors’ report continued
In addition to the above we perform specific audit procedures over Group wide processes.
Of the eight components selected, we performed an audit of the complete financial information of two components (“full scope
components”) which were selected based on their size or risk characteristics. For the remaining six components (“specific
scope components”), we performed audit procedures on specific accounts within that component that we considered had the
potential for the greatest impact on the significant accounts in the financial statements either because of the size of these
accounts or their risk profile. For group-wide processes we performed audit procedures over the specific accounts which
consist of IBNR and Reinsurers’ share of IBNR, Taxation, Cash and cash equivalents, Share based payments, Right of use
assets, Lease liabilities, Financial assets and Intangible assets (indefinite life).
The reporting components where we performed audit procedures accounted for 95% (2021:97%) of the Group’s Profit before
tax, 96% (2021: 96%) of the Group’s Revenue and 98% (2021: 99%) of the Group’s Total assets. For the current year, the full
scope components contributed 87% (2021: 90%) of the Group’s Profit before tax, 89% (2021: 90%) of the Group’s Gross
Written Premium and 7% (2021: 10%) of the Group’s Total assets. The specific scope component contributed 8% (2021: 7%) of
the Group’s Profit before tax, 7% (2021: 6%) of the Group’s Gross Written Premium and 91% (2021: 89%) of the Group’s Total
assets. The audit scope of these components may not have included testing of all significant accounts of the component but
will have contributed to the coverage of significant accounts tested for the Group.
Of the remaining 26 legal entities that together represent 5% (2021: 3%) of the Group’s Profit before Income Tax, none are
individually greater than 4% (2021: 4%) of the Group’s Gross Written Premium, none are individually greater than 2% (2021: 1%)
of the Group’s total assets. For these components, we performed other procedures, including analytical review, testing of
significant balances, review of consolidation journals and intercompany eliminations to respond to any potential risks of
material misstatement to the Group financial statements.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each
of the components by us, as the primary audit engagement team, or by component auditors from the UK and other EY global
network firms operating under our instruction.
The primary audit team provided detailed audit instructions to the component team which included guidance on areas of focus,
including the relevant risks of material misstatement detailed above, and set out the information required to be reported to the
primary audit team.
For three specific scope components (BIDAC, Beazley Furlonge Limited, Beazley Management Limited) and all group-wide
processes, all audit procedures were performed directly by the primary audit team whilst the other full scope components (BICI
and Syndicate 2623) and specific scope component (Beazley Services USA Inc and Syndicate 3623) were audited by
component audit teams in the United States of America and United Kingdom respectively. For the companies where the work
was performed by component auditors, the primary audit team was responsible for the scope and direction of the audit process
and the primary audit team determined the appropriate level of involvement to enable us to determine that sufficient audit
evidence has been obtained as a basis for our opinion on the Group as a whole.
The Senior Statutory Auditor, Stuart Wilson maintained oversight of the UK and US component teams through a programme of
meetings (both in person and virtually) with management of each significant component and held regular team interactions with
the component teams during various stages of the audit.
The work performed on the components, together with the additional procedures performed at Group level, gave us appropriate
evidence for our opinion on the Group financial statements.
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Climate change
There has been increasing interest from stakeholders as to how climate change will impact Beazley. The Group has determined
that the most significant future impacts from climate change on their operations will be from underwriting portfolio
management, exposure risk appetite management and investment portfolio management. These are explained on pages 29 to
49 in the required Task Force for Climate related Financial Disclosures, which form part of the “Other information,” rather than
the audited financial statements as explained below. Our procedures on these disclosures therefore consisted solely of
considering whether they are materially inconsistent with the financial statements, or our knowledge obtained in the course of
the audit or otherwise appear to be materially misstated, in line with our responsibilities on ‘Other information’.
As explained in the Basis of Preparation note governmental and societal responses to climate change risks are still developing,
and are interdependent upon each other, and consequently financial statements cannot capture all possible future outcomes as
these are not yet known. The degree of certainty of these changes may also mean that they cannot be taken into account
when determining asset and liability valuations and timing of future cash flows under the requirements of International Financial
Reporting Standards. As explained in note 1, management believe that reasonably possible changes arising from climate risks
would not have a material impact on asset and liability valuations at the year-end date.
Our audit effort in considering climate change was focused on validating this assertion, through considering the potential
effects of climate risks on asset values and associated disclosures where values are determined through modelling future cash
flows. We also challenged the Directors’ considerations of climate change in their assessment of going concern and viability
and associated disclosures. Based on our work we have not identified the impact of climate change on the financial statements
to be a key audit matter or to impact a key audit matter.
Whilst the Group have stated their commitment to the aspirations of the Paris Agreement to achieve net zero emissions by
2050, the Group are currently unable to determine the full future economic impact on their business model, operational plans
and customers to achieve this and therefore as set out above the potential impacts are not fully incorporated in these financial
statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
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Auditors’ report continued
Key observations
communicated to the Audit
and Risk Committee
Our response to the risk
Risk
Valuation of Gross Insurance claims Liabilities of $7,382.5m and reinsurers’ share of IBNR of $2,066.8m. (PY comparative
Gross: $6,399.1m and reinsurers’ share of IBNR: $1,458.0m)
Refer to the Audit and Risk Committee Report (page 94); Accounting policies (pages 168 and 170); and Note 24 of the
Consolidated Financial Statements (pages 211 to 220).
One of the most significant financial statement risk areas from both a business and an audit perspective is the valuation and
adequacy of the claims liabilities held by the Group. Gross claims liabilities, and the related reinsurance on IBNR are
inherently uncertain and subjective by nature and therefore are more susceptible to fraud or error than other financial
statement balances. A small manipulation of an assumption could have a significant impact on the result for the year. This
could lead to insurance liabilities not falling within a reasonable range of estimates, resulting in a misstatement in the
financial statements. Additionally, the valuation process is conditional upon the accuracy and completeness of the data.
We have split the risk relating to the valuation of insurance liabilities into the following component parts:
• Actuarial assumptions used in estimating gross IBNR and reinsurers’ share of IBNR; and
• Data
The assumptions used to develop
the IBNR reserves, which make up
a significant component of the
insurance liabilities (gross and
reinsurers’ share on IBNR), involve
a significant degree of judgement.
As a result we focused on this area
as the valuation can be materially
impacted by various factors
including
• The risk of inappropriate
assumptions used in
determining gross IBNR and
reinsurers’ share of IBNR,
especially on:
◦ Newer or growing classes of
effectiveness of key controls over management’s process in
respect of the valuation of gross IBNR and reinsurers’ share
of IBNR including the setting and updating of actuarial
assumptions and the reinsurance netting down process to
calculate the reinsurers’ share of IBNR from the gross IBNR.
• Assessed the reserving methodology on a gross basis and net
of reinsurers’ share of IBNR. This also involved comparing the
Group’s reserving methodology with industry practice.
We determined that the
actuarial assumptions
as a whole, which are
used by management
are reasonable based
on our analysis of the
experience to date,
industry practice and
the financial and
regulatory
requirements. We
therefore concluded
that IBNR reserves lie
within a reasonable
range of possible
outcomes.
To obtain sufficient audit evidence to conclude on the
appropriateness of actuarial assumptions, we engaged our
actuaries as part of our audit team and performed the following
procedures:
• Obtained an understanding and tested the design
• Performed independent re-projections of IBNR applying our
own assumptions, across all classes of business for
attritional claims on a net of reinsurance and gross basis and
compared these to management’s results as at 31 December
2022.
business, due to reliance on expert
judgement in management’s
estimates due to the limited
historical data available and
limitations in use of market data;
and
◦ Classes subject to changing claims
environment or trends such as
Cyber, due to greater reliance on
expert judgement in management’s
estimates due to limited relevance
of historical data to form a view on
future claim development.
• The risk that IBNR loss reserve
estimates in respect of
catastrophe and large claims
losses are insufficient due to the
size and extent of these losses
being uncertain. The areas we
consider as key areas of
judgement include the tail
development and consistency of
reserves specifically on reserving
classes where prior year
deteriorations are seen,
premium rate increases are
assumed, and inflationary
trends, including social inflation,
are experienced.
• Assessed whether the assumptions, such as inflation, applied
to key areas of uncertainty were appropriate based on our
knowledge of the Group, industry practice and regulatory and
financial reporting requirements. As part of our re-projections
of the net and gross IBNR, we have formed an independent
view of the additional claims cost arising from the current
economic inflationary environment.
• Compared premium rate increases against industry
benchmarks and held discussions with management’s
underwriting and actuarial teams to understand any variances
seen. Additionally, we reviewed evidence of renewals to verify
the cause of rate increases which included determining the
reasonableness of the factors used to convert price changes
to rate increases.
• Benchmarking quantum of catastrophe losses, large losses,
assumptions, and rates used in inherently uncertain classes
and new growing classes, against other comparable industry
participants to challenge and assess the reserving
assumptions.
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Risk
Data
The valuation of insurance
liabilities depends on complete
and accurate data used in the
actuarial process as this data is
used to form expectations about
future claims.
Measurement of estimated
premium within Gross Written
Premium income (Gross Written
Premium $5,268.7m, PY
comparative $4,618.9m)
Refer to the Audit and Risk
Committee Report (page 94) and
Accounting policies (pages 168 and
169).
For certain contracts, premium is
initially recognised based on
estimates of ultimate premium.
This occurs where pricing is based
on variables which are not known
with certainty at the point of
binding the policy. Subsequent
adjustments to those estimates
arise as updated information
relating to those pricing variables
becomes available and are
recorded in the period in which
they are determined. These
estimates are judgemental and
therefore could result in
misstatements of revenue
recognised in the financial
statements.
Key observations
communicated to the Audit
and Risk Committee
We determined based
on our audit work that
the data used for the
actuarial model inputs
was materially
complete and accurate.
Based on the results of
the procedures
performed we
concluded that
premium estimates had
been recorded
appropriately.
Our response to the risk
To obtain sufficient audit evidence to assess the integrity of
premiums, paid and outstanding claims data used to determine
the gross and net of reinsurance reserves, we performed the
following procedures:
• Obtained an understanding of the process and tested the
design and operating effectiveness of key controls over
management’s data collection, extraction, and validation
process.
• Tested the completeness and accuracy of the claims,
reinsurance programme and premium data used within the
reserving process by reconciling the data used in the actuarial
projections to the underlying policy administration,
reinsurance, and finance systems.
• For a sample of paid and outstanding claims we corroborated
to underlying supporting evidence. For paid claims this
included authorisation requests and bank statements. For
claims outstanding we obtained an understanding of
management’s process of setting claims reserves and tested
the design and operating effectiveness of key controls within
the claim outstanding process. For a sample of outstanding
claims, we held discussions with claims handlers to further
understand the background of the claims and assess the
reasonableness of the assumptions made in setting the
reserve. We also obtained supporting evidence, where
relevant, including lawyer or defence counsel reports provided
by third parties to corroborate the year end balances.
• Additionally, for claims outstanding we assessed the
consistency in reserving methodology used in the current year
compared to the methodology used in previous years for
similar claims.
Our procedures included:
• Obtaining an understanding of the process and testing the
design and operating effectiveness of key controls, including
the monitoring of estimated premium income.
• Performing independent re-projections of ultimate premium
per underwriting year for the 2021 and prior underwriting
years where ultimate premiums are booked, applying our own
assumptions and comparing these to the Group’s booked
ultimate premium on a class of business including distribution
channel basis. Where there were significant variances, we
challenged management’s assumptions used for bias and
consistency in approach from prior year.
• For the data used in our independent re-projections we
corroborated premium data to underlying policy and finance
systems in order to test the completeness and accuracy of
this data set. This was performed through testing of key
reconciliations to external sources such as external service
organisations reports.
• For a sample of policy estimates in respect of the 2022
underwriting year, we corroborated the estimated premium for
polices such as binders and inward reinsurance to supporting
evidence such as signed slips. Additionally, to corroborate
estimates, including for coverholder business, where similar
policies and binders have been written previously, we
performed back testing of historical estimated premium
income compared to actual premium signed.
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Auditors’ report continued
Key observations
communicated to the Audit
and Risk Committee
Based on our
procedures performed
we were satisfied that
the valuations of illiquid
credit asset funds were
reasonable.
In respect of the
syndicate loans, we
were satisfied the
carrying value was not
materially different to
our own valuation.
Our response to the risk
To obtain sufficient audit evidence to conclude on the
appropriateness of valuation of level 3 investments, we
performed the following procedures for a sample of investments:
• Obtained an understanding of the valuation process and
tested the design effectiveness of key controls.
• Obtained net assets valuation (‘NAV’) statements provided by
third party administrators in respect of all investments and
compared these to management’s valuations.
• Assessed management’s valuations by performing
independent back testing of recent realisations, to confirm
that NAV is an appropriate proxy for fair value.
• Obtained the most recent audited financial statements for
each fund and inspected liquidity and going concern
disclosures for indication of impairment. Furthermore, we
inspected the relevant accounting policies to confirm that the
underlying investments are being held at fair value to support
the NAV being a suitable proxy for fair value.
• Performed retrospective testing to establish historic
consistency between the booked and final audited valuation
positions in the underlying funds. This involved an analysis to
establish any trends, patterns, conditions, or discrepancies
allowing challenge to management’s latest valuation.
• Assessed investment carrying values for possible material
movements since the latest asset valuation by obtaining
confirmation of the investment managers latest percentage
change NAV estimates, where available, and inquire if they
are aware of any indications of impairment since the latest
valuation date.
• With support from our EY valuation specialists, we performed
an independent valuation of the syndicate loans.
Risk
Valuation of level 3 investments
($255.4m, PY comparative
$315.8m)
Refer to the Audit and Risk
Committee Report (page 94);
Accounting policies (page 168 and
172) and Note 16 of the
Consolidated Financial Statements
(pages 199 to 204).
Investments in level 3 assets
predominately comprise illiquid
credit asset funds managed by
third party managers (generally
closed end limited partnerships or
open-ended funds). The
investments themselves are in
many cases private and unquoted.
These assets are inherently harder
to value due to the inability to
obtain a market price of these
assets as at the balance sheet
date. Therefore, there is judgement
in both deriving the price and the
timeliness of receiving the
information from the third-party
managers, either of which could
result in misstatements of the
value recognised in the financial
statements. Additionally, Beazley
holds syndicate loans which are
funds provided by Beazley’s group
syndicates to the Central Funds at
Lloyd’s in respect of the 2019 and
2020 underwriting years.
Observable inputs are not readily
available for the valuation of
Syndicate loans and so
management use models with
other inputs to estimate their
value. We consider that the key
risks on the valuation of Syndicate
loans relates to (i) the
assumptions used, as these are
largely based on non-observable
inputs (ii) the appropriateness of
the valuation methodology applied
to derive the fair value.
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Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined materiality for the Group to be $11.3 million (2021: $11.2 million), which is 5% of pre-tax profits on a 5-year
average adjusted for Covid-19 losses ($340m) and the gain on sale of the Beazley Benefit business ($55.4m) (2021: 5% of pre-
tax profits on a 5-year average adjusted for Covid-19 losses and the gain on sale of the Beazley Benefit business). This
materiality basis is in line with our approach taken in the prior year. We considered that adjusted pre-tax profits is the most
relevant performance measure used by investors, regulators and other stakeholders when assessing the Group. Given the
nature of risks underwritten by Beazley, we believe the use of a five-year average profit is appropriate, as the profitability of the
Group is expected to fluctuate from period to period. Despite this we believe that an additional adjustment for COVID losses is
also appropriate given its unprecedented nature, which would not normally be expected in such a five-year time horizon.
We determined materiality for the Parent Company to be $16.4 million (2021: $10.4 million), which is 1% (2021: 1%) of net
assets. The Parent company primarily holds the investment in Group entities and, therefore, net assets is considered to be the
key focus for users of the financial statements.
We calculated materiality at the planning stage of the audit and then during the course of our audit, we reassessed initial
materiality at year end based on actual 2022 with no change as a result.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 50% (2021: 50%) of our planning materiality, namely $5.6m (2021: $5.6m).
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is
based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement
at that component. In the current year, the range of performance materiality allocated to components was $5.6m to $1.2m
(2021: $5.6m to $1.2m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of
$0.6m (2021: $0.6m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 232, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within
the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
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Auditors’ report continued
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group and company’s compliance with the provisions of the UK Corporate Governance
Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 140.
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the
period is appropriate set out on page 70;
• Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and
meets its liabilities set out on page 70;
• Directors’ statement on fair, balanced and understandable set out on page 139;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 67;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems
set out on page 98; and;
• The section describing the work of the Audit and Risk Committee set out on pages 91 to 99.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement out on page 139, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
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Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of
the company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that
the most significant are permissions and supervisory requirements of the Central Bank of Ireland (‘CBI’), Lloyd’s, Prudential
Regulation Authority (‘PRA’), the Financial Conduct Authority (‘FCA’), state of Connecticut Insurance Department and the UK
Listing Authority (‘UKLA’).
• We understood how Beazley plc is complying with those frameworks by making enquiries of management, internal audit and
those responsible for legal and compliance matters. We also reviewed correspondence between the Group and regulatory
bodies, reviewed minutes of the Executive Committee, Risk and Regulatory Committee and attended the Audit and Risk
Committees and gained an understanding of the Group’s approach to governance demonstrated by The Board’s approval of
the Group’s governance framework.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might
occur by occur by considering the controls that the Group has established to address risks identified by the entity, or that
otherwise seek to prevent, deter or detect fraud. We also considered areas of significant judgement, including complex
transactions, performance targets, external pressures and the impact these have on the control environment and their
potential to influence management to manage earnings or influence the perceptions of investors and stakeholders. Where
this risk was considered to be higher, within the valuation of insurance liabilities and the reinsurers’ share of IBNR and
estimated premium income we performed audit procedures to address the identified fraud risk as detailed in the respective
key audit matters above. We made enquiries with management in person and via the use of video conferencing and
performed analytical review procedures to assess for unusual movements throughout the year. Our procedures to address the
risk identified also incorporated unpredictability into the nature, timing and/or extent of our testing; challenging assumptions,
significant judgements and estimates made by management within their forward-looking information within their five-year plan,
for example. Additionally, we tested year-end manual journals to provide reasonable assurance that the financial statements
were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved making enquiry of those charged with governance and senior management for their awareness of any
non-compliance of laws or regulations; inquiring about the policies that have been established to prevent non-compliance with
laws and regulations by officers and employees both at a Group and component level; inquiring about the Group’s methods of
enforcing and monitoring compliance with such policies; and inspecting significant correspondence with CBI, Lloyd’s, FCA,
PRA, State of Connecticut Insurance Department and UKLA.
• The Group operates in the insurance industry which is a highly regulated environment. As such the Senior Statutory Auditor
considered the experience and expertise of the engagement team to ensure that the team had the appropriate competence
and capabilities, which included the use of specialists where appropriate.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit and Risk committee, we were appointed by the company on 23 May 2019 to
audit the financial statements for the year ending 31 December 2019 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is four years covering the
years ending 31 December 2019 to 31 December 2022.
• The audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Stuart Wilson (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
12 March 2023
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Beazley | Annual report 2022
155
Financial
statements
157
158
159
162
162
164
232
Consolidated statement of profit or loss
Statements of comprehensive income
Statements of changes in equity
Statements of financial position
Statements of cash flows
Notes to the financial statements
Alternative performance measures
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Consolidated statement of profit or loss
for the year ended 31 December 2022
Gross premiums written
Written premiums ceded to reinsurers
Net premiums written
Change in gross provision for unearned premiums
Reinsurers’ share of change in the provision for unearned premiums
Change in net provision for unearned premiums
Net earned premiums
Net investment (loss)/income
Other income
Gain from sale of business
Revenue
Insurance claims
Insurance claims recoverable from reinsurers
Net insurance claims
Expenses for the acquisition of insurance contracts
Administrative expenses
Foreign exchange loss
Operating expenses
Expenses
Results of operating activities
Finance costs
Profit before income tax
Income tax expense
Profit for the year attributable to equity shareholders
Earnings per share (cents per share):
Basic
Diluted
Earnings per share (pence per share):
Basic
Diluted
Notes
3
3
3
4
5
3
3
3
3
3
8
9
2022
2021
$m
5,268.7
(1,392.5)
3,876.2
(507.3)
245.3
(262.0)
3,614.2
(179.7)
32.1
–
(147.6)
3,466.6
3,046.3
(1,089.9)
1,956.4
952.1
303.7
24.0
1,279.8
3,236.2
230.4
(39.4)
191.0
(30.2)
160.8
$m
4,618.9
(1,106.5)
3,512.4
(545.0)
179.9
(365.1)
3,147.3
116.4
28.2
54.4
199.0
3,346.3
2,734.3
(908.1)
1,826.2
821.8
283.0
7.2
1,112.0
2,938.2
408.1
(38.9)
369.2
(60.5)
308.7
10
10
10
10
26.3
25.9
21.1
20.8
50.9
50.3
37.0
36.5
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157
Statement of comprehensive income
for the year ended 31 December 2022
Group
Profit for the year attributable to equity shareholders
Other comprehensive (expense)/income
Items that will never be reclassified to profit or loss:
(Loss)/gain on remeasurement of retirement benefit obligations
Income tax on defined benefit obligation
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences
Total other comprehensive income
Total comprehensive income recognised
Statement of comprehensive income
for the year ended 31 December 2022
Company
Profit for the year attributable to equity shareholders
Total comprehensive income recognised
2022
$m
2021
$m
160.8
308.7
(12.5)
2.7
13.0
(1.8)
(12.2)
(22.0)
138.8
(5.9)
5.3
314.0
2022
$m
303.1
303.1
2021
$m
37.2
37.2
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Statement of changes in equity
for the year ended 31 December 2022
Group
Balance at 1 January 2021
Total comprehensive
(loss) / income recognised
Equity settled share based
payments
Tax on share option vestings
Transfer of shares to employees
Balance at 31 December 2021
Balance at 1 January 2022
Total comprehensive
(loss) / income recognised
Dividends paid
Issue of shares
Equity raise1
Transfer of merger reserve to retained
earnings1
Equity settled share based
payments
Acquisition of own shares held in trust
Tax on share option vestings
Transfer of shares to employees
Balance at 31 December 2022
Share
capital
$m
Share
premium
$m
Notes
Foreign
currency
translation
reserve
$m
Other
reserves
$m
Retained
earnings
$m
Total
$m
42.9
5.3
(91.3)
(9.4)
1,862.0
1,809.5
–
–
(5.9)
–
319.9
314.0
22
9
22
11
21
21
21
22
22
9
22
–
–
–
42.9
42.9
–
–
0.1
3.6
–
–
–
–
–
46.6
–
–
–
5.3
5.3
–
–
0.8
3.6
–
–
–
–
–
9.7
–
–
–
(97.2)
11.0
(3.9)
(1.7)
(4.0)
–
–
1.9
2,183.8
11.0
(3.9)
0.2
2,130.8
(97.2)
(4.0)
2,183.8
2,130.8
(12.2)
–
–
–
–
–
–
397.2
151.0
(103.0)
–
–
138.8
(103.0)
0.9
404.4
–
(397.2)
397.2
–
–
–
–
–
(109.4)
15.7
(17.8)
3.1
(4.6)
(7.6)
–
–
0.6
4.6
2,634.2
15.7
(17.8)
3.7
–
2,573.5
1 In November 2022, the Company issued 60,959,017 new ordinary shares of 5 pence each, comprising the ‘Placing Shares’, the ‘Retail Offer Shares’ and the
‘Subscription Shares’. No share premium was recorded in relation to the Placing Shares as merger relief under the Companies Act was available. The premium
over the nominal value of these shares was credited to a merger reserve and subsequently recognised in retained earnings as it was deemed to be distributable.
Refer to Note 21 for further details.
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159
Statement of changes in equity
for the year ended 31 December 2022
Company
Balance at 1 January 2021
Total comprehensive income recognised
Equity settled share based payments
Transfer of shares to employees
Balance at 31 December 2021
Balance at 1 January 2022
Total comprehensive income recognised
Dividends paid
Issue of shares
Equity raise²
Transfer of merger reserve to retained earnings
Equity settled share based payments
Acquisition of own shares held in trust
Transfer of shares to employees
Balance at 31 December 2022
Share
capital
$m
Share
premium
$m
Merger
reserve1
$m
Notes
Foreign
currency
translation
reserve
$m
Other
reserves
$m
Retained
earnings
$m
Total
$m
42.9
–
–
–
42.9
42.9
–
–
0.1
3.6
–
–
–
–
46.6
22
22
11
21
21
22
22
22
22
5.3
–
–
–
5.3
5.3
–
–
0.8
3.6
–
–
–
–
9.7
55.4
0.7
(16.9)
904.1
991.5
–
–
–
55.4
55.4
–
–
–
397.2
(397.2)
–
–
–
55.4
–
–
–
0.7
0.7
–
–
–
–
–
–
–
–
0.7
–
37.2
37.2
11.0
(1.7)
(7.6)
(7.6)
–
–
–
–
–
15.7
(17.8)
(4.6)
–
1.9
11.0
0.2
943.2 1,039.9
943.2 1,039.9
303.1
303.1
(103.0)
(103.0)
0.9
–
404.4
–
–
397.2
15.7
–
(17.8)
–
–
4.6
(14.3) 1,545.1 1,643.2
1 A merger reserve was created through a scheme of arrangement on 13 April 2016, in which Beazley plc became the parent company of the Group.
2 In November 2022, the Company issued 60,959,017 new ordinary shares of 5 pence each, comprising the ‘Placing Shares’, the ‘Retail Offer Shares’ and the
‘Subscription Shares’. No share premium was recorded in relation to the Placing Shares as merger relief under the Companies Act was available. The premium
over the nominal value of these shares was credited to a merger reserve and subsequently recognised in retained earnings as it was deemed to be distributable.
Refer to Note 21 for further details.
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Statements of financial position
as at 31 December 2022
Assets
Intangible assets
Plant and equipment
Right of use assets
Deferred tax asset
Investment in subsidiaries
Investment in associates
Deferred acquisition costs
Retirement benefit asset
Reinsurance assets
Financial assets at fair value
Insurance receivables
Other receivables
Current income tax asset
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium
Merger reserve
Foreign currency translation reserve
Other reserves
Retained earnings
Total equity
Liabilities
Insurance liabilities
Financial liabilities
Lease liabilities
Current income tax liability
Other payables
Total liabilities
Total equity and liabilities
2022
2021
Group
Company
Group
Company
Notes
$m
$m
$m
$m
12
13
29
28
31
14
15
27
19, 24
16, 17
18
30
20
21
22
24
16, 17, 25
29
26
128.8
14.9
60.5
35.2
–
0.4
550.1
4.6
3,286.6
8,345.6
1,811.7
196.4
11.7
652.5
15,099.0
46.6
9.7
–
(109.4)
(7.6)
2,634.2
2,573.5
10,354.2
562.5
72.7
8.6
1,527.5
12,525.5
15,099.0
–
–
–
–
724.6
–
–
–
–
–
–
919.1
0.3
3.4
1,647.4
46.6
9.7
55.4
0.7
(14.3)
1,545.1
1,643.2
–
–
–
–
4.2
4.2
1,647.4
123.5
19.2
75.5
16.3
–
0.6
477.8
18.1
2,386.4
7,283.5
1,696.1
106.7
11.9
591.8
–
–
–
–
724.6
–
–
–
–
–
–
315.0
0.7
0.3
12,807.4 1,040.6
42.9
42.9
5.3
5.3
55.4
–
0.7
(97.2)
(7.6)
(4.0)
2,183.8
943.2
2,130.8 1,039.9
–
8,871.8
–
554.7
–
84.3
–
24.5
0.7
1,141.3
10,676.6
0.7
12,807.4 1,040.6
No income statement is presented for the parent company as permitted by Section 408 of the Companies Act 2006. The profit after tax of the parent company for
the period was $303.6m (2021: $37.2m).
The financial statements were approved by The Board of Directors on 12 March 2023 and were signed on its behalf by:
C LaSala
Chair
S M Lake
Group Finance Director
12 March 2023
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161
Statements of cash flows
for the year ended 31 December 2022
Cash flow from operating activities
Profit before income tax
Adjustments for:
Amortisation of intangibles
Equity settled share based compensation
Net fair value loss/(gain) on financial assets
Depreciation of plant and equipment
Depreciation of right of use assets
Impairment/(write back) of reinsurance assets recognised
Increase/(decrease) in insurance and other payables
(Increase) in insurance, reinsurance and other receivables
(Increase) in deferred acquisition costs
Interest and dividends received on investments
Finance costs
Income tax paid
Net cash from/(used in) operating activities
Cash flow from investing activities
Purchase of plant and equipment
Expenditure on software development and other intangible assets
Purchase of investments
Proceeds from sale of investments
Proceeds from sale of business
Loan to subsidiary
Interest and dividends received
Net cash (used in)/from investing activities
Cash flow from financing activities
Acquisition of own shares in trust
Payment of lease liabilities
Equity raise
Finance costs
Dividend paid
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
2022
Group
$m
Company
$m
2021
Group
$m
Company
$m
Notes
191.0
303.3
369.2
36.4
12
22
4
13
29
2
4
8
13
12
4
22
29
21
8
20
14.3
15.7
274.4
3.3
12.3
17.8
1,868.6
(1,105.5)
(72.3)
(101.1)
39.4
(61.1)
1,096.8
(1.0)
(22.7)
(6,645.4)
5,325.3
–
–
94.2
(1,249.6)
(17.8)
(11.6)
404.4
(36.3)
(103.0)
235.7
82.9
591.8
(22.2)
652.5
–
15.7
–
–
–
–
3.5
(3.4)
–
(305.0)
4.8
–
18.9
–
–
–
–
–
(600.7)
305.0
(295.7)
(17.8)
–
404.4
(4.8)
(103.0)
278.8
2.0
0.3
1.1
3.4
20.5
11.0
(45.8)
4.9
15.0
(3.3)
1,900.8
(950.1)
(92.9)
(76.5)
38.9
(22.2)
1,169.5
(4.5)
(17.7)
(7,979.1)
7,037.1
54.4
–
70.6
(839.2)
–
(12.8)
–
(35.2)
–
(48.0)
282.3
309.5
–
591.8
–
11.0
–
–
–
–
(3.1)
(47.1)
–
(40.0)
3.6
–
(39.2)
–
–
–
–
–
–
40.0
40.0
–
–
–
(3.6)
–
(3.6)
(2.8)
0.9
2.2
0.3
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Notes to the financial statements
1 Statement of accounting policies
Beazley plc (registered number 09763575) is a public company incorporated in England and Wales. The company’s registered
address is 22 Bishopsgate, London, EC2N 4BQ, United Kingdom. The principal activity of the company and its subsidiaries (the
‘Group’) is to participate as a specialist insurer which transacts primarily in commercial lines of business through its
subsidiaries and through Lloyd’s syndicates. The Group financial statements for the year ended 31 December 2022 comprise
the parent company, its subsidiaries and the Group’s interest in associates.
The financial statements of the parent company, Beazley plc, and the Group’s consolidated financial statements have been
prepared in accordance with UK adopted International Financial Reporting Standards (IFRS) and the requirements of the
Companies Act 2006.
By publishing the parent company financial statements together with the Group financial statements, the company is taking
advantage of the exemption in s408 of the Companies Act 2006 not to present its individual statement of profit or loss.
In the current year, the Group have applied amendments to IFRS issued by the International Accounting Standards Board (IASB)
and endorsed by the UK Endorsement Board (UKEB) that are mandatorily effective for an accounting period that begins on or
after 1 January 2022. The new effective amendments are:
• Amendments to IAS 37 ‘Onerous contracts – Cost of Fulfilling a Contract’ issued in May 2020;
• Annual Improvements to IFRS Standards 2018–2020 issued in May 2020;
• Amendments to IAS 16 ‘Property, Plant and Equipment – Proceeds before Intended Use’ issued in May 2020; and
• Reference to the Conceptual Framework – Amendments to IFRS 3 ‘Business combinations’ issued in May 2020.
None of the amendments issued by the IASB and endorsed by the UKEB have had a material impact to the Group.
A number of new standards and interpretations adopted by the UKEB which are not mandatorily effective, as well as standards
and interpretations issued by the IASB but not yet adopted by the UKEB, have not been applied in preparing these financial
statements. The Group does not plan to adopt these standards early; instead it expects to apply them from their effective dates
as determined by their dates of UKEB endorsement. The Group expects the following upcoming standards to have an impact on
its future financial statements:
• IFRS 9: Financial Instruments (UKEB effective date: 1 January 2018, deferred in line with implementation of IFRS 17);
• IFRS 9: Amendment: Prepayment Features with Negative Compensation (UKEB effective date: 1 January 2019, deferred in
line with implementation of IFRS 17); and
• IFRS 17: Insurance Contracts (UKEB effective date: 1 January 2023);
The IASB have issued a number of other minor amendments to standards which are not yet effective. None of these are
expected to have a material impact on the Group.
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Notes to the financial statements continued
1 Statement of accounting policies continued
Significant changes in accounting policy not yet effective
International Financial Reporting Standard 17, Insurance Contracts (‘IFRS 17’)
IFRS 17, Insurance Contracts, was issued by the International Accounting Standards Board (IASB) in May 2017 and was
approved for adoption in the United Kingdom by the UK endorsement Board on 16 May 2022. UK-adopted IFRS 17 is effective
for accounting periods beginning on or after 1 January 2023. IFRS 17 will materially change the way the Group accounts for,
and reports, (re)insurance contracts issued and reinsurance contracts entered into in its consolidated financial statements.
Changes to accounting policies
The IFRS 17 general measurement model requires that the following balances are recognised on initial recognition of an
insurance contract:
• a discounted probability-weighted best estimate of future cash flows relating to the insurance contract;
• a risk adjustment for non-financial risk; and
• a contractual service margin (‘CSM’) representing the unearned profit that will be recognised over the coverage period of the
contract. The CSM is measured such that no profit arises on initial recognition.
The Group intends to measure all contracts consistently using the general measurement model set out above and does not
expect to use the simplified premium allocation approach for any portfolios or groups of insurance contracts currently issued. A
discount rate to discount future cash flows will be derived using the ‘bottom-up’ approach, based on a risk-free discount rate
that is then adjusted with an illiquidity premium. Subsequent changes in discount rates on remeasurement will be accounted for
through the statement of profit or loss.
IFRS 17 requires that insurance contracts where the underlying risks are of a similar nature and where they are managed
together be aggregated into groups of insurance contracts. These will then be subdivided based on the year coverage begins
and whether it is onerous on initial recognition. The Group intends to align its IFRS 17 groupings with the way it currently
manages and reports its business. Where a contract is onerous on initial recognition, the Group will be required to recognise
any losses up-front. The Group is currently assessing the extent to which contracts currently in issue may be onerous.
Reinsurance contracts which the Group takes out (reinsurance contracts held) will be measured similarly to (re)insurance
contracts issued. However the concept of onerosity does not exist in IFRS 17 for reinsurance and therefore the reinsurance
CSM is measured such that no income or expense is recognised on initial recognition.
Changes to presentation of financial statements on adoption of IFRS 17
The adoption of IFRS 17 will result in significant changes to the consolidated statement of profit or loss, the consolidated
statement of financial position and related notes. These include:
• An insurance service result comprised of insurance revenue, insurance service expense and insurance finance income or
expense will replace the current premium and claims lines in the statement of profit or loss.
• Reinsurance will be presented separately to insurance contracts issued.
• The statement of financial position will contain less detail, with all balances in the scope of IFRS 17 being included in
insurance assets/liabilities or reinsurance assets/liabilities.
• More extensive analysis of the IFRS 17 balances will be found in the notes to the financial statements.
Estimated impact of the adoption of IFRS 17
IFRS 17 requires that on transition comparative information is restated in accordance with the new accounting policies in force.
The Group expects to apply the fully retrospective transition approach. Contracts in the scope of IFRS 17 will be recognised and
measured as if IFRS 17 had always applied, and previously reported balances which would not have existed if IFRS 17 had
always been applied (such as certain insurance receivables and some deferred acquisition costs) will be derecognised. Any
resulting net difference will be included as a transition adjustment to retained earnings.
The Group has assessed the initial impact of IFRS 17 will have on its statement of financial position as at 1 January 2022.
Based on assessments undertaken to date, the total adjustment (after tax) to the balance of the Group’s consolidated retained
earnings is expected to be an increase of at least 2% of equity.
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1 Statement of accounting policies continued
This increase is due to a number of valuation differences between IFRS 4 and IFRS 17:
• IFRS 17 technical provisions are discounted to reflect the time value of money. Under IFRS 4 the Group does not discount
technical provisions, and thus under IFRS 17 net technical provisions will be less than when measured under IFRS 4.
• In order to cover claims expected to be paid, the Group has historically held reserves within a range of 5-10% over an
actuarial estimate. This actuarial estimate itself has a level of prudence within it. Under IFRS 17, reserves will be held at a
best estimate (with no prudence), with an added risk adjustment calculated to a specified confidence level. This will show a
percentile giving an indication about where reserves sit compared to the best estimate and the capital requirement. The
reserve margin at date of transition had a confidence level at the upper end of a 80th to 90th percentile range under IFRS 4.
Under IFRS 17 we expect the confidence level on transition to be nearer the middle of this range. Accordingly, the Group
expects the provision for claims recognised on adoption of IFRS 17 to be lower than current IFRS 4 technical provisions.
• Under IFRS 4 unearned premium reserves and deferred acquisition costs are treated as non-monetary and are translated to
the Group’s functional currency using historic exchange rates. These balances are eliminated upon adoption of IFRS 17 and
all insurance contract balances are considered to be monetary and are revalued using spot rates at each reporting date.
The assessment above is preliminary as we work to finalise the transition to IFRS 17. The actual impact of the adoption of IFRS
17 may change as the Group refines the accounting processes and internal controls required for applying IFRS 17 whilst
carrying out parallel runs alongside IFRS 4 reporting. Additionally, the new accounting policies, judgements and estimation
techniques which will be adopted are subject to change until the Group finalises its first set of IFRS 17 compliant financial
reporting in 2023.
As at the date of approval of these financial statements, the Group is conducting parallel runs of the IFRS 17 model which will
produce an IFRS 17 compliant result for the year ended 31 December 2022. The output of these parallel runs is currently being
reviewed by management and will be subject to external audit. As the quantification of the impact of IFRS 17 on these financial
statements for the year ended 31 December 2022 is not fully audited, the Group has not disclosed this impact.
International Financial Reporting Standard 9, Financial Instruments (‘IFRS 9’)
IFRS 9 was issued by the IASB in July 2014 and became effective for accounting periods beginning on or after 1 January 2018.
The IASB issued amendment to IFRS 4, Insurance Contracts in September 2016 and June 2020 which exempts eligible entities
from applying IFRS 9 for accounting periods beginning before 1 January 2023. The Group remains eligible to apply the
temporary exemption in IFRS 4 and thus will begin to apply IFRS 9 for accounting periods beginning on 1 January 2023.
The Group qualifies for this exemption because, as at 31 December 2015, $5,040.7m or 95% of its total liabilities were
connected with insurance. There has been no material change in the Group’s activities since 31 December 2015, therefore the
Group is still eligible to use the exemption. The Group has also disclosed information in relation to specific types of financial
instruments to ensure the comparability with the entities applying IFRS 9. As such, fair values are disclosed separately for the
Group’s financial assets which are managed and evaluated on a fair value basis and those which meet the solely payments of
principal and interest (SPPI) test under IFRS 9.
The below table sets out the disclosures required by the amendments to IFRS 4 for the deferral of IFRS 9 and sets out the fair
value of assets which are managed and evaluated on a fair value basis and those which meet the SPPI test under IFRS 9.
Information on credit exposures can be found in note 2 on page 183.
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Notes to the financial statements continued
1 Statement of accounting policies continued
Financial assets managed and evaluated on a fair value basis
Fixed and floating rate debt securities:
– Government issued
– Corporate bonds
– Investment grade
– High yield
Syndicate loans
Equity funds
Hedge funds
Illiquid credit assets
Derivative financial assets
Total financial assets managed and evaluated on a fair value basis
Financial assets meeting the SPPI test
Cash and cash equivalents
Other receivables
Total financial assets meeting the SPPI test
2022
$m
2021
$m
5,006.3
4,008.1
2,050.5
308.7
32.5
159.4
530.6
222.9
34.7
8,345.6
1,861.9
402.3
37.9
209.6
478.2
277.9
7.6
7,283.5
652.5
196.4
848.9
591.8
106.7
698.5
Estimated impact of the adoption of IFRS 9
The Group expects the impact of IFRS 9 on the valuation of financial assets to be immaterial at transition as these assets are
already held at fair value through profit or loss in accordance with IAS 39. This practice will continue under IFRS 9 as the Group
does not manage its investments using a ‘hold to collect’ or ‘hold to collect and sell’ business model and therefore is required
to measure its investments at fair value through profit or loss. Certain receivable balances will continue to be measured at
amortised cost and will have an expected credit loss applied on adoption of IFRS 9. The Group will continue to measure
borrowings at amortised cost. The Group does not expect the adoption of IFRS 9 to have a material impact on the Group's
earnings or the timing of when profits are recognised.
IFRS 9 is not required to be applied retrospectively, as such the new standard will be applied prospectively from 1 January
2023. At this point an expected credit loss provision will be recognised with the resulting difference recognised as an
adjustment in retained earnings. The Group expects this resulting difference to be insignificant on the date of transition.
Beazley plc as a standalone entity adopted IFRS 9 from 1 January 2018, which had an immaterial impact on its financial
statements.
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1 Statement of accounting policies continued
1.1 Basis of presentation
The Group financial statements are prepared on the historical cost basis, with the exception of financial assets and derivative
financial instruments which are stated at their fair value, and the defined benefit pension asset which is measured as the fair
value of plan assets less the present value of the defined benefit pension obligation. All amounts presented are in US dollars
and millions, unless stated otherwise.
1.2 Going concern
The consolidated financial statements of Beazley plc and the standalone financial statements of the company have been
prepared on a going concern basis. In adopting the going concern basis, The Board has reviewed the Group’s current and
forecast solvency and liquidity positions for the next 12 months from the date that the financial statements are authorised for
issue. The Group’s business activities, together with the factors likely to affect its future development, performance, and
position, are set out in the strategic report contained in the Group’s Annual Report & Accounts. In addition, the risk report and
financial review includes the Group’s risk management objectives and the Group’s objectives, policies and processes for
managing its capital.
In assessing the Group’s going concern position as at 31 December 2022, the Directors have considered a number of factors,
including:
• the current statement of financial position and in particular the adequacy of technical provisions;
• the Group’s strategic and financial plan for the next 12 months, taking account of possible changes in trading performance
and funding retention;
• the Group's capital forecast, which takes into account the capital requirements of major subsidiaries and their current
external credit rating and outlook;
• the Group's liquidity at both a group and material subsidiary level;
• stress testing and scenario analysis which, among others, assess the impact of natural and cyber catastrophe events on the
Group's capital and liquidity positions and reverse stress test scenarios designed to render the business model unviable; and
• other qualitative factors, such as the market environment and the Group's ability to raise additional capital and/or liquidity.
As a result of the assessment, no material uncertainty in relation to going concern has been identified. As at its most recent
regulatory submission, the Group’s capital ratios and its total capital resources are comfortably in excess of regulatory solvency
requirements, and internal stress testing indicates the Group can withstand severe economic and competitive stresses.
Based on the going concern assessment performed, the directors have a reasonable expectation that the company and the
Group have adequate resources to continue in operational existence over a period of at least 12 months from the date of this
report and therefore believe that the Group is well placed to manage its business risks successfully. Accordingly, they continue
to adopt the going concern basis in preparing the consolidated financial statements.
1.3 Use of estimates and judgements
The preparation of financial statements requires the use of certain critical accounting estimates and judgements that affect the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from those on which management’s
estimates are based. Estimates and assumptions are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable. Estimates which are sensitive to economic,
regulatory and geopolitical conditions could be impacted by significant changes in the external environment such as rising
inflation, rising interest rates, climate change, the Russia-Ukraine conflict, and US legislation.
Specific to climate change, since responses to it are still developing, it is not possible to consider all possible future outcomes
when determining asset and liability valuations, and timing of future cash flows, as these are not yet known. Nevertheless, the
current management view is that reasonably possible changes arising from climate risks would not have a material impact on
asset and liability valuations at the year-end date.
Estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
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Notes to the financial statements continued
1 Statement of accounting policies continued
a) Valuation of insurance contract liabilities
The most critical estimate included within the Group’s financial position is the estimate for insurance losses incurred but not
reported (IBNR), which is included within total insurance liabilities and reinsurance assets in the statement of financial position
and in note 24. This estimate is critical as it outlines the current liability for future expenses expected to be incurred in relation
to claims. If this estimation was to prove inadequate then an exposure would arise in future years where a liability has not been
provided for.
The best estimate of the most likely ultimate outcome is used when calculating notified claims. This estimate is based upon
the facts available at the time, in conjunction with the claims manager’s view of likely future developments. Further detail on
how the Group determines its technical provisions is included in note 24.
b) Valuation of unquoted and illiquid financial assets
Determination of fair value of unquoted and illiquid assets involves judgement in model valuations, through the incorporation of
both observable and unobservable market inputs. These inputs include assumptions that lead to the existence of a range of
plausible valuations. Further detail on the methodologies and inputs used by the Group is included in note 16.
c) Premium estimates
A portion of gross written premiums is based on the estimated premium income (EPI) of each contract, which is an
underwriters’ estimate of the ultimate premium expected to be paid over the life of the contract. Where premium is written
through delegated authority agreements, the EPI is pro-rated across the agreement period. Judgement is involved in determining
the ultimate estimates in order to establish the appropriate premium value and, ultimately, the cash to be received. EPI
estimates are updated to reflect changes in an underwriters expectation through consultation with brokers and third-party
coverholders, changes in market conditions, historic experience and to reflect actual cash received for a contract.
Due to the nature of the Lloyd’s business and the settlement patterns of the underlying business it is also not uncommon for
some contracts to take a number of years to finalise and settle, and a receivable on the balance sheet remains. The amount of
estimated future premium that remains in insurance receivables relating to years of account that are more than three years
developed at 31 December 2022 is $29.8m (2021: $15.4m).
d) Assessing indicators of impairment of Goodwill
A number of estimates are used in determining the key assumptions underlying the recoverable amounts used in assessing the
impairment of goodwill. The key assumptions used in the preparation of future cash flows are: premium growth rates, claims
experience, discount rates, retention rates and expected future market conditions. Further detail is provided in note 12.
1.4 Significant Accounting Policies
Consolidation
a) Subsidiary undertakings
Subsidiary undertakings are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. Subsidiary companies where the Group has control are consolidated within these financial statements.
Equity financial investments made by the parent company in subsidiary undertakings and associates are stated at cost in its
separate financial statements and are reviewed for impairment when events or changes in circumstances indicate the carrying
value may be impaired.
Certain Group subsidiaries underwrite as corporate members of Lloyd’s on syndicates managed by Beazley Furlonge Limited. In
view of the several and direct liability of underwriting members at Lloyd’s for the transactions of syndicates in which they
participate, only attributable shares of transactions, assets and liabilities of those syndicates are included in the Group
financial statements. The Group continues to conclude that it remains appropriate to consolidate its share of the result of these
syndicates and accordingly, as the Group is the sole provider of capacity on syndicates 2623, 3622 and 3623, these financial
statements include 100% of the economic interest in these syndicates. The Group provides 10% of the capacity on Syndicate
4321 and these financial statements include 10% of the economic interest in this syndicate.
For the following syndicates to which Beazley is appointed managing agent, being syndicates 623, 6107, and 5623, for which
the capacity is provided entirely by third parties to the Group, these financial statements reflect Beazley’s economic interest in
the form of agency fees and profit commission to which it is entitled.
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1 Statement of accounting policies continued
b) Associates
Associates are those entities over which the Group has power to exert significant influence but which it does not control.
Significant influence is generally presumed if the Group has between 20% and 50% of voting rights. Other factors may be taken
into consideration when determining the existence of significant influence. Investments in associates are accounted for using
the equity method of accounting.
c) Intercompany balances and transactions
All intercompany transactions, balances and unrealised gains or losses on transactions between Group companies are
eliminated in the Group financial statements. Transactions and balances between the Group and associates are not eliminated.
Foreign currency translation
a) Functional and presentational currency
Items included in the financial statements of the parent and the subsidiaries are measured using the currency of the primary
economic environment in which the relevant entity operates (the functional currency). The Group financial statements are
presented in US dollars, being the functional and presentational currency of the parent and its main trading subsidiaries, as the
majority of trading assets and insurance premiums are denominated in US dollars.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using average exchange rates applicable to the period
in which the transactions take place. Foreign exchange gains and losses resulting from the settlement of such transactions and
from translation at the period end of monetary assets and liabilities denominated in foreign currencies are recognised in the
statement of profit or loss. Non-monetary items recorded at historical cost in foreign currencies are translated using the
exchange rate on the date of the initial transaction.
c) Foreign operations
The results and financial position of the Group companies that have a functional currency different from the Group
presentational currency are translated into the presentational currency as follows:
• assets and liabilities are translated at the closing rate as at the statement of financial position date;
• income and expenses for each statement of profit or loss are translated at average exchange rates for the reporting period
where this is determined to be a reasonable approximation of the actual transaction rates; and
• all resulting exchange differences are recognised in other comprehensive income and as a separate component of equity.
Insurance contracts
Insurance contracts (including inwards reinsurance contracts) are defined as those containing significant insurance risk.
Insurance risk is considered significant if, and only if, an insured event could cause Beazley to pay significant additional
benefits in any scenario, excluding scenarios that lack commercial substance. Such contracts remain insurance contracts until
all rights and obligations are extinguished or expire.
Net earned premiums
a) Premiums
Gross premiums written represent premiums on business commencing in the financial year together with adjustments to
premiums written in previous accounting periods and estimates for premiums from contracts entered into during the course of
the year. Gross premiums written are stated before deduction of brokerage, taxes, duties levied on premiums and other
deductions.
b) Unearned premiums
A provision for unearned premiums (gross of reinsurance) represents that part of the gross premiums written that it is
estimated will be earned in the following financial periods. It is calculated using the daily pro-rata method, under which the
premium is apportioned over the period of risk.
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Notes to the financial statements continued
1 Statement of accounting policies continued
Deferred acquisition costs (DAC)
Acquisition costs comprise brokerage, premium levy and staff-related costs (excluding performance related pay) of the
underwriters acquiring new business and renewing existing contracts. The proportion of acquisition costs in respect of unearned
premiums is deferred at the reporting date and recognised in later periods when the related premiums are earned.
Claims
These include the cost of claims and claims handling expenses paid during the period, together with the movements in
provisions for outstanding claims, claims incurred but not reported (IBNR) and claims handling provisions. The provision for
claims comprises amounts set aside for claims advised and IBNR, including claims handling expenses.
The IBNR amount is based on estimates calculated using widely accepted actuarial techniques which are reviewed quarterly by
the Group actuary and annually by Beazley’s independent syndicate reporting actuary. The techniques generally use projections,
based on past experience of the development of claims over time, to form a view on the likely ultimate claims to be
experienced.
For more recent underwriting years, attention is paid to the variations in the business portfolio accepted and the underlying
terms and conditions. Thus, the critical assumptions used when estimating provisions are that past experience is a reasonable
predictor of likely future claims development and that the rating and business portfolio assumptions are a fair reflection of the
likely level of ultimate claims to be incurred for the more recent years.
Liability adequacy testing
At each reporting date, liability adequacy tests are performed to ensure the adequacy of the claims liabilities net of DAC and
unearned premium reserves. In performing these tests, current best estimates of future contractual cash flows, claims handling
and administration expenses, and investment income from the assets backing such liabilities are used.
Any deficiency is immediately charged to the statement of profit or loss and subsequently by establishing a URR provision for
losses arising from liability adequacy tests.
Ceded reinsurance
Any benefits to which the Group is entitled under its outwards reinsurance contracts held are recognised as reinsurance assets.
These assets consist of balances due from reinsurers and include reinsurers’ share of provisions for claims. These balances
are based on calculated amounts of outstanding claims and projections for IBNR and URR, net of estimated irrecoverable
amounts, having regard to the reinsurance programme in place for the class of business, the claims experience for the period
and the current security rating of the reinsurer involved. Reinsurance liabilities are primarily premiums payable for reinsurance
contracts and are recognised as an expense when a contract incepts.
The Group assesses its reinsurance assets for impairment. If there is objective evidence of impairment, then the carrying
amount is reduced to its recoverable amount and the impairment loss is recognised in the statement of profit or loss.
Other income
Other income is made up of commissions received from Beazley service companies, profit commissions, managing agent’s fees
and service fees. Profit commissions are recognised and earned as the performance obligations of the related contracts are
met. Commissions received from service companies and managing agent’s fees are recognised as the services are provided,
and therefore the performance obligations of the contracts are met.
Dividends paid
Dividend distributions to the shareholders of the Group are recognised in the period in which the dividends are paid.
Plant and equipment
All plant and equipment is recorded at cost less accumulated depreciation and any impairment losses. Depreciation is
calculated using the straight-line method to allocate the cost of the assets to their residual values over their estimated useful
lives, which vary from three to ten years.
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that
the carrying value may be impaired. If any such condition exists, the recoverable amount of the asset is estimated in order to
determine the extent of impairment and the difference is charged to the statement of profit or loss.
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Intangible assets
a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the fair value of the
identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill is carried
at cost less accumulated impairment losses.
Goodwill has an indefinite life and is annually tested for impairment. Goodwill is allocated to each cash-generating unit (‘CGU’)
for the purpose of impairment testing. Goodwill is impaired when the net carrying amount of the relevant CGU exceeds its
recoverable amount, being its value in use. Value in use is defined as the present value of the future cash flows expected to be
derived from the CGU.
b) Syndicate capacity
The syndicate capacity represents the cost of purchasing the Group’s participation in the combined syndicates. The capacity is
capitalised at cost in the statement of financial position. It has an indefinite useful life and is carried at cost less accumulated
impairment. It is annually tested for impairment by reference to the latest auction prices provided by Lloyd’s.
c) Licences
Licences have an indefinite useful life and are initially recorded at fair value. Licenses are allocated to each CGU for the
purpose of impairment testing. Licences are annually tested for impairment and provision is made for any impairment when the
recoverable amount, being the higher of its value in use and fair value, is less than the carrying value.
d) IT development costs
Costs that are directly associated with the development of identifiable and unique software products and that are anticipated to
generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include external
consultants’ fees, certain qualifying internal staff costs and other costs incurred to develop software programs. The Group does
not routinely capitalise costs relating to software products hosted in the cloud. Costs are amortised over their estimated useful
life, three years, on a straight-line basis and subject to impairment testing annually. Amortisation commences when the asset
becomes operational. Other non-qualifying costs are expensed as incurred.
e) Renewal rights
Renewal rights comprise future profits relating to insurance contracts acquired and the expected renewal of those contracts.
The costs directly attributable to acquire the renewal rights are recognised as intangible assets where they can be measured
reliably and it is probable that they will be recovered by directly related future profits. These costs are subject to an impairment
review annually and are amortised on a straight-line basis, based on the estimated useful life of the assets, which is estimated
to be between five and 10 years.
Financial instruments
Financial instruments are recognised in the statement of financial position at such time as the Group becomes a party to the
contractual provisions of the financial instrument. Purchases and sales of financial assets are recognised on the trade date,
which is the date the Group commits to purchase or sell the asset. A financial asset is derecognised when the contractual
rights to receive cash flows from the financial assets expire, or where the financial assets have been transferred, together with
substantially all the risks and rewards of ownership. Financial liabilities are derecognised if the Group’s obligations specified in
the contract expire, are discharged or are cancelled.
a) Financial Assets
On acquisition of a financial asset, the Group is required to classify the asset into one of the following categories: financial
assets at fair value through the statement of profit or loss, loans and receivables, assets held to maturity and assets available
for sale. The Group does not make use of the held to maturity and available for sale categories.
Except for derivative financial instruments and other financial assets listed in policies (c), (e) and (f) below, all financial assets
are designated as fair value through the statement of profit or loss upon initial recognition because they are managed and their
performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair value
basis to the Group’s key management. The Group’s investment strategy is to invest and evaluate their performance with
reference to their fair values.
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Notes to the financial statements continued
1 Statement of accounting policies continued
b) Fair value measurement
Fair value is the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market
participants at the measurement date. Fair value is a market-based measure and in the absence of observable market prices in
an active market, it is measured using the assumptions that market participants would use when pricing the asset or liability.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of
the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique
whose variables include only data from observable markets.
When the transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially
measured at the transaction price and any difference between this price and the value initially obtained from a valuation model
is subsequently recognised in profit or loss depending on the individual facts and circumstances of the transaction but before
the valuation is supported wholly by observable market data or the transaction is closed out.
Upon initial recognition, attributable transaction costs relating to financial instruments at fair value through profit or loss are
recognised in the statement of profit or loss when incurred. Financial assets at fair value through profit or loss are continuously
measured at fair value, and changes therein are recognised in the statement of profit or loss. Net changes in the fair value of
financial assets at fair value through profit or loss exclude interest and dividend income, as these items are accounted for
separately.
c) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Loans and receivables are carried at amortised cost less any impairment losses.
d) Hedge funds, equity funds and illiquid credit assets
The Group invests in a number of hedge funds, equity funds and illiquid credit assets for which there are no available quoted
market prices. The valuation of these assets is based on fair value techniques as described in note 16. The fair value of our
hedge fund and illiquid asset portfolio is calculated by reference to the underlying net asset values (NAVs) of each of the
individual funds. Consideration is also given to adjusting such NAV valuations for any restriction applied to distributions, the
existence of side pocket provisions and the timing of the latest available valuations. At certain times, we will have uncalled
unfunded commitments in relation to our illiquid credit assets. These uncalled unfunded commitments are actively monitored by
the Group and are disclosed in the notes 2 and 16 to the financial statements. The additional investment into our illiquid credit
asset portfolio is recognised on the date that this funding is provided by the Group.
e) Insurance receivables and payables
Insurance receivables and payables are recognised when due. These include amounts due to and from agents, brokers and
insurance contract holders. Insurance receivables are classified as ‘loans and receivables’ as they are non-derivative financial
assets with fixed or determinable payments that are not quoted on an active market. Insurance receivables are measured at
amortised cost less any impairment losses. Insurance payables are stated at amortised cost.
f) Other receivables
Other receivables categorised as loans and receivables are carried at amortised cost less any impairment losses.
g) Investment income
Investment income consists of dividends, interest, realised and unrealised gains and losses and foreign exchange gains and
losses on financial assets and liabilities at fair value through the statement of profit or loss. Dividends on equity securities are
recorded as revenue on the ex-dividend date. Interest is recognised on an effective rate basis for financial assets at fair value
through the statement of profit or loss. The realised gains or losses on disposal of an investment are the difference between
the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between
the carrying value at the reporting date, and the carrying value at the previous period end or purchase value during the period.
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1 Statement of accounting policies continued
h) Borrowings
Borrowings are initially recorded at their issue proceeds less transaction costs incurred. Subsequently borrowings are stated at
amortised cost and interest is recognised in the statement of profit or loss over the period of the borrowings using the effective
interest method.
Finance costs comprise interest, fees paid for the arrangement of debt and letter of credit facilities, and commissions charged
for the utilisation of letters of credit. These costs are recognised in the statement of profit or loss using the effective interest
method.
In addition, finance costs include gains on the early redemption of the Group’s borrowings. These gains are recognised in the
statement of profit or loss, being the difference between proceeds paid plus related costs and the carrying value of the
borrowings redeemed.
i) Other payables
Other payables are stated at amortised cost determined according to the effective interest rate method.
j) Hedge accounting and derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. The best evidence of fair value of a derivative at initial recognition is the transaction price. The
method of recognising the resulting fair value gains or losses depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. Fair values are obtained from quoted market prices in active
markets, recent market transactions, and valuation techniques which include discounted cash flow models. All derivatives are
carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivative assets and liabilities are offset and the net amount reported in the statement of financial position when there is a
legally enforceable right to set off the recognised amounts and the parties intend to settle on a net basis, or realise the assets
and settle the liability simultaneously.
The Group has not designated any derivatives as fair value hedges, cash flow hedges or net investment hedges and therefore
all fair value movements are recorded through profit or loss.
k) Impairment of financial assets
The Group considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and a
collective level. The Group assesses at each reporting date whether there is objective evidence that a specific financial asset
measured at amortised cost is impaired. A financial asset is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the assets
and that event has an impact on the estimated cash flows of the financial asset that can be reliably estimated. Assets that are
not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.
If there is objective evidence that impairment exists, the amount of the loss is measured as the difference between the asset’s
carrying amount and the value of the estimated future cash flows discounted at the financial asset’s original effective interest
rate. The amount of the loss is recognised in the statement of profit or loss.
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and
the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are
such that the actual losses are likely to be greater or lesser than those suggested by historical trends.
l) Cash and cash equivalents
Cash and cash equivalents consist of cash held at bank, cash in hand, deposits held at call with banks, cash held in Lloyd’s
trust accounts and other short term highly liquid investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. These investments have less than three months maturity from the date
of acquisition. Cash and cash equivalents are measured at fair value through the profit and loss account.
m) Unfunded commitment capital
Unfunded committed capital arising in relation to certain financial asset investments is not shown on the statement of financial
position as unfunded committed capital represents a loan commitment that is scoped out of IAS 39.
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Notes to the financial statements continued
1 Statement of accounting policies continued
Leases
Where the Group is the lessee, a lease liability equal to the present value of outstanding lease payments and a corresponding
right-of use asset equal to cost are initially recognised at the commencement of the lease. The right-of-use asset is
subsequently measured at amortised cost and depreciated on a straight-line basis over the length of the lease term. The cost
of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, an estimate of any costs
to be incurred at expiration of the lease agreements and lease payments made at or before the commencement date less any
lease incentives received. Recognised right of use assets are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right of use assets are subject to impairment.
The lease term is determined as the non-cancellable term of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised. The Group applies judgement in evaluating whether it is reasonably certain to exercise
the option to renew. After the commencement date, the Group reassesses the lease term if there is a significant event or
change in circumstances that is within its control and affect its ability to exercise (or not to exercise) the option to renew (e.g., a
change in business strategy).
The Group applies the IFRS 16 election not to recognise any amounts on the balance sheet associated with leases that are
either deemed to be short-term, or where the underlying asset is of low-value. Lease payments on short-term leases and leases
of low-value assets are recognised as an expense in the profit or loss on a straight-line basis over the lease term.
Employee benefits
a) Pension obligations
The Group operates a defined benefit pension plan that is closed to new entrants and future service accruals. All employees
may now participate in defined contribution pension arrangements, to which the Group contributes.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation. The pension costs are assessed
using the projected unit credit method. Under this method the costs of providing pensions are charged to the statement of profit
or loss so as to spread the regular costs over the service lives of employees in accordance with the advice of the qualified
actuary, who values the plans annually. The net pension obligation is measured at the present value of the estimated future net
cash flows and is stated net of plan assets.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other
comprehensive income.
The Group also determines the net interest income/expense for the period on the net defined benefit asset/liability by applying
the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit
asset/liability at the beginning of the annual period, taking into account any changes in the net defined benefit asset/liability
during the period as a result of contributions and benefit payments. Consequently, the net interest on the defined benefit
asset/ liability comprises:
• interest cost on the defined benefit obligation;
• interest income on plan assets; and
• interest on the effect of the asset ceiling.
Net interest income/expense is recognised in the statement of profit or loss.
Past service costs are recognised as an expense at the earlier of the date when a plan amendment or curtailment occurs and
the date when an entity recognises any termination benefits.
For the defined contribution plan, the Group pays contributions to a privately administered pension plan. Once the contributions
have been paid, the Group has no further obligations. The Group’s contributions are charged to the statement of profit or loss in
the period to which they relate.
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1 Statement of accounting policies continued
b) Share based compensation
The grant date fair value of share based payment awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market performance conditions at the vesting date. For share based
payment awards with non-vesting conditions, the grant date fair value of the share based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.
When options are exercised and new shares are issued, the proceeds received, net of any transaction costs, are credited to
share capital (nominal value) with the excess amount going to share premium. For other plans, when no proceeds are received,
the nominal value of shares issued is to share capital and debited to retained earnings. When the options are exercised and
the shares are granted from the employee share trust, the proceeds received, net of any transaction costs, and the value of
shares held within the trust, are credited to retained earnings.
Income taxes
Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised in the statement of
profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in
which case it is recognised respectively in other comprehensive income or directly in equity.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at
the year end reporting date and any adjustments to tax payable in respect of prior periods.
Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets are recognised in the statement of financial position to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.
Earnings per share
Basic earnings per share are calculated by dividing profit or loss after tax available to shareholders by the weighted average
number of ordinary shares in issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares such as share options granted to employees. Share options with performance conditions
attaching to them have been excluded from the weighted average number of shares to the extent that these conditions have not
been met at the reporting date.
The shares held in the employee share options plan (ESOP) and treasury shares are excluded from both the calculations, until
such time as they vest unconditionally with the employees.
Provisions and contingencies
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources or economic benefits will be required to settle the obligation, and a reliable estimate of
the obligation can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a
separate asset but only when the reimbursement is most probable.
Contingent liabilities are present obligations that are not recognised because it is not probable that an outflow of resources will
be required to meet the liabilities or because the amount of the obligation cannot be measured with sufficient reliability.
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Notes to the financial statements continued
2 Risk management
The symbol † by a table or numerical information means it has not been audited.
2.1 Insurance Risk
Insurance risk arises from this risk transfer due to inherent uncertainties about the occurrence, amount and timing of insurance
premium and claim liabilities. The Group seeks insurance risks as its core business. The four key components of insurance risk
are underwriting, reinsurance, claims management and reserving. Each element is considered below.
a) Underwriting risk
Underwriting risk comprises four elements that apply to all insurance products offered by the Group:
• cycle risk – the risk that business is written without full knowledge as to the (in)adequacy of rates, terms and conditions;
• event risk – the risk that individual risk losses or catastrophes lead to claims that are higher than anticipated in plans and
pricing;
• pricing risk – the risk that the level of expected loss is understated in the pricing process; and
• expense risk – the risk that the allowance for expenses and inflation in pricing is inadequate.
The Group’s underwriting strategy is to seek a diverse and balanced portfolio of risks in order to limit the variability of
outcomes. This is achieved by accepting a spread of business over time, segmented between different products, geographies
and sizes. The annual business plans for each underwriting team reflect the Group’s underwriting strategy, and set out the
classes of business, the territories and the industry sectors in which business is to be written which are approved by the
appropriate Boards.
Our underwriters determine premiums for risks written based on a range of criteria tailored specifically to each individual risk.
These factors include but are not limited to financial exposure, loss history, risk characteristics, limits, deductibles, terms and
conditions and acquisition expenses depending on the type of risk. A proportion of the Group’s insurance risks are transacted
by third parties under delegated underwriting and claims authorities. Each third party is thoroughly vetted by our coverholder
approval group before it can bind risks, and is subject to monitoring to maintain underwriting quality and confirm ongoing
compliance with contractual guidelines. All underwriters also have a right to refuse renewal or change the terms and conditions
of insurance contracts upon renewal. Rate monitoring details, including limits, deductibles, exposures, terms and conditions
and risk characteristics are also captured and the results are combined to monitor the rating environment for each class of
business.
The Group also recognises that insurance events are, by their nature, random, and the actual number and size of events during
any one year may vary from those estimated using established statistical techniques. To address this, the Group sets out the
exposure that it is prepared to accept in certain territories to a range of events such as natural catastrophes and specific
scenarios which may result in large industry losses. This is monitored through regular calculation of realistic disaster scenarios
(RDSs). The aggregate position is monitored at the time of underwriting a risk, and reports are regularly produced to highlight
the key aggregations to which the Group is exposed.
The Group uses a number of modelling tools to monitor its exposures against the agreed risk appetite set and to simulate
catastrophe losses in order to measure the effectiveness of its reinsurance programmes. Stress and scenario tests are also
run using these models. The range of scenarios considered includes natural catastrophe, cyber, marine, liability, political,
terrorism and war events.
One of the largest types of event exposure relates to natural catastrophe events such as windstorm or earthquake. With the
increasing risk from climate change impacts the frequency and severity of natural catastrophes, the Group continues to monitor
its exposure. Where possible the Group measures geographic accumulations and uses its knowledge of the business, historical
loss behaviour and commercial catastrophe modelling software to assess the expected range of losses at different return
periods. Upon application of the reinsurance coverage purchased, the key gross and net exposures are calculated on the basis
of extreme events at a range of return periods.
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2 Risk management continued
The Group’s catastrophe risk appetite is set by the risk management function and approved by The Board and the business
plans of each team are determined within these parameters. The Board may adjust these limits over time as conditions change.
In 2022 the Group operated to a catastrophe risk appetite for a probabilistic 1-in-250 years US event of † $438.0m (2021:
$520.0m) net of reinsurance. This represents a reduction of 16% in 2022.
Lloyd’s has also defined its own specific set of RDS events for which all syndicates with relevant exposures must report. Of
these the three largest, net of reinsurance, events which could have impacted Beazley in 2021 and 2022 are:
†
2022
Lloyd’s prescribed natural catastrophe event (total incurred losses)
Los Angeles quake (2022: $78bn)
US Northeast windstorm (2022: $81bn)
Gulf of Mexico windstorm (2022: $118bn)
Lloyd’s prescribed natural catastrophe event (total incurred losses)
Los Angeles quake (2021: $78bn)
San Francisco quake (2021: $78bn)
US Northeast windstorm (2021: $112bn)
1 Probable market loss.
Modelled
PML1(before
reinsurance)
Modelled
PML1(after
reinsurance)
$m
692.4
579.6
725.0
$m
266.8
257.2
253.2
2021
Modelled
PML1(before
reinsurance)
Modelled
PML1(after
reinsurance)
$m
737.6
708.0
560.4
$m
265.2
249.9
231.5
The tables above show each event independent of each other and considered on their own. Net of reinsurance exposures for
the Los Angeles quake scenario have increased by less than 1% in 2022, whereas gross exposures have reduced by 6%. The
reduction in gross exposures is being driven by less exposure being written in the Property Risks division, which has had
minimal impact on the net, as the loss is contained within the Reinsurance protections. The US Northeast windstorm scenario
has increased by 3% gross and 11% net, with the increase in gross being driven by an increase in exposure in Contingency, and
the net increasing across both Contingency & Property Risks. Windstorm exposures have increased in the Gulf of Mexico during
2022, which has resulted in the Gulf of Mexico scenario replacing the San Francisco quake scenario as one of the three largest
net scenarios for 2022. The net natural catastrophe risk appetite reduced by 16% in 2022 to $438.0m from $520.0m in 2021,
with the reduction in appetite coming from the Property Risks division.
The net exposure of the Group to each of these modelled events at a given point in time is a function of assumptions made
about how and where the event occurs, its magnitude, the amount of business written that is exposed to each event and the
reinsurance arrangements in place.
The Group also has exposure to man-made claim aggregations, such as those arising from terrorism, liability, and cyber events.
Beazley chooses to underwrite cyber insurance within the Cyber Risks and Specialty Risks divisions using our team of specialist
underwriters, claims managers and data breach services managers. Other than for affirmative cyber coverage, Beazley’s
preference is to exclude cyber exposure where possible.
To manage the potential exposure, The Board has approved a risk budget for the aggregation of cyber related claims which is
monitored by reference to the largest of seventeen realistic disaster scenarios that have been developed internally. These
scenarios include the failure of a data aggregator, the failure of a shared hardware or software platform, the failure of a cloud
provider & physical damage scenarios. Whilst it is not possible to be precise, as there is sparse data on actual aggregated
events, these severe scenarios are expected to be very infrequent. To manage underwriting exposures, the Group has
developed limits of authority and business plans which are binding upon all staff authorised to underwrite and are specific to
underwriters, classes of business and industry. In 2022, the maximum line that any one underwriter could commit the managed
syndicates to was $150m. In most cases, maximum lines for classes of business were much lower than this.
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Notes to the financial statements continued
2 Risk management continued
The largest net realistic disaster scenario is currently just under $140m for the Group as at 31 December 2022. The
reinsurance programmes that protect the Cyber and Specialty Risks divisions would partially mitigate the cost of most, but not
all, Cyber catastrophes.
Beazley also reports on Cyber exposure to Lloyd’s using the three largest internal realistic disaster scenarios and three new
prescribed scenarios which include a cloud provider scenario & a ransomware scenario.
Operating divisions
In 2022, the Group’s business consisted of five operating divisions. The following table provides a breakdown of gross
premiums written by division, and also provides a geographical split based on placement of risk.
2022
Cyber Risks
Digital
MAP Risks
Property Risks
Specialty Risks
Total
2021
Cyber Risks
Digital
MAP Risks
Property Risks
Specialty Risks
Total
Lloyd’s
Worldwide
17 %
3 %
19 %
16 %
28 %
83 %
Non-Lloyd’s
US
3 %
1 %
2 %
–
6 %
12 %
Non-Lloyds
Europe
2 %
–
–
–
3 %
5 %
Lloyd’s
Worldwide
13 %
2 %
18 %
18 %
31 %
82 %
Non-Lloyd’s
US
4 %
2 %
1 %
–
7 %
14 %
Non-Lloyd’s
Europe
1 %
–
–
–
3 %
4 %
Total
22 %
4 %
21 %
16 %
37 %
100 %
Total
18 %
4 %
19 %
18 %
41 %
100 %
b) Reinsurance risk
Reinsurance risk to the Group arises where reinsurance contracts put in place to reduce gross insurance risk do not perform as
anticipated, result in coverage disputes or prove inadequate in terms of the vertical or horizontal limits purchased. Failure of a
reinsurer to pay a valid claim is considered a credit risk which is detailed in the credit risk section on page 183. In some cases
the Group deems it more economic to hold capital than purchase reinsurance. These decisions are regularly reviewed.
The reinsurance security committee examines and approves all reinsurers to ensure that they possess suitable security.
The Group’s ceded reinsurance team ensures that these guidelines are followed, undertakes the administration of reinsurance
contracts and monitors and instigates our responses to any erosion of the reinsurance programmes.
c) Claims management risk
Claims management risk may arise within the Group in the event of inaccurate or incomplete case reserves and claims
settlements, poor service quality or excessive claims handling costs. These risks may damage the Group brand and undermine
its ability to win and retain business, or incur punitive damages. These risks can occur at any stage of the claims life cycle. The
Group’s claims teams are focused on delivering quality, reliability and speed of service to both internal and external clients.
Their aim is to adjust and process claims in a fair, efficient and timely manner, in accordance with the policy’s terms and
conditions, the regulatory environment, and the business’s broader interests. Case reserves are set for all known claims
liabilities, including provisions for expenses, as soon as a reliable estimate can be made of the claims liability.
d) Reserving and ultimate reserves risk
Reserving and ultimate reserves risk occurs within the Group where established insurance liabilities are insufficient through
inaccurate forecasting, or where there is inadequate allowance for expenses and reinsurance bad debts in provisions.
178
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2 Risk management continued
To manage reserving and ultimate reserves risk, our actuarial team uses a range of recognised techniques to project gross
premiums written, monitor claims development patterns and stress-test ultimate insurance liability balances. The Group aims to
hold reserves within a range of 5-10% above the actuarial estimates, which themselves include some margin for uncertainty.
The objective of the Group’s reserving policy is to produce accurate and reliable estimates that are consistent over time and
across classes of business. The estimates of gross premiums written and claims prepared by the actuarial department are
used through a formal quarterly peer review process to independently test the integrity of the estimates produced by the
underwriting teams for each class of business. These meetings are attended by senior management, senior underwriters, and
actuarial, claims, and finance representatives.
2.2 Market risk
Market risk (known as asset risk in the Group’s risk management framework) arises from adverse financial market movements
of values of investments, interest rates, exchange rates, or external market forces. Efficient management of market risk is key
to the investment of Group assets for matching to future liabilities. Appropriate levels of investment risk are determined by
limiting the proportion of forecast Group earnings which could be at risk from lower than expected investment returns, using a 1
in 10 confidence level as a practical measure of such risk. In 2022, this permitted variance from the forecast investment return
was set at † $200m. For 2023, the permitted variance is likely to be modestly increased due to the higher level of investment
assets. Investment strategy is developed to be consistent with this limit and investment risk is monitored on an ongoing basis,
using outputs from our internal model.
Changes in interest rates also impact the present values of estimated Group liabilities, which are used for solvency and capital
calculations. The four key components of asset risk are foreign exchange, interest rate, prices of assets and derivatives and
investment. Each element is in more detail considered below.
a) Foreign exchange risk
The functional currency of Beazley plc and its main trading entities is US dollars and the presentational currency in which the
Group reports its consolidated results is US dollars. The effect of this on foreign exchange risk is that the Group is mainly
exposed to fluctuations in exchange rates for non-dollar denominated transactions and to net asset translation risk on non-
dollar functional currency entities.
The Group operates in four main currencies: US dollars, sterling, Canadian dollars and euros. Transactions in all currencies are
converted to US dollars on initial recognition with any resulting monetary items being translated to the US dollar spot rate at the
reporting date. If any foreign exchange risk arises it is actively managed as described below.
In 2022, the Group managed its foreign exchange risk by periodically assessing its non-dollar exposures and hedging these to a
tolerable level while targeting to have net assets that are predominantly denominated in US dollar. As part of this hedging
strategy, exchange rate derivatives were used to rebalance currency exposure across the Group. Details of foreign currency
derivative contracts entered into with external parties are disclosed in note 17. On a forward looking basis an assessment is
made of expected future exposure development and appropriate currency trades put in place to reduce risk.
The Group’s underwriting capital is matched by currency to the principal underlying currencies of its written premiums. This
helps to mitigate the risk that the Group’s capital required to underwrite business is materially affected by any future
movements in exchange rates.
The Group also has foreign operations with functional currencies that are different from the Group’s presentational currency.
The effect of this on foreign exchange risk is that the Group is exposed to fluctuations in exchange rates for US dollar
denominated transactions and net assets arising in those foreign currency operations. It also gives rise to a currency
translation exposure for the Group to sterling, euro, Canadian dollars, Singapore dollars and Australian dollars on translation to
the Group’s presentational currency. These exposures are minimal and are not hedged.
www.beazley.com
Beazley | Annual report 2022
179
Notes to the financial statements continued
2 Risk management continued
The following table summarises the carrying value of total assets and total liabilities categorised by the Group’s main
currencies:
31 December 2022
Total assets
Total liabilities
Net assets
31 December 2021
Total assets
Total liabilities
Net assets
UK £
$m
1,123.7
(1,151.9)
(28.2)
UK £
$m
904.3
(1,038.0)
(133.7)
CAD $
$m
268.0
(280.1)
(12.1)
CAD $
$m
248.8
(236.1)
12.7
EUR €
Subtotal
US $
Total $
$m
669.5
(628.4)
41.1
$m
2,061.2
(2,060.4)
0.8
$m
13,037.8
(10,465.1)
2,572.7
$m
15,099.0
(12,525.5)
2,573.5
EUR €
Subtotal
US $
Total $
$m
501.9
(561.7)
(59.8)
$m
1,655.0
(1,835.8)
(180.8)
$m
11,152.4
(8,840.8)
2,311.6
$m
12,807.4
(10,676.6)
2,130.8
Sensitivity analysis to foreign currency fluctuations
Fluctuations in the Group’s trading currencies against the US dollar would result in a change to profit after tax and net asset
value. The table below gives an indication of the impact on profit after tax and net assets of a percentage change in the relative
strength of the US dollar against the value of sterling, the Canadian dollar and the euro, simultaneously. The analysis is based
on information on net asset positions as at the balance sheet date.
Change in exchange rate of sterling, Canadian dollar and euro relative to US dollar
Dollar weakens 30% against other currencies
Dollar weakens 20% against other currencies
Dollar weakens 10% against other currencies
Dollar strengthens 10% against other currencies
Dollar strengthens 20% against other currencies
Dollar strengthens 30% against other currencies
Impact on profit after
tax for the year ended
Impact on net assets
2022
$m
0.2
0.1
0.1
(0.1)
(0.1)
(0.2)
2021
$m
(45.3)
(30.2)
(15.1)
15.1
30.2
45.3
2022
$m
(13.5)
(9.0)
(4.5)
4.5
9.0
13.5
2021
$m
(64.0)
(42.7)
(21.3)
21.3
42.7
64.0
b) Interest rate risk
Some of the Group’s financial instruments, including cash and cash equivalents, certain financial assets at fair value and
borrowings, are exposed to movements in market interest rates.
The Group manages interest rate risk by primarily investing in short duration financial assets along with cash and cash
equivalents. The investment committee monitors the duration of these assets on a regular basis.
The Group also entered into bond futures contracts to manage the interest rate risk on bond portfolios.
The following table shows the modified duration at the reporting date of the financial instruments that are exposed to
movements in market interest rates. Modified duration is a commonly used measure of volatility which represents the
percentage change of the price of a security to yield. The Group believes gives a better indication than maturity of the likely
sensitivity of the portfolio to changes in interest rates.
180
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2 Risk management continued
Duration
<1 yr
1-2 yrs
2-3 yrs
3-4 yrs
31 December 2022
Fixed and floating rate debt securities
Syndicate loans
Cash and cash equivalents
Derivative financial instruments
Borrowings
Total
2 Risk management continued
$m
$m
$m
1,962.9 3,094.1 1,430.9
25.6
–
–
–
2,650.1 3,101.0 1,456.5
–
652.5
34.7
–
6.9
–
–
–
$m
441.2
–
–
–
(249.4)
191.8
4-5 yrs
$m
434.9
–
–
–
–
434.9
5-10 yrs
Total
$m
$m
1.5 7,365.5
32.5
–
652.5
–
34.7
–
(298.6)
(548.0)
(297.1) 7,537.2
Duration
<1 yr
1-2 yrs
2-3 yrs
31 December 2021
Fixed and floating rate debt securities
Syndicate loans
Cash and cash equivalents
Derivative financial instruments
Borrowings
Total
$m
1,938.5
–
591.8
7.3
–
2,537.6
$m
$m
2,624.4 1,033.2
7.8
–
–
–
2,624.4 1,041.0
–
–
–
–
3-4 yrs
$m
390.8
30.1
–
–
–
420.9
4-5 yrs
5-10 yrs
Total
$m
216.6
–
–
0.3
(249.2)
(32.3)
$m
$m
68.8 6,272.3
37.9
–
591.8
–
7.6
–
(298.4)
(547.6)
(229.6) 6,362.0
Borrowings consist of two items. The first is $250m of subordinated tier 2 debt raised in November 2016. This debt is due in
2026 and has annual interest of 5.875% payable in May and November of each year. The second comprises $300m of
subordinated tier 2 debt raised in September 2019. This debt is due in 2029 and has annual interest of 5.5% payable in March
and September each year.
Sensitivity analysis of yields
Changes in yields, with all other variables constant, would result in changes in the capital value of debt securities and syndicate
loans as well as subsequent interest receipts and payments. This would affect reported profits and net assets as indicated in
the table below:
Shift in yield (basis points)
150 basis point increase
100 basis point increase
50 basis point increase
50 basis point decrease
100 basis point decrease
Impact on profit after
income tax for the year
Impact on net assets
2022
$m
2021
$m
2022
$m
2021
$m
(179.0)
(119.3)
(59.7)
59.7
119.3
(124.1)
(82.8)
(41.4)
41.4
82.8
(179.0)
(119.3)
(59.7)
59.7
119.3
(124.1)
(82.8)
(41.4)
41.4
82.8
c) Price risk of assets and derivatives
Financial assets and derivatives that are recognised in the statement of financial position at their fair value are susceptible to
losses due to adverse changes in prices. This is referred to as price risk.
Financial assets include fixed and floating rate debt securities, syndicate loans, hedge funds, illiquid credit assets, equity
investments and derivative financial assets. The price of debt securities is affected by interest rate risk, as described above,
and also by issuer’s credit risk. The sensitivity to price risk that relates to the Group’s hedge fund, syndicate loans, illiquid
credit and equity investments is presented below.
Listed investments that are quoted in an active market are recognised in the statement of financial position at quoted bid price,
which is deemed to be approximate exit price. If the market for the investment is not considered to be active, then the Group
establishes fair value using valuation techniques (refer to note 16). This includes comparison of orderly transactions between
market participants, reference to the current fair value of other investments that are substantially the same, discounted cash
flow models and other valuation techniques that are commonly used by market participants.
www.beazley.com
Beazley | Annual report 2022
181
Notes to the financial statements continued
2 Risk management continued
Change in fair value of hedge funds,
equity funds and illiquid credit assets
30% increase in fair value
20% increase in fair value
10% increase in fair value
10% decrease in fair value
20% decrease in fair value
30% decrease in fair value
Impact on profit after
income tax for the year
Impact on net assets
2022
$m
2021
$m
2022
$m
2021
$m
230.6
153.7
76.9
(76.9)
(153.7)
(230.6)
242.2
161.5
80.7
(80.7)
(161.5)
(242.2)
230.6
153.7
76.9
(76.9)
(153.7)
(230.6)
242.2
161.5
80.7
(80.7)
(161.5)
(242.2)
d) Investment risk
The value of the Group’s investment portfolio is impacted by interest rate and market price risks, as described above. Managing
the Group’s exposures to these risks is an intrinsic part of the investment strategy. Beazley uses an Economic Scenario
Generator to simulate multiple simulations of financial conditions, to support stochastic analysis of asset risk. Beazley uses
these outputs to assess the value at risk (VAR) of its investments, at different confidence levels, including ‘1 in 200’, which
reflects Solvency II modelling requirements, and ‘1 in 10’, reflecting scenarios which are more likely to occur in practice. It is
assessed for investments in isolation and also in conjunction with the present value of our liabilities, to help us monitor and
manage asset risk for solvency and capital purposes. By its nature, stochastic modelling does not provide a precise measure of
risk, and Economic Scenario Generator outputs are regularly validated against actual market conditions, and Beazley also uses
a number of other, qualitative measures to support the monitoring and management of investment risk. These include stress
testing and scenario analysis.
Beazley’s investment strategy is developed by reference to an investment risk budget, approved annually by The Board. The
Solvency II internal model is used to monitor compliance with the budget, which limits the amount by which our reported annual
investment return may deviate from a predetermined target, at the 1 in 10 confidence level. In 2022, this permitted deviation
was set at † $200m. Additionally, a limit is specified for the net interest rate sensitivity of assets and liabilities combined and
investments are managed to ensure that this limit is not exceeded.
2.3 Credit risk
The risk arises when failure of another party to perform its financial or contractual obligations to the Group in a timely manner.
The Group accepts credit risk overall and recognizes credit risk is aligned to its appetite for insurance risk. The primary sources
of credit risk for the Group are:
• reinsurers – reinsurers may fail to pay valid claims against a reinsurance contract held by the Group;
• brokers and coverholders – counterparties fail to pass on premiums or claims collected or paid on behalf of the Group;
• investments – issuer default results in the Group losing all or part of the value of a financial instrument or a derivative
financial instrument; and
• cash and cash equivalents.
An approval system also exists for brokers with their credit and performance monitored. The investment committee has
established parameters for investment managers regarding the type, duration and quality of investments including credit ratings
acceptable to the Group. The performance of investment managers is regularly reviewed to confirm adherence to these
guidelines. The Group has developed processes to examine all reinsurers before entering into new business arrangements and
they receive periodic review of their continued relationship with Beazley. Reinsurance recoverables are reviewed regularly to
assess their collectability.
To assist in the understanding of credit risks, A.M. Best, Moody’s and Standard & Poor’s (S&P) ratings are used. These ratings
have been categorised below as used for Lloyd’s reporting:
Tier 1
Tier 2
Tier 3
Tier 4
A.M. Best
Moody’s
S&P
A++ to A-
Aaa to A3
AAA to A-
B++ to B- Baa1 to Ba3 BBB+ to BB-
B+ to CCC
B1 to Caa
C++ to C-
R, (U,S) 3
Ca to C
D, E, F, S
182
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2 Risk management continued
The following tables summarise the Group’s concentrations of credit risk:
31 December 2022
Financial assets at fair value
– fixed and floating rate debt securities
– syndicate loans
– equity funds
– hedge funds
– illiquid credit assets
– derivative financial instruments
Insurance receivables
Reinsurance assets
Other receivables
Cash and cash equivalents
Total
31 December 2021
Financial assets at fair value
– fixed and floating rate debt securities
– syndicate loans
– equity funds
– hedge funds
– illiquid credit assets
– derivative financial instruments
Insurance receivables
Reinsurance assets
Other receivables
Cash and cash equivalents
Total
Tier 1
$m
6,767.0
32.5
–
–
–
–
157.4
2,487.4
–
652.5
10,096.8
Tier 1
$m
5,517.1
37.9
–
–
–
–
177.0
1,829.4
–
589.7
8,151.1
Tier 2
$m
598.5
–
–
–
–
–
–
–
–
–
598.5
Tier 2
$m
755.2
–
–
–
–
–
–
–
–
0.3
755.5
Tier 3
$m
Tier 4
$m
Unrated
$m
Total
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
159.4
530.6
222.9
34.7
1,654.3
799.2
196.4
–
3,597.5
7,365.5
32.5
159.4
530.6
222.9
34.7
1,811.7
3,286.6
196.4
652.5
14,292.8
Tier 3
$m
Tier 4
$m
Unrated
$m
Total
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
209.6
478.2
277.9
7.6
1,519.1
557.0
106.7
1.8
3,157.9
6,272.3
37.9
209.6
478.2
277.9
7.6
1,696.1
2,386.4
106.7
591.8
12,064.5
The largest counterparty exposure within tier 1 is $3,715.8m of US treasuries (2021: $2,956.3m).
Financial investments falling within the unrated category comprise hedge funds and illiquid credit assets for which there is no
readily available market data to allow classification within the respective tiers. Additionally, insurance receivables are classified
as unrated, due to premium debtors not being credit rated with the exception of the CRI accrual element. At 31 December
2022, no cash and cash equivalents fell within the unrated category (2021: $1.8m). This was due to the Group transacting with
a bank in the US that did not have an external credit rating. Additionally the reinsurance share of unearned premium provision is
classified as unrated.
Insurance receivables and other receivables balances held by the Group have not been impaired, based on all evidence
available, and no impairment provision has been recognised in respect of these assets. Insurance receivables in respect of
coverholder business are credit controlled by third-party managers. We monitor third party coverholders’ performance and their
financial processes. These assets are individually impaired after considering information such as the occurrence of significant
changes in the counterparties’ financial position, patterns of historical payment information and disputes with counterparties.
An analysis of the overall credit risk exposure indicates that the Group has reinsurance assets that are impaired at the
reporting date.
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Beazley | Annual report 2022
183
Notes to the financial statements continued
2 Risk management continued
The total impairment in respect of the reinsurance assets, including reinsurers’ share of outstanding claims, at 31 December
2022 was as follows:
Balance at 1 January 2021
Impairment loss written back
Balance at 31 December 2021
Impairment loss recognised
Balance at 31 December 2022
Total
$m
14.8
(3.3)
11.5
17.8
29.3
The Group has insurance receivables and reinsurance assets that are past due at the reporting date. An aged analysis of these
is presented below:
31 December 2022
Insurance receivables
Reinsurance assets
31 December 2021
Insurance receivables
Reinsurance assets
Up to 30 days
past due
30-60 days
past due
60-90 days
past due
$m
102.0
24.7
$m
28.0
29.2
$m
16.6
8.9
Up to 30 days
past due
30-60 days
past due
60-90 days
past due
$m
79.3
55.6
$m
23.7
16.7
$m
16.0
9.9
Greater than
90 days past
due
$m
62.0
82.6
Greater than
90 days past
due
$m
33.4
81.9
Total
$m
208.6
145.4
Total
$m
152.4
164.1
The total impairment provision in the statement of financial position in respect of reinsurance assets past due (being
reinsurance recoverables due on paid claims) by more than 30 days at 31 December 2022 was $17.3m (2021: $2.1m). This
$17.3m provision in respect of overdue reinsurance recoverables is included within the total provision of $29.3m shown in the
table at the top of the page.
The Group believes that the unimpaired amounts that are past due more than 30 days are still collectable in full, based on
historic payment behaviour and analyses of credit risk.
2.4 Liquidity risk
Liquidity risk arises where cash may not be available to pay obligations. The Group is exposed to daily calls on its available
cash resources, principally from claims arising from its insurance business which is an industry norm. In the majority of the
cases, these claims are settled from the premiums received held as assets. Beazley avoids the risk of having insufficient liquid
assets to meet expected cash flow requirements.
The Group’s approach is to manage its liquidity position so that it can reasonably survive a significant individual or market loss
event (details of the Group’s exposure to realistic disaster scenarios are provided on pages 177 to 179. This means that the
Group maintains sufficient liquid assets, or assets that can be converted into liquid assets at short notice and without any
significant capital loss, to meet expected cash flow requirements. These liquid funds are regularly monitored using cash flow
forecasting to ensure that surplus funds are invested to achieve a higher rate of return. The Group also makes use of loan
facilities and borrowings, details of which can be found in note 25. Further information on the Group’s capital resources is
contained on pages 64 to 66.
184
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2 Risk management continued
The following is an analysis by business segment of the estimated timing of the net cash flows based on the net claims
liabilities1 balance held at 31 December:
31 December 2022
Cyber Risks
Digital
MAP Risks
Property Risks
Specialty Risks
Net claims liabilities
31 December 2021
Cyber Risks
Digital
MAP Risks
Property Risks
Specialty Risks
Net claims liabilities
Within 1 year
1-3 years
3-5 years
$m
219.4
70.2
294.5
343.9
520.8
1,448.8
$m
321.4
56.4
241.2
265.9
933.7
1,818.6
$m
112.2
10.7
73.1
69.9
584.0
849.9
Within 1 year
1-3 years
3-5 years
$m
184.4
58.1
270.4
321.8
463.4
1,298.1
$m
264.5
51.1
230.5
258.5
910.4
1,715.0
$m
92.0
9.9
69.5
68.3
576.2
815.9
Greater than
5 years
$m
30.3
1.4
44.5
45.3
656.3
777.8
Greater than
5 years
$m
23.6
1.1
40.2
41.7
634.1
740.7
Total
$m
683.3
138.7
653.3
725.0
2,694.8
4,895.1
Total
$m
564.5
120.2
610.6
690.3
2,584.1
4,569.7
1 For a breakdown of net claims liabilities refer to note 24.
The following table is an analysis of the net contractual cash flows based on all the liabilities held at 31 December:
31 December 2022
Net claims liabilities
Borrowings
Lease liabilities
Other payables
31 December 2021
Net claims liabilities
Borrowings
Lease liabilities
Other payables
Within 1 year
1,448.8
31.2
9.6
1,527.5
Within 1 year
1,298.1
31.2
10.6
1,141.3
1-3 years
1,818.6
62.4
20.8
–
1-3 years
1,715.0
62.4
22.2
–
3-5 years
849.9
295.4
7.7
–
3-5 years
815.9
310.1
17.4
–
Greater than
5 years
777.8
327.9
37.3
–
Greater than
5 years
740.7
344.4
47.0
–
Weighted
average term
to settlement
(years)
$m
2.0
1.3
1.8
1.7
3.6
Weighted
average term
to settlement
(years)
$m
1.9
1.3
1.8
1.7
3.7
Total
4,895.1
716.9
75.4
1,527.5
Total
4,569.7
748.1
97.2
1,141.3
The next two tables summarise the carrying amount at reporting date of financial instruments analysed by maturity date.
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Beazley | Annual report 2022
185
Notes to the financial statements continued
2 Risk management continued
Maturity
31 December 2022
Fixed and floating rate debt securities
Syndicate loans
Derivative financial instruments
Cash and cash equivalents
Insurance receivables
Other receivables
Other payables
Borrowings
Total
<1 yr
1-2 yrs
2-3 yrs
3-4 yrs
4-5 yrs 5-10 yrs
Total
$m
1,854.9
–
34.7
652.5
1,811.7
196.4
(1,527.5)
–
3,022.7
$m
2,651.4
6.9
–
–
–
–
–
–
2,658.3
$m
1,676.5
25.6
–
–
–
–
–
–
1,702.1
$m
431.0
–
–
–
–
–
–
(249.4)
181.6
$m
652.8
–
–
–
–
–
–
–
652.8
$m
98.9
–
–
–
–
–
–
(298.6)
(199.7)
$m
7,365.5
32.5
34.7
652.5
1,811.7
196.4
(1,527.5)
(548.0)
8,017.8
31 December 2021
Fixed and floating rate debt securities
Syndicate loans
Derivative financial instruments
Cash and cash equivalents
Insurance receivables
Other receivables
Other payables
Borrowings
Total
<1 yr
1-2 yrs
$m
1,675.6
–
7.6
591.8
1,696.1
106.7
(1,141.3)
–
2,936.5
$m
2,316.7
–
–
–
–
–
–
–
2,316.7
2-3 yrs
$m
953.5
7.8
–
–
–
–
–
–
961.3
3-4 yrs
$m
706.8
30.1
–
–
–
–
–
–
736.9
4-5 yrs 5-10 yrs
Total
$m
361.9
–
–
–
–
–
–
(249.2)
112.7
$m
257.8
6,272.3
–
37.9
–
7.6
–
591.8
–
1,696.1
106.7
–
– (1,141.3)
(547.6)
7,023.5
(298.4)
(40.6)
Illiquid credit assets, hedge funds and equity funds are not included in the maturity profile because the maturity profiles of
these asset classes cannot be determined with any degree of certainty.
The Group makes additional interest payments for borrowings. Further details are provided in notes 8 and 25.
2.5 Capital management
The Group follows a risk-based approach to determine the amount of capital required to support its activities. Recognised
stochastic modelling techniques are used to measure risk exposures, and capital to support business activities is allocated
according to risk profile. Stress and scenario analysis is regularly performed and the results are documented and reconciled to
The Board’s risk appetite where necessary.
The Group has several requirements for capital, including:
• to support underwriting at Lloyd’s through the syndicates in which it participates, being 2623, 3622, 3623 and 4321. This is
based on the Group’s own individual capital assessment. It may be provided in the form of either the Group’s cash,
investments, debt facilities, or letter of credit;
• to support underwriting in Beazley Insurance Company, Inc., Beazley America Insurance Company, Inc., and Beazley NewCo
Captive Company, Inc. in the US;
• to support underwriting in Beazley Insurance dac in Europe; and
• to support strategic acquisitions and investments.
186
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2 Risk management continued
All entities within the Group have been in compliance with externally imposed capital requirements during the year.
The Group uses letters of credit (LOC) available under a syndicated short term banking facility led by Lloyds Banking Group plc
to support Funds at Lloyd’s (FAL) requirements. Lloyd’s of London apply certain criteria to banks issuing LOCs as FAL, including
minimum credit rating requirements and counterparty limits. Should any of the banks on the existing LOC facility breach Lloyd’s
of London requirements, the Group might be asked to replace the LOC provided with alternative eligible issuer(s) and/or assets
meeting Lloyd’s requirements. The creditworthiness of the counterparties on the facility is monitored by the Group on an
ongoing basis.
The Group considers Shareholders' Funds, Tier 2 subordinated debt and letters of credit to be the primary sources of capital for
the Group. For more detail on the value of capital managed and how its value has changed in the year, please see pages 64 to
66.
The Internal Model Solvency Capital Requirement is a dedicated quantitative review of syndicate models and it sets outs to be a
key input to the Lloyd’s Internal Model.
The Board operates a progressive dividend strategy, intending to grow the dividend each year but recognising that some
earnings fluctuations are to be expected. When determining the level of the dividend, The Board considers the Group's capital
position, future investment and growth opportunities and our ability to generate cash flows. Dividends are typically paid on an
annual basis to align with the Group's capital planning cycle. Our capital management strategy is to carry some surplus capital
to enable us to take advantage of growth opportunities which may arise. At 31 December 2022, we have surplus capital of 44%
of ECR (on a Solvency II basis), above our preferred target range of 15% to 25% of ECR. The capital base has been
strengthened following the recent equity raise to enable us to continue to pursue our sustainable long-term growth strategy,
particularly in opportunities identified in Property Risks.
2.6 Company risk
The Group’s parent company is exposed to the same interest rate and liquidity risk exposure experienced on its mutual
borrowings with the Group. The Group’s exposure can be seen in sections 2.3b and 2.7. The company also experiences
operational, regulatory and legal risks as defined in section 2.4 and 2.6.
www.beazley.com
Beazley | Annual report 2022
187
Notes to the financial statements continued
3 Segmental analysis
a) Reporting Segments
Segment information is presented based on the Group’s management and internal reporting structures, which represent the
level at which financial information is reported, performance is analysed and resources are allocated by the Group’s Executive
Committee, being the chief operating decision maker as defined in IFRS 8.
In March 2022, the Group updated its underwriting team structure with the creation of four underwriting divisions: Cyber Risks,
Marine, Accident and Political (MAP) Risks, Property Risks and Specialty Risks.
From January 2022, the Group began separately reporting the performance of the Digital division, following the creation of that
team in 2021.
Accordingly the Group has determined that its reporting segments are now as follows:
Cyber Risks
This segment underwrites cyber and technology risks.
Digital
This segment underwrites a variety of marine, contingency and SME liability risks through digital channels such as e-trading
platforms and broker portals.
MAP Risks
This segment underwrites marine, portfolio underwriting and political and contingency business.
Property Risks
This segment underwrites first party property risks and reinsurance business.
Specialty Risks
This segment underwrites a wide range of liability classes, including employment practices risks and directors and officers, as
well as healthcare, lawyers and international financial institutions.
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3 Segmental analysis continued
b) Segment information
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Those items that are allocated on a reasonable basis, including net investment income, are split based
on each segment’s capital requirements which is taken from the Group’s most up to date business plan.
Finance costs and taxation have not been allocated to operating segments as these items are determined at a consolidated
level and do not relate to operating performance.
As a result of the changes in reporting segments, prior period comparative information has been re-presented in accordance
with the requirements of IFRS 8.
2022
Gross premiums written
Net premiums written
Net earned premiums
Net investment loss
Other income
Revenue
Net insurance claims
12 months ended 31 December 2022
Cyber Risks
Digital MAP Risks
$m
1,156.1
832.3
783.9
(34.5)
7.9
757.3
$m
204.9
168.8
163.4
(8.7)
2.3
157.0
$m
1,107.8
777.0
726.5
(20.5)
1.0
707.0
Property
Risks
$m
859.8
687.9
Specialty
Risks
$m
1,940.1
1,410.2
Total
$m
5,268.7
3,876.2
663.4
1,277.0
3,614.2
(27.1)
7.4
643.7
(88.9)
13.5
1,201.6
(179.7)
32.1
3,466.6
432.1
74.4
312.1
403.2
734.6
1,956.4
Expenses for the acquisition of insurance contracts
Administrative expenses
Foreign exchange loss
Expenses
155.7
34.5
5.2
627.5
47.8
19.3
1.1
142.6
232.2
66.3
4.8
615.4
170.9
74.4
4.4
652.9
345.5
109.2
8.5
1,197.8
952.1
303.7
24.0
3,236.2
Segment result
Finance costs
Profit before income tax
Income tax expense
Profit after income tax
Claims ratio
Expense ratio
Combined ratio
Segment assets and liabilities
Segment assets
Segment liabilities
Net assets
129.8
14.4
91.6
(9.2)
3.8
55 %
24 %
79 %
46 %
41 %
87 %
43 %
41 %
84 %
61 %
37 %
98 %
57 %
36 %
93 %
230.4
(39.4)
191.0
(30.2)
160.8
54 %
35 %
89 %
2,964.1
(2,244.6)
719.5
461.5
(359.3)
102.2
2,258.4
(1,980.6)
277.8
2,370.8
(1,920.3)
450.5
7,044.2
(6,020.7)
1,023.5
15,099.0
(12,525.5)
2,573.5
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Beazley | Annual report 2022
189
Notes to the financial statements continued
3 Segmental analysis continued
2021
Gross premiums written
Net premiums written
Net earned premiums
Net investment income
Other income
Gain from sale of business1
Revenue
12 months ended 31 December 2021 (re-presented)
Cyber Risks
Digital
MAP Risks
$m
814.3
624.8
499.7
14.5
4.6
–
518.8
$m
190.8
166.2
149.3
3.6
1.9
–
154.8
$m
897.5
671.5
613.3
17.0
2.7
54.4
687.4
Property
Risks
$m
812.6
573.1
Specialty
Risks
$m
1,903.7
1,476.8
Total
$m
4,618.9
3,512.4
521.7
1,363.3
3,147.3
22.6
7.5
–
551.8
58.7
11.5
–
1,433.5
116.4
28.2
54.4
3,346.3
Net insurance claims
326.9
56.1
252.5
335.4
855.3
1,826.2
Expenses for the acquisition of insurance contracts
Administrative expenses
Foreign exchange gain
Expenses
Segment result
Finance costs
Profit before income tax
Income tax expense
Profit for the year attributable to equity shareholders
Claims ratio
Expense ratio
Combined ratio
Segment assets and liabilities
Segment assets
Segment liabilities
Net assets
100.7
29.0
1.2
42.2
15.6
0.3
206.8
59.2
1.4
149.4
66.9
1.3
322.7
112.3
3.0
821.8
283.0
7.2
457.8
114.2
519.9
553.0
1,293.3
2,938.2
61.0
40.6
167.5
(1.2)
140.2
65 %
26 %
91 %
37 %
39 %
76 %
41 %
44 %
85 %
64 %
42 %
106 %
63 %
32 %
95 %
408.1
(38.9)
369.2
(60.5)
308.7
58 %
35 %
93 %
2,289.7
(1,737.8)
551.9
432.1
(322.7)
109.4
1,844.6
(1,599.6)
245.0
2,244.5
(1,809.8)
434.7
5,996.5
(5,206.7)
789.8
12,807.4
(10,676.6)
2,130.8
1 The gain from sale of business relates to the sale of the Beazley Benefits business in the second half of 2021. A net gain of $54.4m was recognised, following
the receipt of gross proceeds of $56.7m and recognised closing costs of $2.3m. Further details can be found in note 5b of Beazley’s 2021 Annual report and
accounts.
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3 Segmental analysis continued
c) Information about geographical areas
The Group’s generates revenue in multiple geographies, an overview of which is set out below. UK earned premium in the
analysis below represents all risks placed at Lloyd’s; US earned premium represents all risks placed at the Group’s US
insurance companies, Beazley Insurance Company, Inc. and Beazley America Insurance Company, Inc; and Europe earned
premium represents all risks placed at the Group’s European insurance company, Beazley Insurance dac. An analysis of gross
premiums written split geographically by placement of risk and by reportable segment is provided in note 2 on page 179.
Net earned premiums
UK (Lloyd’s)
US (Non-Lloyd’s)
Europe (Non-Lloyd’s)
Assets by Geography
UK (Lloyd's)
US (Non-Lloyd’s)
Europe (Non-Lloyd’s)
Segment assets are allocated based on where the assets are located.
4 Net investment income
Interest and dividends on financial investments at fair value through profit or loss
Interest on cash and cash equivalents
Net realised (losses)/gains on financial investments at fair value through profit or loss
Net unrealised fair value (losses) on financial investments at fair value through profit or loss
Investment income from financial investments
Investment management expenses
2022
$m
2021
$m
3,008.7
437.6
167.9
3,614.2
2,550.6
477.1
119.6
3,147.3
2022
$m
2021
$m
13,256.7
1,281.5
560.8
15,099.0
11,267.5
1,164.9
375.0
12,807.4
2022
$m
101.1
0.5
(7.6)
(266.8)
(172.8)
(6.9)
(179.7)
2021
$m
76.5
–
79.8
(34.0)
122.3
(5.9)
116.4
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Beazley | Annual report 2022
191
Notes to the financial statements continued
5 Other Income
Commissions received by Beazley service companies
Profit commissions from syndicates
Agency fees from syndicate 623
Other income
2022
$m
20.0
7.2
4.0
0.9
32.1
2021
$m
19.4
3.8
3.9
1.1
28.2
Profit commissions
There is an agreement between syndicate 623 and Beazley Furlonge Limited (the managing agent) where the syndicate
remunerates Beazley for writing business in parallel with syndicate 2623. As such, profitability of 623 is a performance criterion
for this contract. The transaction price represents a fixed percentage on profit by YOA. No other variable considerations (for
example: discounts, rebates, refunds, incentives) are attached. The value of a transaction price is derived at each reporting
period from the actual profit syndicate 623 has made to date and therefore represents the most likely amount of consideration
at the reporting date.
Commissions received from service companies
Commission is payable to the Group by syndicate 623 due to Group service companies writing business on behalf of the
syndicate. While the commercial purpose of the contract is to pass business to syndicate 623, the remuneration is triggered by
incurring expenses, irrespective of volume of business gained. The performance criterion is deemed to be the realisation of
expenses.
6 Auditor's Remuneration
Operating expenses include amounts receivable by the Group’s auditors in:
– audit of the Group’s annual report & accounts
– audit of subsidiaries pursuant to legislation
– audit-related assurance services
– other non-audit services
2022
$m
2021
$m
1.7
3.1
1.4
0.7
6.9
0.8
1.9
1.1
0.6
4.4
Other than the fees disclosed above, no other fees were paid to the company’s auditor. Audit-related assurance services
primarily comprise the review and audit of regulatory reporting pursuant to legislation and review of the Group’s condensed
interim financial statements.
7 Employee benefit expenses
Wages and salaries
Short term incentive payments
Social security
Share based remuneration
Pension costs1
Recharged to syndicate 623
2022
$m
215.8
78.1
30.0
14.7
17.0
355.6
(53.1)
302.5
2021
$m
199.1
82.5
26.6
11.6
15.7
335.5
(48.5)
287.0
1 Pension costs primarily include contributions made under the defined contribution scheme. Further information on the defined benefit pension scheme can be
found in note 27.
The average number of employees for 2022 was 1,808 (2021: 1,617). An overview of employees by type is included on page
25.
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8 Finance costs
Interest expense on financial liabilities
Interest expense on lease liabilities
Equity raise costs not charged to share premium
9 Income tax expense
Current tax expense
Current tax expense
Prior year adjustment
Deferred tax expense
Origination and reversal of temporary differences
Impact of change in UK/US tax rates
Prior year adjustments
Income tax charge
2022
$m
35.6
3.1
0.7
39.4
2021
$m
35.2
3.7
–
38.9
2022
$m
53.2
(9.9)
43.3
(12.0)
(1.0)
(0.1)
(13.1)
30.2
2021
$m
64.0
(7.5)
56.5
4.4
(0.6)
0.2
4.0
60.5
Reconciliation of tax expense
The Group makes the majority of its profit in Ireland, the UK and the US. The weighted average of statutory tax rates applied to
the profits earned in each country in which the Group operates is 21.2% (2021: 17.2%), whereas the tax charged for the year
ending 31 December 2022 as a percentage of profit before tax is 15.8% (2021: 16.4%). The reasons for the difference are
explained below:
Profit before tax
Tax calculated at the weighted average of statutory tax rate
Effects of:
– non-deductible expenses
– tax relief on remuneration
– over provided in prior years
– change in UK/US tax rates1
Tax charge for the period
2022
$m
191.0
40.6
1.8
(1.2)
(10.0)
(1.0)
30.2
2022
%
21.2
1.0
(0.6)
(5.2)
(0.5)
15.8
2021
$m
369.2
63.3
3.5
1.6
(7.3)
(0.6)
60.5
2021
%
–
17.2
1.0
0.4
(2.0)
(0.2)
16.4
1 The Finance Act 2021, which provides for an increase in the UK corporation tax rate from 19% to 25% effective from 1 April 2023 received Royal Assent on 10
June 2021. This tax rate change to 25% will increase the Group’s future current tax charge. It was reflected in the calculation of the deferred tax balances as at
31 December 2021 for relevant temporary differences expected to reverse on or after 1 April 2023.
The Tax Act (the Tax Cuts and Jobs Act) was signed into law in the US in December 2017. The Tax Act includes base erosion
anti-avoidance tax provisions (the ‘BEAT’). We have performed an assessment for our intra-group transactions potentially in
scope of BEAT. The application of this new BEAT legislation is still uncertain for some types of transaction and we are keeping
developments under review. With support from external advisors, we believe that the BEAT impact on the Group is not
significant. No amount has been provided for BEAT liabilities in these financial statements (2021: nil). The ultimate outcome
may differ and if any additional amounts did fall within the scope of the BEAT, incremental tax at 10% might arise on some or all
of those amounts.
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Beazley | Annual report 2022
193
Notes to the financial statements continued
9 Income tax expense continued
The Group is monitoring the impact of the implementation of a Global Minimum Tax Rate of 15%, expected to apply in some
countries from 2024. Our initial assessment is that the impact will not be significant as the Group mainly operates in
jurisdictions with a statutory tax rate above 15%. We anticipate some additional tax arising in Ireland if profits are taxed at 15%
rather than 12.5%.
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity:
Current tax: share based payments
Deferred tax: share based payments
10 Earnings per share
Basic (cents)
Diluted (cents)
Basic (pence)
Diluted (pence)
Basic
2022
$m
(0.6)
(3.1)
(3.7)
2021
$m
–
3.9
3.9
2022
26.3c
25.9c
21.1p
20.8p
2021
50.9c
50.3c
37.0p
36.5p
Basic earnings per share are calculated by dividing profit after tax of $160.8m (2021: $308.7m) by the weighted average
number of shares in issue during the year of 611.7m (2021: 606.0m). The shares held in the Beazley plc Employee Benefit
Trust of 5.7m (2021: 3.1m) have been excluded from the calculation, until such time as they vest unconditionally with the
employee.
Diluted
Diluted earnings per share are calculated by dividing profit after tax of $160.8m (2021: $308.7m) by the adjusted weighted
average number of shares of 619.7m (2021: 614.3m). The adjusted weighted average number of shares assumes conversion
of dilutive potential ordinary shares, being shares from the equity settled compensation schemes. The shares held in the
Employee Benefit Trust of 5.7m (2021: 3.1m) have been excluded from the calculation, until such time as they vest
unconditionally with the employees. Further details of equity compensation plans can be found in note 23 as well as in the
Directors’ remuneration report on pages 112 to 139.
11 Dividends per share
An interim dividend of 13.5p covering the whole of 2022 (2021: 12.9p) will be payable on 28 April 2023 to Beazley plc
shareholders registered on 10 March 2023. The company expects the total amount to be paid in respect of the interim dividend
to be approximately £91m (2021: £78m). These financial statements do not provide for the interim dividend as a liability.
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12 Intangible assets
Cost
Balance at 1 January 2021
Disposal
Other additions
Foreign exchange (loss) / gain
Balance at 31 December 2021
Balance at 1 January 2022
Disposal
Additions
Foreign exchange (loss)
Balance at 31 December 2022
Amortisation and impairment
Balance at 1 January 2021
Disposal
Amortisation for the year
Foreign exchange gain / (loss)
Balance at 31 December 2021
Balance at 1 January 2022
Disposal
Amortisation for the year
Foreign exchange gain
Balance at 31 December 2022
Carrying amount
31 December 2022
31 December 2021
Goodwill
$m
Syndicate
capacity
$m
72.0
–
–
–
72.0
72.0
–
–
–
72.0
(10.0)
–
–
–
(10.0)
(10.0)
–
–
–
(10.0)
10.7
–
–
–
10.7
10.7
–
3.0
–
13.7
–
–
–
–
–
–
–
–
–
–
IT
development
costs
$m
Renewal
rights
$m
109.2
(10.4)
17.7
(1.1)
115.4
115.4
–
19.7
(9.8)
125.3
(73.6)
10.4
(12.4)
1.3
(74.3)
(74.3)
–
(13.6)
6.4
(81.5)
61.3
–
–
0.1
61.4
61.4
–
–
(2.5)
58.9
(52.6)
–
(8.1)
(0.3)
(61.0)
(60.8)
–
(0.7)
2.6
(58.9)
Total
$m
262.5
(10.4)
17.7
(1.0)
268.8
268.8
–
22.7
(12.3)
279.2
(136.2)
10.4
(20.5)
1.0
(145.3)
(145.1)
–
(14.3)
9.0
(150.4)
Licences
$m
9.3
–
–
–
9.3
9.3
–
–
–
9.3
–
–
–
–
–
–
–
–
–
–
62.0
62.0
13.7
10.7
9.3
9.3
43.8
41.1
–
0.4
128.8
123.5
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Beazley | Annual report 2022
195
Notes to the financial statements continued
12 Intangible assets continued
Impairment tests
Goodwill, syndicate capacity and US insurance authorisation licences are deemed to have indefinite life as they are expected to
have value in use that does not erode or become obsolete over the course of time. Consequently, they are not amortised but
annually tested for impairment. For the purpose of impairment testing, they are allocated to the Group’s cash-generating units
(CGUs) as follows:
2022
Goodwill
Capacity
Licences
Total
2021
Goodwill
Capacity
Licences
Total
Cyber Risks
Digital
MAP Risks
Property
Risks
Specialty
Risks
$m
1.7
3.1
2.8
7.6
$m
0.3
0.6
0.6
1.5
$m
31.9
3.0
–
34.9
$m
25.7
3.7
1.9
31.3
$m
2.4
3.3
4.0
9.7
Cyber Risks
Digital
MAP Risks
Property
Risks
Specialty
Risks
$m
1.7
1.8
2.8
6.3
$m
0.3
0.4
0.6
1.3
$m
31.9
2.6
–
34.5
$m
25.7
3.3
1.9
30.9
$m
2.4
2.6
4.0
9.0
Total
$m
62.0
13.7
9.3
85.0
Total
$m
62.0
10.7
9.3
82.0
Value in use is defined as the present value of the future cash flows expected to be derived from the CGU and represents
recoverable amount for goodwill. It is estimated by discounting future cash flows sourced from financial budgets approved by
management which cover specific estimates for a five year period. The key assumptions used in the preparation of future cash
flows are: premium growth rates,combined ratios, retention rates and expected future market conditions.
A discount rate, based on weighted average cost of capital (WACC) of 10.9% (2021: 9%) has been applied to projected future
cash flows. This has been calculated using independent measures of the risk-free rate of return and is indicative of the Group’s
risk profile relative to the market. The impairment test for goodwill confirms that no impairment is required.
The Group has taken the following measures to ensure that the key assumptions used in deriving value in use for each CGU
considers the potential adverse effects of these potential changes in economic and regulatory environments:
• Projected combined ratio – The Group has used projected combined ratios consistent with its five year financial budgets.
Sensitivity testing (a 5% increase in combined ratio for all classes and all years) has been performed to model the impact of
reasonably possible changes in combined ratio to our base case impairment analysis and headroom. Within these ranges,
the recoverable amounts remain supportable.
• Future market conditions – to test the segment’s sensitivity to variances (including those caused by the factors listed above)
from forecast profits, the discount rate has been flexed to 5% above and 5% below the central assumption. Within this range,
the recovery of goodwill was stress tested and remains supportable across all CGUs. Headroom was calculated in respect of
the value in use of all the Group’s other intangible assets.
• Premium growth rates/Retention rates – The Group has used a terminal growth rate of 0% (2021: 0%) to extrapolate
projections beyond the covered five year period.
The Group’s intangible assets relating to syndicate capacity is allocated across all CGUs. The fair value of syndicate capacity
can be determined from the latest Lloyd's of London capacity auctions. Based upon the latest market prices, management
concludes that the fair value exceeds the carrying amount and as such no impairment is necessary.
US insurance authorisation licences represent the privilege to write insurance business in particular states in the US. Licences
are allocated to the relevant CGU. There is no active market for licences, therefore the recoverable amount is deemed to be the
fair value. As described above, a WACC discount rate applied to projected future cash flows sourced from management
approved budgets. Key assumptions are the same as those outlined above. Based upon all available evidence the results of
the testing indicate that no impairment is required.
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13 Plant and equipment
Cost
Balance at 1 January 2021
Additions
Disposals
Foreign exchange gain / (loss)
Balance at 31 December 2021
Balance at 1 January 2022
Additions
Foreign exchange (loss)
Balance at 31 December 2022
Accumulated Depreciation
Balance at 1 January 2021
Depreciation charge for the year
Disposals
Foreign exchange (loss)
Balance at 31 December 2021
Balance at 1 January 2022
Depreciation charge for the year
Foreign exchange gain / (loss)
Balance at 31 December 2022
Carrying amounts
31 December 2022
31 December 2021
Fixtures &
fittings
Computer
equipment
$m
$m
37.8
3.8
(9.7)
0.7
32.6
32.6
0.8
(1.3)
32.1
(22.9)
(2.3)
9.7
(0.5)
(16.0)
(16.0)
(2.8)
0.3
(18.5)
14.3
0.7
–
(0.1)
14.9
14.9
0.2
(0.5)
14.6
(9.5)
(2.6)
–
(0.2)
(12.3)
(12.3)
(0.5)
(0.5)
(13.3)
Total
$m
52.1
4.5
(9.7)
0.6
47.5
47.5
1.0
(1.8)
46.7
(32.4)
(4.9)
9.7
(0.7)
(28.3)
(28.3)
(3.3)
(0.2)
(31.8)
13.6
16.6
1.3
2.6
14.9
19.2
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Beazley | Annual report 2022
197
Notes to the financial statements continued
14 Investment in associates
Associates are those entities over which the Group has power to exert significant influence but which it does not control.
Significant influence is generally presumed if the Group has between 20% and 50% of voting rights.
Group
As at 1 January
Investment in CyberAcuView LLC
Share of loss
As at 31 December
The Group’s investment in associates consists of:
2022
Falcon Money Management Holdings Limited (and subsidiaries)
Pegasus Underwriting Limited
CyberAcu View
1 259 St Paul Street, Valletta, Malta.
2 Suite 126, 12/F Somptuex Central, 52-54 Wellington Street, Hong Kong
3 8130 Lakewood Main Street, Suite 103 #329. Lakewood Ranch, FL 34202
2022
$m
0.6
–
(0.2)
0.4
2021
$m
0.3
0.3
–
0.6
Country/region of
incorporation
% interest
held
Carrying value
$m
Malta1
Hong Kong2
USA3
25 %
33 %
13 %
—
—
0.4
0.4
The CyberAcuView LLC board is charged with governance over its affairs. The board is composed of individuals who are selected
by the investors. The Group has the ability to appoint a member to the board of CyberAcuView LLC to represent the Group’s
interest. As a result, the Group is deemed to have significant influence over CyberAcuView LLC and therefore this investment is
recognised as an associate.
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15 Deferred acquisition costs
Balance at 1 January
Additions
Amortisation charge
Balance at 31 December
16 Financial assets and liabilities
Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities.
Financial assets at fair value
Debt securities:
– Government issued
Corporate bonds
– Investment grade
– High yield
Syndicate loans
Total debt securities and syndicate loans
Equity funds
Hedge funds
Illiquid credit assets
Total capital growth assets
Total financial investments at fair value through statement of profit or loss
Derivative financial assets
Total financial assets at fair value
2022
$m
477.8
1,024.4
(952.1)
550.1
2021
$m
384.9
914.7
(821.8)
477.8
2022
$m
2021
$m
5,006.3
4,008.1
2,050.5
308.7
32.5
7,398.0
159.4
530.6
222.9
912.9
8,310.9
1,861.9
402.3
37.9
6,310.2
209.6
478.2
277.9
965.7
7,275.9
34.7
7.6
8,345.6
7,283.5
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Beazley | Annual report 2022
199
Notes to the financial statements continued
16 Financial assets and liabilities continued
Investment corporate bonds are rated BBB-/Baa3 or higher by at least one major rating agency, while high yield corporate bonds
have lower credit ratings. Hedge funds are investment vehicles pursuing alternative investment strategies, structured to have
minimal correlation to traditional asset classes. Equity funds are investment vehicles which invest in equity securities and
provide diversified exposure to global equity markets. Illiquid credit assets are investment vehicles that predominantly target
private lending opportunities, often with longer investment horizons. The fair value of these assets at 31 December 2022
excludes an unfunded commitment of $30.5m (2021: $40.5m).
The amounts expected to mature within and after one year are:
Assets
Within one year
After one year
Total
Liabilities
Within one year
After one year
Total
2022
$m
2021
$m
1,673.5
5,759.2
7,432.7
1,409.4
4,908.4
6,317.8
14.5
548.0
562.5
7.1
547.6
554.7
Our capital growth assets have no defined maturity dates and have thus been excluded from the above maturity table. However,
all $159.4m (2021: $209.6m) of equity funds could be liquidated within two weeks, $416.8m (2021: $378.1m) of hedge fund
assets within six months and the remaining $113.8m (2021: $100.0m) of hedge fund assets within 18 months, in normal
market conditions. Illiquid credit assets are not readily realisable and principal will be returned over the life of these assets,
which may be up to 12 years.
Financial liabilities
Tier 2 subordinated debt (2026)
Tier 2 subordinated debt (2029)
Derivative financial liabilities
Total financial liabilities
2022
$m
249.4
298.6
14.5
562.5
2021
$m
249.2
298.4
7.1
554.7
The Group has given a fixed and floating charge over certain of its investments and other assets to secure obligations to Lloyd’s
in respect of its corporate member subsidiary. Further details are provided in note 32.
Valuation hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a
whole. If the inputs used to measure the fair value of an asset or a liability could be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire measurement.
Level 1 – Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which
transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect
prices at which an orderly transaction would take place between market participants at the measurement date.
200
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16 Financial assets and liabilities continued
Level 2 – Valuations based on quoted prices in markets that are not active, or based on pricing models for which significant
inputs can be corroborated by observable market data, directly or indirectly (e.g. interest rates and exchange rates). Level 2
inputs include:
• Quoted prices for similar assets and liabilities in active markets;
• Quoted prices for identical or similar assets and liabilities in markets that are not active, the prices are not current, or price
quotations vary substantially either over time or among market makers, or in which little information is released publicly;
• Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves
observable at commonly quoted intervals, implied volatilities and credit spreads); and
• Market corroborated inputs. Included within level 2 are government bonds and treasury bills, equity funds and corporate
bonds which are not actively traded, hedge funds and senior secured loans.
Level 3 – Valuations based on inputs that are unobservable or for which there is limited market activity against which to
measure fair value. The availability of financial data can vary for different financial assets and is affected by a wide variety of
factors, including the type of financial instrument, whether it is new and not yet established in the marketplace, and other
characteristics specific to each transaction. To the extent that valuation is based on models or inputs that are unobservable in
the market, the determination of fair value requires more judgement. Accordingly the degree of judgement exercised by
management in determining fair value is greatest for instruments classified in level 3. The Group uses prices and inputs that
are current as of the measurement date for valuation of these instruments.
Our valuation approach for fair value assets and liabilities classified as level 2:
a) For the Group’s level 2 debt securities, our fund administrator obtains the prices used in the valuation from independent
pricing vendors. The independent pricing vendors derive an evaluated price from observable market inputs. These inputs are
verified in their pricing assumptions such as weighted average life, discount margins, default rates, and recovery and
prepayments assumptions for mortgage securities.
b) For our hedge funds , the pricing and valuation of each fund is undertaken by administrators in accordance with each
underlying fund’s valuation policy. Individual fund prices are communicated by the administrators to all investors via the monthly
investor statements. The fair value of the hedge fund portfolios are calculated by reference to the underlying net asset values of
each of the individual funds.
c) Subordinated debt and tier 2 subordinated debt fair value are based on quoted market prices.
Our valuation approach for fair value assets and liabilities classified as level 3:
a) Our illiquid credit fund investments are managed by third party managers (generally closed ended limited partnerships or
open ended funds). While the funds provide full transparency on their underlying investments, the investments themselves are
predominantly in private and unquoted instruments. The valuation techniques used by the fund managers to establish the fair
value of the underlying private/unquoted investments may incorporate discounted cash flow models or a more market-based
approach, whilst the main inputs might include discount rates, fundamental pricing multiples, recent transaction prices, or
comparable market information to create a benchmark multiple.
b) The syndicate loans are loans provided by our Group syndicates to the Central Fund at Lloyd’s in respect of the 2019 and
2020 underwriting years. These instruments are not tradeable and are valued using discounted cash flow models, designed to
appropriately reflect the credit and illiquidity risk of the instruments.
There were no changes in the valuation techniques during the year compared to those described in the Group's 2021 Annual
Report and Accounts.
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Beazley | Annual report 2022
201
Notes to the financial statements continued
16 Financial assets and liabilities continued
The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value
hierarchy.
2022
Financial assets carried at fair value
Fixed and floating rate debt securities
– Government issued
– Corporate bonds
– Investment grade
– High yield
Syndicate loans
Equity funds
Hedge funds
Illiquid credit assets
Derivative financial assets
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative financial liabilities
Financial liabilities not measured at fair value
Tier 2 subordinated debt (2029)
Tier 2 subordinated debt (2026)
Total financial liabilities measured at fair value
2021
Financial assets carried at fair value
Fixed and floating rate debt securities
– Government issued
– Corporate bonds
– Investment grade
– High yield
Syndicate loans
Equity funds
Hedge funds
Illiquid credit assets
Derivative financial assets
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative financial liabilities
Financial liabilities not measured at fair value
Tier 2 subordinated debt (2029)
Tier 2 subordinated debt (2026)
Total financial liabilities measured at fair value
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
4,022.5
983.8
–
5,006.3
893.8
34.2
–
159.4
–
–
34.7
5,144.6
1,156.7
274.5
–
–
530.6
–
–
2,945.6
–
–
32.5
–
–
222.9
–
255.4
2,050.5
308.7
32.5
159.4
530.6
222.9
34.7
8,345.6
14.5
–
–
–
14.5
265.9
240.3
506.2
–
–
–
–
14.5
265.9
240.3
520.7
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
3,513.2
494.9
–
4,008.1
802.8
82.1
–
209.6
–
–
7.6
4,615.3
7.1
–
–
7.1
1,059.1
320.2
–
–
478.2
–
–
2,352.5
–
334.6
279.0
613.6
–
–
37.9
–
–
277.9
–
315.8
–
–
–
–
1,861.9
402.3
37.9
209.6
478.2
277.9
7.6
7,283.5
7.1
334.6
279.0
620.7
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16 Financial assets and liabilities continued
The table above does not include financial assets and liabilities that are, in accordance with the Group’s accounting policies,
recorded at amortised cost, if the carrying amount of these financial assets and liabilities approximates their fair values at the
reporting date. Cash and cash equivalents have not been included in the table above; however, the full amount of cash and
cash equivalents would be classified under level 1 in both the current and prior year.
Transfers
The Group determines whether transfers have occurred between levels in the fair value hierarchy by assessing categorisation at
the end of the reporting period.
The following transfers between levels 1 & 2 for the period ended 31 December 2022 reflect the level of trading activities
including frequency and volume derived from market data obtained from an independent external valuation tool.
31 December 2022 vs 31 December 2021 transfer from level 2 to level 1
– Corporate Bonds – Investment grade
31 December 2022 vs 31 December 2021 transfer from level 1 to level 2
– Corporate Bonds – Investment grade
– Government issued
Level 1
$m
187.7
Level 2
$m
(187.7)
Level 1
$m
(307.2)
(213.7)
Level 2
$m
307.2
213.7
The values shown in the transfer tables above are translated at foreign exchange rate as at 31 December 2022.
Level 3 investment reconciliations
The table below shows a reconciliation from the opening balances to the closing balances of level 3 fair values.
As at 1 January
Purchases
Sales
Realised gain
Unrealised (loss) / gain
As at 31 December
2022
$m
315.8
13.0
(81.4)
13.2
(5.2)
255.4
2021
$m
268.5
87.1
(60.2)
12.1
8.3
315.8
Unconsolidated structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant
activities are directed by means of contractual arrangements.
As part of its standard investment activities the Group holds fixed interest investments in high yield bond funds, as well as
capital growth investments in equity funds, hedge funds and illiquid credit assets which in accordance with IFRS 12 are
classified as unconsolidated structured entities. The Group does not sponsor any of the unconsolidated structured entities. The
assets classified as unconsolidated structured entities are held at fair value on the statement of financial position.
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203
Notes to the financial statements continued
16 Financial assets and liabilities continued
As at 31 December the investments comprising the Group’s unconsolidated structured entities are as follows:
High yield bond funds
Equity funds
Hedge funds
Illiquid credit assets
Investments through unconsolidated structured entities
2022
2021
$m
308.7
159.4
530.6
222.9
1,221.6
$m
402.3
209.6
478.2
277.9
1,368.0
Apart from a relatively small exposure to high yield bond funds, our unconsolidated structured entity exposures fall within our
capital growth assets. The capital growth assets are held in investee funds managed by asset managers who apply various
investment strategies to accomplish their respective investment objectives. The Group’s investments in investee funds are
subject to the terms and conditions of the respective investee fund’s offering documentation and are susceptible to market
price risk arising from uncertainties about future values of those investee funds. Investment decisions are made after extensive
due diligence on the underlying fund, its strategy and the overall quality of the underlying fund’s manager and assets.
The right to sell or request redemption of investments in high yield bond funds, asset backed securities, equity funds and
hedge funds ranges in frequency from daily to semi-annually. The Group did not sponsor any of the respective structured
entities.
The Group’s maximum exposure to loss from its interests in investee funds is equal to the total fair value of its investments in
investee funds and unfunded commitments.
Currency exposures
The currency exposures of our financial assets held at fair value are detailed below:
2022
Financial assets at fair value
Fixed and floating rate debt securities
Syndicate loans
Equity Linked Funds
Hedge funds
Illiquid credit assets
Derivative financial assets
Total
2021
Financial assets at fair value
Fixed and floating rate debt securities
Syndicate loans
Equity funds
Hedge funds
Illiquid credit assets
Derivative financial assets
Total
UK £
$m
636.1
32.5
–
–
0.1
–
668.7
UK £
$m
465.0
37.9
–
–
0.5
–
503.4
CAD $
$m
365.9
–
–
–
–
–
365.9
CAD $
$m
341.4
–
–
–
–
–
341.4
EUR €
$m
–
–
–
–
46.2
–
46.2
EUR €
$m
–
–
–
–
39.8
–
39.8
Sub Total
$m
1,002.0
32.5
–
–
46.3
–
1,080.8
US $
$m
Total
$m
6,363.5
–
159.4
530.6
176.6
34.7
7,264.8
7,365.5
32.5
159.4
530.6
222.9
34.7
8,345.6
Sub Total
$m
US $
$m
Total
$m
806.4
37.9
–
–
40.3
–
884.6
5,465.9
–
209.6
478.2
237.6
7.6
6,398.9
6,272.3
37.9
209.6
478.2
277.9
7.6
7,283.5
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17 Derivative financial instruments
The Group uses a variety of derivative financial instruments, including both over-the-counter and exchange traded contracts.
These derivatives help the Group to manage exposure to market and foreign currency and/or interest rate risk on existing
assets or liabilities. The Group had the right and the intention to settle each contract on a net basis.
The assets and liabilities of these contracts at 31 December are detailed below:
Derivative financial instrument assets
Foreign exchange forward contracts
Bond futures contract
Derivative financial instrument liabilities
Foreign exchange forward contracts
Bond futures contract
2022
2021
Gross contract
amount
Market value
of derivative
position
Gross contract
amount
Market value
of derivative
position
$m
560.1
–
560.1
$m
34.7
–
34.7
$m
317.8
522.7
840.5
$m
7.3
0.3
7.6
2022
2021
Gross contract
amount
Market value
of derivative
position
Gross contract
amount
$m
549.7
–
549.7
$m
(14.5)
–
(14.5)
$m
351.4
141.2
492.6
Market
value
of derivative
position
$m
(7.1)
–
(7.1)
Foreign exchange forward contracts
The Group utilises over-the-counter foreign exchange forward agreements to economically hedge the foreign currency risk
resulting from transactions and balances held in currencies that are different to the functional currency of the Group.
Bond futures positions
The Group utilises bond futures transactions for the purpose of efficiently managing the term structure of its interest rate
exposures. A negative gross contract amount represents a notional short position that generates positive fair value as interest
rates rise.
18 Insurance receivables
Insurance receivables
2022
$m
2021
$m
1,811.7
1,811.7
1,696.1
1,696.1
These are receivables due within one year and relate to business transacted with brokers and intermediaries. All insurance
receivables are classified as loans and receivables and their carrying values approximate fair value at the reporting date.
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Beazley | Annual report 2022
205
Notes to the financial statements continued
19 Reinsurance assets
Reinsurers’ share of claims
Impairment provision
Reinsurers’ share of unearned premium reserve
2022
2021
$m
2,516.7
(29.3)
2,487.4
799.2
3,286.6
$m
1,840.9
(11.5)
1,829.4
557.0
2,386.4
The total impairment provision in the statement of financial position in respect of reinsurance assets past due by more than 30
days at 31 December was $17.3m (2021: $2.1m). This provision in respect of overdue reinsurance recoverables is included
within the total provision of $29.3m.
Operating expenses include an impairment loss / (write back) on reinsurance assets of $17.8m (2021: $(3.3)m).
20 Cash and cash equivalents
Group
Cash at bank and in hand
Company
Cash at bank and in hand
21 Share capital
Ordinary shares of 5p each
Issued and fully paid
Balance at 1 January
Issue of shares to satisfy employee share schemes
Equity raise
Balance at 31 December
2022
$m
2021
$m
652.5
591.8
2022
$m
3.4
2021
$m
0.3
2022
No. of
shares (m)
671.2
609.2
1.0
61.0
671.2
$m
46.6
42.9
0.1
3.6
46.6
2021
No. of
shares (m)
609.2
608.9
0.3
–
609.2
$m
42.9
42.9
–
–
42.9
There are no limits to the authorised share capital of the company.
On 16 November 2022, the company issued 60,959,017 new ordinary shares of 5 pence each, comprising the ‘Placing
Shares’, the ‘Retail Offer Shares’ and the ‘Subscription Shares’ (together, the ‘equity raise’). The shares issued represented
approximately 9.99% of the company's issued ordinary share capital on the day to prior to the equity raise. The shares were
issued at a price of 575 pence per share, representing a discount of 8.0% to the closing share price of 625 pence on 15
November 2022. In aggregate, the equity raise represented gross proceeds of £350.5m ($415.8m) and net proceeds of
£340.8m ($404.4m). The company incurred other transaction costs of $0.7m which were recognised in the consolidated
statement of profit or loss.
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21 Share capital continued
The 60,403,895 Placing Shares were issued for non-cash consideration by way of a 'cash box' structure structure. involving a
newly incorporated subsidiary of the company (‘Cash Box’). This structure involved the issue of ordinary and preference shares
by Cash Box to one of the investment banks advising the company in respect of the equity raise. These preference and ordinary
shares were subsequently acquired by the company and the preference shares were redeemed by Cash Box. The acquisition by
the company of the ordinary shares in Cash Box held by the investment bank resulted in the company securing over 90% of the
equity share capital of Cash Box. The company was therefore able to rely on Section 612 of the Companies Act 2006, which
provides relief from the requirements under Section 610 of the Companies Act 2006 to create a share premium account.
Therefore, no share premium was recorded in relation to the Placing shares.
The premium over the nominal value of the Placing shares was credited to a merger reserve and subsequently recognised in
retained earnings. The merger reserve created was determined to be distributable for the purposes of the Companies Act 2006.
Certain Directors of the company participated in the equity raise via the Placing Shares and the 26,086 Subscription Shares.
Retail investors were able to participate in the equity raise on the same terms as institutional investors via the retail offer,
which was hosted on the PrimaryBid platform. A total of 529,036 Retail Offer Shares were issued, and Share Premium of
$3.6m was recognised.
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207
Notes to the financial statements continued
22 Other reserves
Group
Balance at 1 January 2021
Share based payments
Tax on share option vestings
Transfer of shares to employees
Balance at 31 December 2021
Share based payments
Tax on share option vestings
Acquisition of own shares held in trust
Transfer of shares to employees
Balance at 31 December 2022
Company
Balance at 1 January 2021
Share based payments
Transfer of shares to employees
Balance at 31 December 2021
Share based payments
Acquisition of own shares held in trust
Transfer of shares to employees
Balance at 31 December 2022
Employee
share options
reserve
$m
16.0
11.0
(3.9)
(6.1)
17.0
15.7
3.1
–
(7.2)
28.6
Employee
share trust
reserve
$m
(25.4)
–
–
4.4
(21.0)
–
–
(17.8)
2.6
(36.2)
Employee
share options
reserve
$m
Employee
share trust
reserve
$m
(13.2)
11.0
(6.1)
(8.3)
15.7
–
(7.2)
0.2
(3.7)
–
4.4
0.7
–
(17.8)
2.6
(14.5)
Total
$m
(9.4)
11.0
(3.9)
(1.7)
(4.0)
15.7
3.1
(17.8)
(4.6)
(7.6)
Total
$m
(16.9)
11.0
(1.7)
(7.6)
15.7
(17.8)
(4.6)
(14.3)
The merger reserve is shown within the statement of changes in equity as a separate category and as such has been excluded
from the other reserves note.
The employee share options reserve is held in accordance with IFRS 2: Share-based payment. For more information refer to
note 23.2.
More information on the employee share trust reserve is included in note 23.
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23 Equity compensation plans
23.1 Employee share trust
Movements in employee share trust reserve
Balance at 1 January
Additions
Transfer of shares to employees
Balance at 31 December
2022
Number (m)
3.1
3.0
(0.4)
5.7
$m
21.0
17.6
(2.5)
36.1
2021
Number (m)
3.7
–
(0.6)
3.1
$m
25.4
–
(4.4)
21.0
The shares are owned by the employee share trust to satisfy awards under the Group’s deferred share plan, retention plan, one-
off share incentive plan and long term incentive plan (LTIP). These shares are purchased on the market and carried at cost.
On the third anniversary of an award the shares under the deferred share plan are transferred from the trust to the employee.
Under the retention plan, on the third anniversary, and each year after that up to the sixth anniversary, 25.0% of the shares
awarded are transferred to the employee.
The deferred share plan is recognised in the statement of profit or loss on a straight-line basis over a period of three years,
while the retention share plan is recognised in the statement of profit or loss on a straight-line basis over a period of six years.
23.2 Employee share option plans
The Group has a long term incentive plan (LTIP), one-off share incentive plan, deferred share plan, retention plan and save-as-
you-earn (SAYE) plan that entitle employees to purchase shares in the Group.
The terms and conditions of the grants are as follows:
Share option plan
LTIP
LTIP
SAYE (UK)
SAYE (US)
SAYE (Others)
Total share options outstanding
Grant date
20/10/2022
15/02/2022
10/02/2021
11/02/2020
12/02/2019
13/02/2018
20/10/2022
15/02/2022
10/02/2021
11/02/2020
28/03/2022
30/03/2021
30/03/2020
30/05/2022
02/06/2021
28/03/2022
No. of options
(m)
0.3
1.9
2.1
1.2
1.1
0.9
0.3
1.9
2.1
1.2
0.6
1.7
0.2
0.1
0.1
0.2
15.9
Vesting conditions
Contractual life
of options
Five year’s service + NAV +
minimum shareholding
requirement
10 years
Three year’s service + NAV
+ minimum shareholding
requirement
10 years
Three years’ service
N/A
Two years’ service
Two years’ service
N/A
N/A
Vesting conditions
In summary the vesting conditions are defined as:
• two years’ service – an employee has to remain in employment until the second anniversary from the grant date;
• three years’ service – an employee has to remain in employment until the third anniversary from the grant date; and
• NAV – the NAV growth, after adjusting for the effect of dividends, is greater than the risk-free rate of return plus a premium
per year.
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209
Notes to the financial statements continued
23 Equity compensation plans continued
Further details of equity compensation plans can be found in the Directors’ remuneration report on pages 112 to 139. The total
gain on Directors’ exercises of share option plans during the period was £0.2m (2021: £nil).
The number and weighted average exercise prices of share options are as follows:
Outstanding at 1 January
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 31 December
Exercisable at 31 December
2022
2021
Weighted
average
exercise
price (pence
per share)
80.7
74.5
124.3¹
54.5
56.5
–
Weighted
average
exercise
price (pence
per share)
63.5
58.0
25.0²
80.9
80.7
–
No. of
options
(m)
14.9
(3.2)
(1.1)
5.3
15.9
–
No. of
options
(m)
13.6
(5.8)
(0.3)
7.4
14.9
–
1 The weighted average share price at the point of exercise of these options was 498.7p.
2 The weighted average share price at the point of exercise of these options was 366.2p.
The range of exercise prices for options outstanding at the end of the year was £0 to £4.56 (2021: £0 to £4.56). The weighted
average remaining contractual life for the outstanding options at end of the year was 1.89 years (2021: 1.87 years).
The share option programmes allow Group employees to acquire shares of the company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in the employee share options reserve. The fair value of the
options granted is measured at grant date and spread over the period in which the employees become unconditionally entitled
to the options. The fair value of the options granted is measured using the Black Scholes model, taking into account the terms
and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest.
The following is a summary of the assumptions used to calculate the fair value of share options awarded during the period:
Share options charge to employee share options reserve
LTIP
Weighted average share price (pence per option)
Weighted average fair value (pence per option)
Weighted average exercise price (pence per option)
Average expected life of options
Expected volatility
Expected dividend yield
Average risk-free interest rate
SAYE
Weighted average share price (pence per option)
Weighted average fair value (pence per option)
Weighted average exercise price (pence per option)
Average expected life of options
Expected volatility
Expected dividend yield
Average risk-free interest rate
2022
$m
14.7
509.9
509.8
–
4.3yrs
38.9 %
–
3.0 %
435.7
143.4
350.6
3.3yrs
39.3 %
2.6 %
2.6 %
2021
$m
11.6
366.6
367.0
–
4.3yrs
36.4 %
–
0.4 %
348.7
95.0
287.8
3.3yrs
36.6 %
3.2 %
0.4 %
The expected volatility is based on historic volatility over a period of at least two years.
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24 Insurance liabilities and reinsurance assets
Gross
Claims reported and loss adjustment expenses
Claims incurred but not reported
Gross claims liabilities
Unearned premiums
Total insurance liabilities, gross
Recoverable from reinsurers
Claims reported and loss adjustment expenses
Claims incurred but not reported
Reinsurers' share of claims liabilities
Unearned premiums
Total reinsurers' share of insurance liabilities
Net
Claims reported and loss adjustment expenses
Claims incurred but not reported
Net claims liabilities
Unearned premiums
Total insurance liabilities, net
2022
$m
2021
$m
1,758.4
5,624.1
7,382.5
2,971.7
10,354.2
1,627.4
4,771.7
6,399.1
2,472.7
8,871.8
420.6
2,066.8
2,487.4
799.2
3,286.6
371.4
1,458.0
1,829.4
557.0
2,386.4
2022
$m
2021
$m
1,337.8
3,557.3
4,895.1
2,172.5
7,067.6
1,256.0
3,313.7
4,569.7
1,915.7
6,485.4
The gross claims reported, the loss adjustment liabilities and the liabilities for claims incurred but not reported are net of
recoveries from salvage and subrogation.
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211
Notes to the financial statements continued
24 Insurance liabilities and reinsurance assets continued
24.1 Movements in insurance liabilities and reinsurance assets
a) Claims and loss adjustment expenses`
Claims reported and loss adjustment expenses
Claims incurred but not reported
Unexpired risk reserve
Balance at 1 January
Gross
$m
1,627.4
4,771.7
–
6,399.1
2022
Reinsurance
$m
(371.4)
(1,458.0)
–
(1,829.4)
Net
$m
1,256.0
3,313.7
–
4,569.7
Gross
$m
1,507.3
3,855.3
91.5
5,454.1
2021
Reinsurance
$m
(262.2)
(1,034.4)
(9.0)
(1,305.6)
Net $m
1,245.1
2,820.9
82.5
4,148.5
Claims paid
(1,936.7)
371.7
(1,565.0)
(1,718.5)
378.9 (1,339.6)
Increase in claims
Arising from current year claims
Arising from prior year claims
Net exchange differences
Balance at 31 December
3,093.0
(46.8)
(126.1)
7,382.5
(1,003.9)
(85.9)
60.1
(2,487.4)
Claims reported and loss adjustment expenses
Claims incurred but not reported
Unexpired risk reserve
Balance at 31 December
1,758.4
5,624.1
–
7,382.5
(420.6)
(2,066.8)
–
(2,487.4)
2,089.1
(132.7)
(66.0)
4,895.1
1,337.8
3,557.3
–
4,895.1
2,911.5
(177.2)
(70.8)
6,399.1
(875.5)
(32.6)
5.4
1,829.4
1,627.4
4,771.7
–
6,399.1
(371.4)
(1,458.0)
–
(1,829.4)
2,036.0
(209.8)
(65.4)
4,569.7
1,256.0
3,313.7
–
4,569.7
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24 Insurance liabilities and reinsurance assets continued
b) Unearned premiums reserve
2022
2021
Balance at 1 January
Increase in the year
Release in the year
Balance at 31 December
Gross
Reinsurance
Net
Gross
$m
2,472.7
5,268.7
(4,769.7)
2,971.7
$m
(557.0)
(1,392.5)
1,150.3
(799.2)
$m
1,915.7
3,876.2
(3,619.4)
2,172.5
$m
1,924.3
4,618.9
(4,070.5)
2,472.7
Reinsurance
$m
(379.1)
(1,122.8)
Net
$m
1,545.2
3,496.1
944.9 (3,125.6)
1,915.7
(557.0)
24.2 Assumptions, changes in assumptions and claims reserve strength analysis
a) Process used to decide on assumptions
The peer review reserving process
Beazley uses a quarterly dual track process to set its reserves:
• the actuarial team uses several actuarial and statistical methods to estimate the ultimate premium and claims costs, with
the most appropriate methods selected depending on the nature of each class of business; and
• the underwriting teams concurrently review the development of the incurred loss ratio over time, work with our claims
managers to set reserve estimates for identified claims and utilise their detailed understanding of both risks underwritten
and the nature of the claims to establish an alternative estimate of ultimate claims cost, which is compared to the actuarially
established figures.
A formal internal peer review process is then undertaken to determine the reserves held for accounting purposes which, in
totality, are not lower than the actuarially established figure.
The Group has a consistent reserving philosophy, with initial reserves being set to include risk margins which may be released
over time as uncertainty reduces.
Actuarial assumptions
Chain-ladder techniques are applied to premiums, paid claims and incurred claims (i.e. paid claims plus case estimates). The
basic technique involves the analysis of historical claims development factors and the selection of estimated development
factors based on historical patterns. The selected development factors are then applied to cumulative claims data for each
underwriting year that is not yet fully developed to produce an estimated ultimate claims cost for each underwriting year.
Chain-ladder techniques are most appropriate for classes of business that have a relatively stable development pattern. Chain-
ladder techniques are less suitable in cases in which the insurer does not have a developed claims history for a particular class
of business, or for underwriting years that are still at immature stages of development where there is a higher level of
assumption volatility.
The Bornhuetter-Ferguson method uses a combination of a benchmark/market-based estimate and an estimate based on
claims experience. The former is based on a measure of exposure such as premiums; the latter is based on the paid or
incurred claims observed to date. The two estimates are combined using a formula that gives more weight to the experience-
based estimate as time passes. This technique has been used in situations where developed claims experience was not
available for the projection (e.g. recent underwriting years or new classes of business).
The expected loss ratio method uses a benchmark/market-based estimate applied to the expected premium and is used for
classes with little or no relevant historical data.
The choice of selected results for each underwriting year of each class of business depends on an assessment of the
technique that has been most appropriate to observed historical developments. In certain instances, this has meant that
different techniques or combinations of techniques have been selected for individual underwriting years or groups of
underwriting years within the same class of business. As such, there are many assumptions used to estimate general
insurance liabilities.
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213
Notes to the financial statements continued
24 Insurance liabilities and reinsurance assets continued
We also review triangulations of the paid/outstanding claim ratios as a way of monitoring any changes in the strength of the
outstanding claim estimates between underwriting years so that adjustments can be made to mitigate any subsequent over/
(under) reserving. To date, this analysis indicates no systematic change to the outstanding claim strength across underwriting
years.
Where significant large losses impact an underwriting year (e.g. first-party COVID-19 losses, the events of 11 September 2001,
the hurricanes in 2004, 2005, 2008, 2012, 2017, 2018 and 2019, the typhoons in 2018 and 2019, or the earthquakes in
2010, 2011 and 2017), the development is usually very different from the attritional losses. In these situations, the large loss
total is extracted from the remainder of the data and analysed separately by the respective claims managers using exposure
analysis of the policies in force in the areas affected.
Further assumptions are required to convert gross of reinsurance estimates of ultimate claims cost to a net of reinsurance level
and to establish reserves for unallocated claims handling expenses and reinsurance bad debt.
b) Major assumptions
The main assumption underlying these techniques is that the Group’s past claims development experience (with appropriate
adjustments for known changes) can be used to project future claims development and hence ultimate claims costs. As such
these methods extrapolate the development of premiums, paid and incurred losses, average costs per claim and claim
numbers for each underwriting year based on the observed development of earlier years.
Another assumption used within insurance liabilities is the estimation of an unexpired risk reserve (URR) for the expected value
of net claims and expenses attributable to the unexpired periods of policies in force at the balance sheet date which exceeds
the unearned premium reserve.
Throughout, judgement is used to assess the extent to which past trends may or may not apply in the future; for example, to
reflect changes in external or market factors such as economic conditions, public attitudes to claiming, levels of claims
inflation, premium rate changes, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy
conditions and claims handling procedures.
c) Changes in assumptions
As already discussed, general insurance business requires many different assumptions. The diagram below illustrates the main
categories of assumptions used for each underwriting year and class combination.
Further information on the calculation of loss reserves and the risks associated with them is provided in the risk disclosures
section in note 2. The risks associated with general insurance contracts are complex and do not readily lend themselves to
meaningful sensitivity analysis. Given the range of assumptions used, the Group’s profit or loss is relatively insensitive to
changes to an individual assumption used for an underwriting year/class combination.
The Group’s profit or loss is potentially more sensitive to a systematic change in assumptions that affect many classes, such
as judicial changes or when catastrophes produce more claims than expected. The impact of an unreported event could lead to
a significant increase in the Group’s loss reserves. The Group believes that the loss reserves established are adequate,
however a 20% increase in estimated losses would lead to a $1,476.5m (2021: $1,279.8m) increase in gross loss reserves
and a $979.0m (2021: $913.9m) increase in net loss reserves. The Group uses a range of risk mitigation strategies to reduce
such volatility including the purchase of reinsurance. In addition, the Group holds capital to absorb volatility.
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24 Insurance liabilities and reinsurance assets continued
d) Claims reserve strength analysis
The estimation of IBNR reserves for future claim notifications is subject to a greater degree of uncertainty than the estimation
of the outstanding claims already notified. This is particularly true for the Specialty Risk business, which will typically display
greater variations between initial estimates and final outcomes as a result of the greater degree of difficulty in estimating these
reserves. The estimation of IBNR reserves for other business written is generally subject to less variability as claims are
generally reported and settled relatively quickly.
As such, our reserving assumptions contain a reasonable margin for prudence given the uncertainties inherent in the insurance
business underwritten, particularly on the longer tailed Specialty Risk classes.
Since year end 2004, we have identified a range of possible outcomes for each class and underwriting year combination directly
from our internal model (previously our individual capital assessment (ICA)) process. Comparing these with our pricing
assumptions and reserving estimates gives our management team increased insight into our perceived reserving strength and
the relative uncertainties of the business written.
To illustrate the robustness of our reserves, the loss development tables below provide information about historical claims
development by the five segments – Cyber Risks, Digital, MAP Risks, Property Risks and Specialty Risks. The tables are by
underwriting year which in our view provides the most transparent reserving basis. We have supplied tables for both ultimate
gross claims and ultimate net claims.
The top part of the table illustrates how the Group’s estimate of the claims ratio for each underwriting year has changed at
successive year ends. The bottom half of the table reconciles the gross and net claims to the amount appearing in the
statement of financial position.
While the information in the table provides a historical perspective on the adequacy of the claims liabilities established in
previous years, users of these financial statements are cautioned against extrapolating past redundancies or deficiencies on
current claims liabilities. The Group believes that the estimate of total claims liabilities as at 31 December 2022 is adequate.
However, due to inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to
be adequate.
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215
Notes to the financial statements continued
24 Insurance liabilities and reinsurance assets continued
Gross ultimate claims
2012 ae
%
2013
%
2014
%
2015
%
2016
%
2017
%
2018
%
2019
%
2020
%
2021
%
Cyber Risks
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Digital
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
MAP Risks
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
57.5
58.0
52.8
48.3
47.8
45.7
43.2
60.1
59.8
32.5
21.5
20.9
19.8
19.7
60.7
63.5
58.3
56.8
55.2
53.7
53.5
60.7
60.8
52.8
44.4
42.4
41.2
41.0
38.7
64.1
64.2
26.9
24.2
22.3
21.8
21.6
21.5
58.5
56.8
52.7
52.0
49.1
48.3
48.0
47.9
56.7
57.7
53.0
54.8
50.5
62.0
60.8
50.5
40.6
43.6
61.0
62.7
76.1
76.7
77.6
55.1
55.2
45.8
42.0
42.5
41.1
55.2
56.3
41.5
31.2
27.1
27.9
63.9
56.9
55.1
54.3
51.5
51.9
62.9
61.9
55.6
60.3
68.4
64.9
65.3
64.9
69.3
64.9
59.4
36.7
28.7
25.4
25.4
23.1
23.2
23.2
58.5
49.1
47.6
48.4
54.0
52.5
52.3
52.7
52.2
67.8
68.3
69.5
74.3
74.1
71.7
69.0
71.5
71.8
66.5
71.5
72.2
48.8
24.7
23.2
20.3
18.0
17.5
17.5
17.5
57.7
51.5
44.8
43.3
43.6
43.0
42.1
41.4
41.2
40.6
2022
%
56.0
79.9
91.1
110.9
65.6
58.1
57.6
74.6
79.1
81.4
65.9
70.6
63.4
61.6
70.4
50.6
42.9
64.6
65.3
55.3
58.9
71.2
61.9
81.0
80.2
80.9
60.0
93.0
87.8
89.7
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24 Insurance liabilities and reinsurance assets continued
2012 ae
%
2013
%
2014
%
2015
%
2016
%
2017
%
2018
%
2019
%
2020
%
2021
%
2022
%
69.8
Total
92.5
100.1
106.0
106.7
106.2
105.4
75.4
84.3
84.6
82.0
81.7
70.4
64.7
58.4
54.9
72.0
75.7
73.9
72.8
74.5
Gross ultimate claims
Property Risks
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Specialty Risks
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Total
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Estimated total ultimate
losses ($m)
55.9
47.1
44.0
43.5
42.4
43.4
42.7
43.0
43.0
42.9
74.7
74.4
74.8
70.1
64.9
62.0
62.5
61.0
59.6
59.5
63.6
59.2
56.4
54.4
52.4
51.4
50.8
50.5
50.0
49.3
56.0
42.7
37.5
35.9
35.2
35.4
35.1
35.3
34.9
70.0
70.6
69.7
66.5
64.5
63.0
62.2
63.3
63.4
62.1
55.9
52.7
51.7
53.2
52.0
51.6
52.1
52.3
58.5
43.4
38.6
37.8
37.0
38.4
38.0
37.8
69.6
70.1
71.1
70.9
74.7
83.0
87.5
89.6
62.6
58.5
54.5
52.7
52.8
55.6
56.8
57.2
61.7
58.5
60.1
60.8
60.6
60.2
60.1
68.7
68.5
69.6
71.6
70.1
70.7
72.7
63.2
62.9
60.7
60.2
59.2
58.5
58.7
67.3
69.1
71.6
71.1
73.9
79.4
70.4
71.5
71.4
70.2
70.4
71.9
69.4
70.3
70.3
69.1
75.6
66.8
69.7
71.2
70.1
72.1
68.2
69.1
64.3
64.4
68.0
68.6
62.3
66.8
65.2
65.5
65.1
74.1
69.8
69.6
73.2
75.7
75.4
66.1
66.7
62.9
8,586.5
886.4
985.6
1,135.5
1,242.1
1,731.5
1,892.2
2,117.4
2,711.2
3,033.0
3,286.9
27,608.3
Less paid claims ($m)
(8,415.5)
(831.2)
(932.8)
(991.1)
(1,055.7)
(1,379.1)
(1,377.6)
(1,252.3)
(1,168.4)
(566.0)
(72.6)
(18,042.3)
Less unearned portion
of ultimate losses ($m)
Gross claims liabilities
($m)
–
–
–
–
–
–
–
–
(43.9)
(288.8)
(1,850.8)
(2,183.5)
171.0
55.2
52.8
144.4
186.4
352.4
514.6
865.1
1,498.9
2,178.2
1,363.5
7,382.5
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217
Notes to the financial statements continued
24 Insurance liabilities and reinsurance assets continued
Net ultimate claims
Cyber Risks
2012 ae
%
2013
%
2014
%
2015
%
2016
%
2017
%
2018
%
2019
%
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Digital
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
MAP Risks
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Property Risks
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
63.6
64.1
61.7
65.8
64.5
62.6
59.7
61.6
61.8
56.2
65.7
66.8
47.2
22.8
21.4
18.9
16.6
16.1
16.0
16.0
57.3
52.8
47.7
45.7
45.4
45.0
43.6
43.5
43.3
42.8
56.0
54.4
50.6
48.9
47.5
48.5
48.3
48.5
48.2
48.1
60.4
59.4
53.6
56.0
62.4
58.5
59.3
58.3
63.2
62.9
56.9
36.8
28.9
25.0
24.9
22.6
22.7
22.8
56.9
49.5
46.5
47.6
48.5
47.7
47.5
47.2
46.7
56.0
47.5
41.4
39.5
38.8
39.4
39.0
38.8
38.4
56.9
57.1
50.3
41.7
38.7
34.2
33.6
31.3
60.5
60.9
25.0
22.4
20.5
20.0
19.9
19.1
57.5
54.7
51.6
51.0
49.0
48.4
47.5
47.8
57.0
45.7
40.4
38.9
38.7
40.0
38.7
38.4
54.8
55.5
51.0
46.6
42.9
41.2
39.1
57.8
57.7
31.7
21.6
20.7
19.6
19.4
58.8
59.1
56.5
55.5
54.0
52.7
51.9
58.5
60.4
61.7
62.0
61.6
61.4
61.3
53.7
53.1
44.0
41.1
40.1
36.6
54.0
54.9
40.8
30.9
27.0
27.7
57.5
56.2
54.6
53.5
51.4
50.7
86.5
94.8
99.5
98.9
99.7
98.7
53.5
55.6
54.0
53.3
45.1
59.7
59.9
49.6
38.7
40.4
58.2
60.8
72.6
73.8
72.6
71.1
76.3
76.4
73.7
73.4
2020
%
80.2
79.0
86.9
2021
%
64.6
56.1
2022
%
53.9
55.6
71.2
72.7
73.5
60.8
68.8
49.1
41.0
65.2
69.0
60.9
63.0
61.9
52.2
55.3
78.2
73.1
72.3
67.5
63.8
59.4
51.5
53.0
51.2
65.6
67.1
61.5
57.2
73.1
79.9
77.1
64.3
69.7
65.6
218
Beazley | Annual report 2022
www.beazley.com
24 Insurance liabilities and reinsurance assets continued
2012 ae
%
2013
%
2014
%
2015
%
2016
%
2017
%
2018
%
2019
%
2020
%
2021
%
64.9
62.9
2022
%
61.9
66.3
65.3
60.9
59.7
65.0
63.4
55.6
62.1
69.3
64.7
63.1
69.5
69.1
65.1
62.1
60.9
58.1
70.8
70.3
71.1
65.3
60.5
58.5
59.0
57.6
56.3
56.2
62.0
60.2
57.4
54.4
52.2
51.5
50.9
50.6
50.1
49.4
67.4
68.2
68.4
63.9
62.5
62.1
61.1
62.6
62.6
60.7
56.4
53.1
51.4
51.6
51.0
50.5
50.8
51.1
65.7
66.2
67.0
63.1
65.6
69.2
73.7
75.5
60.1
56.9
53.0
50.0
49.9
50.7
51.7
51.9
66.4
66.3
66.0
65.7
62.7
62.6
63.7
60.7
61.2
59.0
57.7
55.7
55.0
54.8
65.3
66.7
69.8
68.2
69.2
71.8
66.2
68.1
68.1
66.2
65.7
65.8
67.2
68.9
69.5
67.8
69.4
63.7
66.4
68.2
66.6
65.6
Net ultimate claims
Specialty Risks
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Total
12 months
24 months
36 months
48 months
60 months
72 months
84 months
96 months
108 months
120 months
Estimated
total ultimate
losses ($m)
Less paid claims
($m)
Less unearned
portion of ultimate
losses ($m)
Net claims
liabilities ($m)
6,395.5
(6,230.6)
756.4
(710.5)
825.7
(783.3)
868.3
(803.7)
975.6
(870.1)
1,335.0
(1,106.6)
1,453.5
(1,102.9)
1,638.9
(1,003.5)
1,871.2
(891.4)
2,163.3
(459.2)
2,150.9
(47.7)
20,434.3
(14,009.5)
–
–
–
–
–
–
–
–
(30.3)
(217.1)
(1,282.3)
(1,529.7)
164.9
45.9
42.4
64.6
105.5
228.4
350.6
635.4
949.5
1,487.0
820.9
4,895.1
Analysis of movements in loss development tables
We have updated our loss development tables to show the ultimate loss ratios as at 31 December 2022 for each underwriting
year. The impact of amounts reported in respect of the unexpired risk reserve are embedded within the loss ratios presented.
Cyber Risks
The 2021 underwriting year has released following favourable experience. The 2019 and 2020 underwriting years have
strengthened in response to adverse claims development on existing claims. However, as these years are recovering under
aggregate excess of loss reinsurance programmes, the impact is reduced net of reinsurance.
Digital
The deterioration on the 2018 underwriting year arises from adverse claims experience on the tech & media private enterprise
class. The recent underwriting years have released following the expiry of risk.
MAP Risks
The 2019 to 2021 underwriting years have been impacted by the Russian invasion of Ukraine. The impact is lower net of
reinsurance as a result of the excess of loss reinsurance programmes in place.
www.beazley.com
Beazley | Annual report 2022
219
Notes to the financial statements continued
24 Insurance liabilities and reinsurance assets continued
Property Risks
Favourable developments on attritional claims and established catastrophe events have led to releases on the 2019 and 2020
underwriting years. The 2021 underwriting year has been impacted by weather related events in the US during 2022. The
impact is less gross of reinsurance due to favourable developments on established catastrophe events.
Specialty Risks
The 2017 and 2018 underwriting years have seen adverse claims development gross of reinsurance predominantly driven by
the healthcare book. Both these years are recovering under aggregate excess of loss reinsurance programmes, so the impact is
lower net of reinsurance. Recent underwriting years continue to improve as the risk expires.
Claim releases
The below table analyses our net claims between current year claims and adjustments to prior year net claims reserves. These
have been broken down by segment and underwriting year. Beazley’s reserving policy is to maintain catastrophe reserve
margins either until the end of the exposure period or until catastrophe events occur. Therefore margins have been released
from prior year reserves where risks have expired during 2022.
The below table has been prepared on an underwriting year of account basis, whereas the net loss development tables on
pages 219 to 220 have been prepared on an accident year basis in relation to our US admitted business. However, in
aggregate the net release or strengthening is consistent.
Reserve releases during the year totalled $132.6m (2021: $209.8m). The net of reinsurance estimates of ultimate claims
costs have improved on the 2021, 2020 and 2019 and earlier underwriting years, with releases of $13.3m, $96.6m and
$22.7m respectively. Our MAP Risks division saw strong releases across all years of account, while the other four divisions
each saw a strengthening on one of the years of account. Our Cyber Risks division saw a large strengthening on the 2020 year
of account, while Specialty Risks saw a strengthening on 2019 year and earlier.
The movements shown on 2019 and earlier are absolute claim movements and are not impacted by any current year
movements in premium on those underwriting years.
2022
Current year
Prior year
– 2019 underwriting year and earlier
– 2020 underwriting year
– 2021 underwriting year
Net insurance claims
2021
Current year
Prior year
– 2018 underwriting year and earlier
– 2019 underwriting year
– 2020 underwriting year
Net insurance claims
Cyber Risks
$m
440.1
(31.2)
33.2
(10.0)
(8.0)
432.1
Digital
$m
89.9
(6.5)
(9.8)
0.8
(15.5)
74.4
MAP Risks
$m
378.3
(13.5)
(32.0)
(20.7)
(66.2)
312.1
Property
Risks
$m
417.8
(19.1)
(16.8)
21.2
(14.7)
403.1
Specialty
Risks
$m
762.9
47.6
(71.2)
(4.6)
(28.2)
734.7
Cyber Risks
Digital MAP Risks
$m
353.1
(38.3)
20.2
(8.2)
(26.3)
326.8
$m
95.8
$m
315.4
(21.2)
(19.5)
1.0
(39.7)
56.1
(15.6)
(36.6)
(10.8)
(63.0)
252.4
Property
Risks
$m
394.6
Specialty
Risks
$m
877.1
(19.5)
(31.1)
(8.5)
(59.1)
335.5
11.0
(30.6)
(2.1)
(21.7)
855.4
Total
$m
2,089.0
(22.7)
(96.6)
(13.3)
(132.6)
1,956.4
Total
$m
2,036.0
(83.6)
(97.6)
(28.6)
(209.8)
1,826.2
220
Beazley | Annual report 2022
www.beazley.com
25 Borrowings
The carrying amount and fair values of the non-current borrowings are as follows:
Carrying Value
Balance at 1 January 2021
Amortisation of capitalised borrowing costs
Balance at 31 December 2021
Amortisation of capitalised borrowing costs
Balance at 31 December 2022
Tier 2
subordinated
debt (2029)
Tier 2
subordinated
debt (2026)
$m
298.1
0.3
298.4
0.2
298.6
$m
249.0
0.2
249.2
0.2
249.4
Total
$m
547.1
0.5
547.6
0.4
548.0
The total fair value of borrowings is $506.2m (2021: $613.6m). Interest accrued of $7.4m (2021: $7.4m) is included within
Other Payables.
In November 2016, the Group issued $250m of subordinated tier 2 notes due in 2026. Annual interest, at a fixed rate of
5.875%, is payable in May and November each year.
In September 2019, the Group issued $300m of subordinated tier 2 notes due in 2029. Annual interest, at a fixed rate of 5.5%
is payable in March and September each year.
Under the facility $450m may be drawn as letters of credit to support underwriting at Lloyd’s, and up to $225m may be
advanced as cash under a revolving facility. The cost of the facility is based on a commitment fee of 0.4725% per annum and
any amounts drawn are charged at a margin of 1.35% per annum. The cash element of the facility will expire on 23 July 2023,
whilst letters of credit issued under the facility can be used to provide support for the 2021, 2022 and 2023 underwriting
years. As at 31 December 2022 $225m has been drawn down under the facility and placed as a letter of credit as Funds at
Lloyd’s (FAL). No liability is recognised in these financial statements for the letter of credit (2021: nil) All of the above
borrowings are subject to covenants, with which the Group has complied with throughout the year. The Group considers the risk
of covenants being breached to be remote.
26 Other payables
Group
Reinsurance premiums payable
Accrued expenses including staff bonuses
Other payables
Due to syndicate 623
Due to syndicate 6107
Due to syndicate 5623
Company
Other payables
2022
2021
$m
894.3
276.9
48.3
21.8
77.8
208.4
1,527.5
$m
660.2
229.8
47.2
–
81.2
122.9
1,141.3
2022
$m
4.2
4.2
2021
$m
0.7
0.7
All other payables are payable within one year of the reporting date. The carrying value approximates fair value.
www.beazley.com
Beazley | Annual report 2022
221
Notes to the financial statements continued
27 Retirement benefit obligations
Present value of funded obligations
Fair value of plan assets
Retirement benefit asset in the statement of financial position
Amounts recognised in the statement of profit or loss
Interest cost
Expected return on plan assets
Retirement benefit return recognised in the statement of profit or loss
2022
$m
(31.1)
35.7
4.6
(1.1)
1.4
0.3
2021
$m
(56.9)
75.0
18.1
(0.9)
0.9
–
Beazley Furlonge Limited operates a defined benefit pension scheme (‘the Beazley Furlonge Limited Pension Scheme’), which
closed to new entrants in 2002. The scheme provides the following benefits:
• an annual pension payable to the member from his or her normal pension age (60th birthday) of generally 1/60th of final
pensionable salary for each year of pensionable service up to 31 March 2006;
• a spouse’s pension of 2/3rds of the member’s pension payable on the member’s death after retirement;
• a lump sum of four times current pensionable salary for death in service at the date of death; and
• a pension of 2/3rds of the member’s prospective pension at the date of death, payable to the spouse until their death. This
pension is related to salary at the date of death.
The scheme is administered by a trust that is legally separated from the Group. The trustees consist of both employee and
employer representatives and an independent chair, all of whom are governed by the scheme rules.
During 2022, the pension scheme trustees completed a transaction that insures all of the scheme's liabilities to a third party
via a bulk annuity buy-in with an external insurance company. The buy-in covers all members of the scheme and preserves their
existing pension entitlements. The annuity contracts meet the criteria to be classified as qualifying insurance policies as
defined in IAS 19 as the cash flows match the timing and value of the benefits payable to members that they cover. These
annuities are thus valued at the present value of the obligations insured.
The pension scheme trustees and the company will consider in due course whether to move to a full buy-out of the plan,
whereby the buy-in policies held by the plan will be converted to individual annuity policies which will be issued to scheme
members. This is a separate decision for the trustees and the company and whilst the buy-in policy allows for such a buy-out to
happen, this is not a requirement. At the reporting date, the trustees and the company retain all obligations to ensure benefits
due to scheme members are paid.
The purchase of these annuities has not been treated as a settlement, and the difference between the purchase price of the
annuities and their carrying value has been recognised in Other comprehensive income on the revaluation of plan assets, which
also includes any valuation movements during the year before the buy-in transaction completed.
Historically the scheme exposed the Group to additional actuarial, interest rate and market risk. However as a result of the buy-
in transaction in December these risks are now born by the insurance company to which liabilities have been insured. The buy-in
transaction does expose the Group to additional credit risk with regard to the insurance company from whom the annuities were
purchased.
Contributions to the scheme are determined by a qualified actuary using the projected unit credit method as set out in the
scheme rules and the most recent valuation was at 31 December 2022. Following the buy-in transaction the Group expects to
make no further contributions to the scheme.
222
Beazley | Annual report 2022
www.beazley.com
27 Retirement benefit obligations continued
Trustees obligations
Under section 222 of the Pension Act 2004, every scheme is subject to the Statutory Funding Objective (SFO), which is to have
sufficient and appropriate assets to cover its technical provisions, which represent the present value of benefits to which
members are entitled based on pensionable service to the valuation date. This is assessed at least every three years using
assumptions agreed between the Trustees and the employer as set out in the Statement of Funding Principles produced in
accordance with the Occupational Pensions (Scheme Funding) Regulations 2005 (OP(SF)R 2005) Regulation 6.
The Trustees written Statement of Funding Principles is dated 29 January 2021 and it sets out their policy for securing that the
SFO is met (that the scheme will have sufficient assets to cover its technical provisions). In accordance with the OP(SF)R 2005
Regulation 5(2) trustees have chosen the Defined Accrued Benefit Method, a variant of the projected unit credit method where
accrual has ceased.
The most recently completed Actuarial Valuation of the Scheme was carried out at 1 January 2020 including a valuation carried
out in accordance with the Pensions Protection Fund (Valuation) Regulations 2005 and with appropriate section 179 guidance
and assumptions issued by The Board of the Pension Protection Fund.
During 2021 a decision was made to move the plan assets out of equities and to reinvest in quoted corporate bonds and index
linked securities. The rationale for this was to protect the scheme’s funding position and provide protection against movements
in interest rates and expected inflation. Following the buy-in transaction, the main class of plan assets is the purchased annuity
contracts. During the year, the scheme had no exposure to liability driven investment products (2021: nil).
The Trust Deed provides Beazley with an unconditional right to a refund of surplus assets assuming the full settlement of plan
liabilities in the event of a plan wind-up. Furthermore, in the ordinary course of business the Trustee has no rights to unilaterally
wind up, or otherwise augment the benefits due to members of, the scheme. Based on these rights, any net surplus in the UK
scheme is recognised in full.
Movement in present value of funded obligations recognised in the statement of financial position
Balance at 1 January
Interest cost
Actuarial (gain) due to changes in financial assumptions
Benefits paid
Foreign exchange (gain)
Balance at 31 December
Movement in fair value of plan assets recognised in the statement of financial position
Balance at 1 January
Expected return on plan assets
(Loss)/gain on asset return
Employer contributions
Benefits paid
Foreign exchange (loss)
Balance at 31 December
Plan assets are comprised as follows:
Purchased annuities
Corporate bonds
Index linked securities
Cash
Total
2022
$m
56.9
1.0
(22.1)
(0.5)
(4.2)
31.1
2022
$m
75.0
1.3
(34.6)
–
(0.5)
(5.5)
35.7
31.1
–
–
4.6
35.7
2021
$m
64.8
0.8
(4.0)
(2.8)
(1.9)
56.9
2021
$m
69.6
0.9
8.1
1.3
(2.8)
(2.1)
75.0
–
3.4
70.0
1.6
75.0
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Beazley | Annual report 2022
223
Notes to the financial statements continued
27 Retirement benefit obligations continued
The actual gain on plan assets was $33.3m (2021: gain of $9.0m).
Principal actuarial assumptions
Discount rate
Inflation rate
Expected return on plan assets
Future salary increases
Future pension increases
Life expectancy for members aged 60 at 31 December
Life expectancy for members aged 40 at 31 December
2022
$m
2021
$m
4.8 %
3.5 %
4.8 %
3.5 %
3.0 %
90years
91years
1.9 %
3.8 %
1.9 %
3.8 %
1.9 %
90years
91years
At 31 December 2022, the weighted-average duration of the defined benefit obligation was 23.7 years (2021: 22.6 years).
Sensitivity analysis
Changes in the relevant actuarial assumptions would result in a change in the value of the funded obligation as shown below.
For 2022 any change in the obligation would be matched by a change in the carrying value of the annuity contracts purchased in
the period.
31 December 2022
Discount rate (0.5% decrease)
Inflation rate (0.3%)
Future salary changes (0.5% decrease)
Life expectancy (1 year increase)
December 31 2021
Discount rate (0.5% decrease)
Inflation rate (0.3%)
Future salary changes (0.5% decrease)
Life expectancy (1 year increase)
Increase
Decrease
$m
2.7
–
–
0.9
$m
–
(1.2)
(0.2)
–
Increase
Decrease
$m
7.4
–
–
2.8
$m
–
(3.7)
(0.5)
–
The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit
obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity
analyses are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses
may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions
would occur in isolation from one another.
224
Beazley | Annual report 2022
www.beazley.com
28 Deferred Tax
Deferred tax asset
The movement in the net deferred income tax is as follows:
Balance at 1 January
Income tax charge / (credit)
Amounts recorded through equity/OCI
Foreign exchange translation differences
Balance at 31 December
2022
$m
35.2
35.2
16.3
13.1
6.2
(0.4)
35.2
2021
$m
16.3
16.3
26.2
(4.0)
(5.7)
(0.2)
16.3
Deferred tax assets and deferred tax liabilities relating to the same tax authority are presented net in the Group’s balance
sheet.
Plant and equipment
Intangible assets
Underwriting profits
Deferred acquisition costs
Tax losses carried forward
Share based payments
Unrealised gains on investments
Other
Net deferred income tax account
Plant and equipment
Intangible assets
Underwriting profits
Deferred acquisition costs
Tax losses carried forward
Share based payments
Other
Net deferred income tax account
Balance
1 Jan 22
Recognised
in income
Recognised in
equity/OCI
FX translation
differences
Balance
31 Dec 22
$m
(1.2)
(0.5)
14.2
(7.8)
9.6
2.6
(1.7)
1.2
16.3
$m
0.4
(1.3)
(6.8)
9.5
(5.6)
3.1
11.6
2.2
13.1
$m
–
–
–
–
–
3.1
–
3.1
6.2
$m
–
–
–
–
–
(0.4)
–
–
(0.4)
$m
(0.8)
(1.8)
7.4
1.7
4.0
8.4
9.9
6.5
35.2
Balance
1 Jan 21
Recognised
in income
Recognised in
equity/OCI
FX translation
differences
Balance
31 Dec 21
$m
0.1
(1.5)
25.3
(7.5)
6.3
7.0
(3.5)
26.2
$m
(1.3)
1.0
(11.1)
(0.3)
3.3
(0.4)
4.7
(4.1)
$m
–
–
–
–
–
(3.9)
(1.8)
(5.7)
$m
–
–
–
–
–
(0.1)
–
(0.1)
$m
(1.2)
(0.5)
14.2
(7.8)
9.6
2.6
(0.6)
16.3
Deferred tax assets of $4.0m (2021: $9.6m) relating to tax losses, which depend on the availability of future taxable profits,
have been recognised. The Group has concluded that, it is probable that the deferred tax assets will be recovered using the
estimated future taxable profits based on the approved business plans. The losses can be carried forward indefinitely.
The Group has unrecognised realised and unrealised capital losses of $2.2m (2021: nil) that will expire in five years.
www.beazley.com
Beazley | Annual report 2022
225
Notes to the financial statements continued
29 Leases
Leases as lessee (IFRS 16)
The Group leases offices, IT equipment and motor vehicles. The leased offices are in several locations and the leases of large
offices such as London and New York typically run for a period of 10 years with an option to renew the lease after that date or
continue on a rolling month by month basis. Lease payments are renegotiated as agreed in the lease contracts.
Information about leases for which the Group is a lessee is presented below.
Right of use assets
Right of use assets related to leased properties that do not meet the definition of investment property are presented as
property, plant and equipment.
Balance at 1 January 2022
Depreciation charge for the year
Additions of right of use assets
Foreign exchange translation differences
Balance at 31 December 2022
Lease liabilities
Balance at 1 January 2022
Lease payments
Interest on lease liabilities and dilapidation provision
Additions to lease portfolio
Foreign exchange translation differences
Balance at 31 December 2022
Right of use assets
Balance at 1 January 2021
Depreciation charge for the year
Additions of right of use assets
Disposals of right of use assets
Foreign exchange translation differences
Balance at 31 December 2021
Offices
IT equipment Motor vehicle
$m
63.4
(8.0)
0.9
(3.0)
53.3
$m
12.0
(4.2)
–
(0.6)
7.2
$m
0.1
(0.1)
–
–
–
Offices
IT equipment Motor vehicle
$m
72.1
(6.9)
2.8
0.9
(3.5)
65.4
$m
12.1
(4.5)
0.4
–
(0.7)
7.3
$m
0.1
(0.2)
–
–
0.1
–
Offices
IT equipment Motor vehicle
$m
69.5
(10.6)
3.0
3.1
(1.6)
63.4
$m
16.8
(4.3)
–
–
(0.5)
12.0
$m
0.1
(0.1)
0.1
–
–
0.1
Total
$m
75.5
(12.3)
0.9
(3.6)
60.5
Total
$m
84.3
(11.6)
3.2
0.9
(4.1)
72.7
Total
$m
86.4
(15.0)
3.1
3.1
(2.1)
75.5
226
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29 Leases continued
Lease liabilities
Balance at 1 January 2021
Lease payments
Interest on lease liabilities
Additions to lease portfolio
Foreign exchange translation differences
Balance at 31 December 2021
Amounts recognised in profit or loss
Leases under IFRS 16
Interest on lease liabilities
Depreciation
Income from sub-leasing right of use assets
Expenses relating to low value leases
Expenses relating to short-term leases
Total recognised in profit or loss
Offices
IT equipment Motor vehicle
$m
73.3
(8.0)
7.5
1.0
(1.7)
72.1
$m
16.7
(4.7)
0.5
–
(0.4)
12.1
$m
0.1
(0.1)
–
0.1
–
0.1
Total
$m
90.1
(12.8)
8.0
1.1
(2.1)
84.3
2022
$m
2021
$m
(3.1)
(12.3)
–
(4.2)
(0.1)
(19.7)
(3.7)
(15.0)
0.1
(5.1)
(0.1)
(23.8)
Extension options
Some property leases contain extension options exercisable by the Group before the end of the non-cancellable contract period
or the option to continue with the lease on a monthly rolling basis. The Group reassess whether it is reasonably certain to
exercise the options if there is a significant event or changes in circumstances within its control.
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227
Notes to the financial statements continued
30 Related party transactions
The Group and company have related party relationships with syndicates 623, 4321, 5623, 6107, its subsidiaries, associates
and its Directors.
30.1 Syndicates 623, 4321, 5623 and 6107
The Group received management fees and profit commissions for providing a range of management services to syndicates 623
and 6107 which are all managed by the Group. In addition, the Group ceded portions or all of a group of insurance policies to
syndicates 6107 and 5623. The participants on syndicates 623, 6107 and 5623 are solely third party capital while the Group
provides 10% of the capital for syndicate 4321.
Details of transactions entered into and the balances with these syndicates are as follows:
Written premium ceded to syndicates
Other income received from syndicates
Services provided
Balances due:
Due (to) / from syndicate 623
Due to syndicate 5623
Due to syndicate 6107
30.2 Key management compensation
Salaries and other short term benefits
Pension costs
Share based remuneration
2022
$m
318.7
20.7
58.9
2021
$m
257.3
28.6
45.8
(7.2)
(208.4)
(77.8)
1.8
(122.9)
(81.2)
2022
$m
18.9
0.5
8.0
27.4
2021
$m
25.6
0.6
2.7
28.9
Key management include Executive and Non-Executive Directors and other senior management.
The total number of Beazley plc ordinary shares held by key management was 2.8m. Apart from the transactions listed in the
table above, there were no further related party transactions involving key management or a close member of their family.
Further details of directors’ shareholdings and remuneration can be found in the Directors’ remuneration report on pages 112
to 139.
30.3 Other related party transactions
At 31 December 2022, the Group had purchased services from Falcon Money Management Holdings Limited of $2.9m (2021:
$2.7m) throughout the year. All transactions with the associate and subsidiaries are priced on an arm’s length basis.
30.4 Company related party transactions
Beazley plc lends funds to subsidiary entities to help meet group working capital and liquidity requirements. Such loans are
repayable on demand and no interest is payable. A summary of amounts due to Beazley plc from other group entities is set out
below:
Company
Balances due:
Due from Beazley Furlonge Holdings Limited
Due from Beazley Management Limited
Due from Beazley Underwriting Limited
Due from other Group companies
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Beazley | Annual report 2022
2022
$m
2021
$m
192.7
39.0
667.2
20.2
919.1
194.5
35.8
84.7
–
315.0
www.beazley.com
30 Related party transactions continued
The key management of Beazley plc as a standalone entity is deemed to be the same as that of the wider Beazley Group. The
majority of costs are incurred by other Group companies and are not recharged to the Company. Amounts paid to key
management by Beazley plc were $1.1m (2021: $1.1m).
31 Parent company and subsidiary undertakings
Beazley plc, a company incorporated in England and Wales and resident for tax purposes in the United Kingdom, is the ultimate
parent and the ultimate controlling party within the Group.
The following is a list of all the subsidiaries in the Group as at 31 December 2022:
Beazley Ireland Holdings plc
Beazley Underwriting Pty Ltd
Beazley Canada Limited
Beazley Corporate Member (No.2) Limited
Beazley Corporate Member (No.3) Limited
Beazley Corporate Member (No.6) Limited
Beazley Furlonge Holdings Limited
Beazley Furlonge Limited
Beazley Group Limited
Beazley Investments Limited
Beazley Leviathan Limited ~
Beazley Management Limited
Beazley Staff Underwriting Limited
Beazley Solutions Limited
Beazley Underwriting Limited
Beazley Underwriting Services Limited
Lodestone Security Limited
Beazley Insurance dac
Beazley Solutions International Limited
Beazley Labuan Limited
Beazley America Insurance Company, Inc.***
Beazley Group (USA) General Partnership**
Beazley Holdings, Inc.*
Beazley Holdings, Inc. Digital LLC*
Beazley Insurance Company, Inc.***
Beazley Newco Captive Company, Inc.***
Beazley USA Services, Inc.*
Lodestone Securities LLC****
Beazley Pte. Limited
Please see page 232 for registered addresses.
Country/region
of incorporation
Jersey
Australia
Canada
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Ireland
Ireland
Malaysia
USA
USA
USA
USA
USA
USA
USA
USA
Singapore
Ownership
interest
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
Beazley plc
direct
investment in
subsidiary ($m)
724.6
724.6
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Beazley | Annual report 2022
229
Notes to the financial statements continued
31 Parent company and subsidiary undertakings continued
The following is a list of Group registered office locations:
Address
City
Postcode
Country/region
United Kingdom and Continental Europe
22 Bishopsgate
C/O RSM UK Restructuring Advisory LLP, 25
Farringdon Street ~
2 Northwood Avenue
22 Grenville Street
North America
1209 Orange Street*
2711 Centerville Road Suite 400**
30 Batterson Park Road***
160 Greentree Drive, Suite 101****
55 University Avenue, Suite 550
Asia
138 Market Street, 03-04 Capita Green
Kensington Gardens, No. I1317, Lot 7616, Jalan
Jumidar Buyong
Australia
Level 15, 1 O’Connell Street
London
London
Dublin
Saint Helier
EC2N 4AJ
EC4A 4AB
D09 X5N9
JE4 8PX
19801
Wilmington, Delaware
Wilmington, Delaware
19808
Farmington, Connecticut 06032
19904
Dover, Delaware
M5J 2HJ
Toronto, Ontario
Singapore
Labuan
Sydney
048946
87000
England
England
Ireland
Jersey
USA
USA
USA
USA
Canada
Singapore
Malaysia
NSW 2000
Australia
32 Contingencies
Funds at Lloyd’s
The following amounts are held in trust by Lloyd’s to secure underwriting commitments:
Financial assets at fair value and cash
Letters of credit (‘LOC’)
Total Funds at Lloyd’s
As at
As at
31 December
31 December
2022
2021
$m
1,307.6
225.0
1,532.6
$m
1,603.5
225.0
1,828.5
The funds are held in trust and can be used to meet claims liabilities should syndicates fail to meet their claim liabilities. The
funds can be only used to meet claim liabilities of the relevant member.
Since 2020, $225m under the Group’s syndicated short term banking facility has been utilised as letters of credit placed as
Funds at Lloyd’s (FAL) to provide capital support for the Group’s underwriting at Lloyd’s. Letters of credit issued under the
facility are uncollateralised. No liability was recognised for these letters of credit in the current or prior period, amounts would
only become due if the letters of credit were called upon to fund liabilities.
Other than the letters of credit these balances are included within financial assets at fair value and cash and cash equivalents
on the statement of financial position.
Other letters of credit
As of December 31, 2022, the Group has placed letters of credit totalling $35.0m (2021: $25.0m) with the State of
Connecticut Insurance Department to collateralise reinsurance arrangements between the Group’s US admitted carrier, Beazley
Insurance Company Inc. (“BICI”) and Beazley NewCo Captive Company Inc. These amounts are guaranteed by Beazley plc. In
addition, BICI has a standby letter of credit of $5.3m (2021: $2.9m) in place to secure certain reinsurance transactions settled
through Lloyd’s. No amounts relating to these letters of credit are recognised in the Group or Company Statement of Financial
Position.
230
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33 Foreign exchange rates
The Group used the following exchange rates to translate foreign currency assets, liabilities, income and expenses into US
dollars, being the Group’s presentational currency:
Pound sterling
Canadian dollar
Euro
2022
2021
Average
Year end spot
Average
0.80
1.29
0.94
0.82
1.37
0.95
0.73
1.25
0.84
Year end spot
0.76
1.27
0.88
34 Subsequent events
There are no events that are material to the operations of the Group that have occurred since the reporting date.
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231
Alternative performance
measures
Net assets per share & net tangible assets per share
Net assets per share is the ratio, in pence and cents,
calculated by dividing the net assets (total equity) by the
number of shares in issue at the end of the period (excluding
those held by the employee benefits trust).
The Group uses APMs to help explain its financial
performance and position. These measures are not defined
under IFRS. The Group is of the view that the use of these
measures enhances the usefulness of our financial reporting
and allows for improved comparison to industry peers.
Information on APMs which the Group uses are set out below.
Where relevant, percentages have been annualised to allow
for comparison with the full year result.
Claims ratio
Ratio, in percentage terms, of net insurance claims to net
earned premiums. The calculation is performed excluding the
impact of foreign exchange.
Net insurance claims
Divided by net earned premiums
Claims ratio
2022
1,956.4
3,614.2
54 %
2021
1,826.2
3,147.3
58 %
Expense ratio
Ratio, in percentage terms, of the sum of expenses for
acquisition of insurance contracts and administrative
expenses to net earned premiums. The calculation is
performed excluding the impact of foreign exchange.
Expenses for the acquisition of
insurance contracts
Administrative expenses
Subtotal
Divided by net premiums earned
Expense ratio
2022
2021
952.1
821.8
303.7
1,255.8
3,614.2
35 %
283.0
1,104.8
3,147.3
35 %
Combined ratio
Ratio, in percentage terms, of the sum of net insurance
claims, expenses for acquisition of insurance contracts and
administrative expenses to net earned premiums. This is also
the sum of the expense ratio and the claims ratio. The
calculation is performed excluding the impact of foreign
exchange.
Claims ratio
Expense ratio
Combined ratio
2022
54 %
35 %
89 %
2021
58 %
35 %
93 %
Net tangible assets per share excludes intangible assets from
net assets in the above calculation.
Net assets
Less intangible assets & goodwill
Net tangible assets
Divided by the shares in issue at the
period end:
Net assets per share (cents)
Net tangible assets per share (cents)
Converted at spot rate:
Net assets per share (pence)
Net tangible assets per share (pence)
2022
2,573.5
128.8
2,444.7
2021
2,130.8
123.5
2,007.3
665.4
606.0
386.7
367.4
315.6
299.8
351.6
331.2
265.8
250.4
Return on equity
Ratio, in percentage terms, calculated by dividing the
consolidated profit after tax by the average equity for the
period. Average equity for the period is calculated as the
average of the opening and closing equity position adjusted
for share issuance, dividend payments and share based
payment transactions.
Profit after tax
Divided by average total equity
Annualised return on equity
2022
160.8
2,224.3
7 %
2021
308.7
1,970.2
16 %
Investment return
Ratio, in percentage terms, calculated by dividing the net
investment income by the average financial assets at fair
value for the period, including cash.
Net investment (loss)/income
Financial assets at fair value
Cash and cash equivalents
Invested assets at the beginning of
the period:
Financial assets at fair value
Cash and cash equivalents
Invested assets at the end of the
period:
Divided by average invested assets
Annualised investment return
2022
(179.7)
7,283.5
591.8
2021
116.4
6,362.0
309.5
7,875.3
6,671.5
8,345.6
652.5
7,283.5
591.8
8,998.1
7,875.3
8,436.7
(2.1) %
7,273.4
1.6 %
232
Beazley | Annual report 2022
www.beazley.com
Beazley plc
22 Bishopsgate
London
EC2N 4BQ
T +44 (0)20 7667 0623
info@beazley.com
www.beazley.com
Beazley online annual report
and accounts 2022
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