Beazley’s third-party capital backed Smart Tracker to transition to full-syndicate

Beazley’s third-party capital backed Smart Tracker to transition to full-syndicate

Beazley has announced this morning that its Smart Tracker special purpose arrangement (SPA) syndicate 5623 will now become a full market-facing syndicate at Lloyd’s.

beazley-logoThe third-party capital backed Smart Tracker is one of Beazley’s underwriting structures that attracts institutional investor capital, akin to an insurance-linked strategy, that augments its underwriting capacity in the market while also enabling it to earn fee-like income.

Beazley’ SPA Syndicate 5623 was launched at the beginning of 2018  with plans to take a 75% quota share of broker facilities business that the company underwrote through its Syndicate 3623, with backing from third-party institutional level investors.

Backers included well-known pension investors that allocate to insurance-linked securities (ILS) and it’s always been apparent that this would prove to be an attractive vehicle, as investors looked to back Beazley’s underwriting to access a differentiated source of returns.

As we explained before, investor appetite for differentiated insurance or reinsurance-linked returns has been rising significantly and the London market continues to be seen as a venue where this can be achieved, with the right partnerships and structures.

Beazley has developed an access point to London market risks that investors really appreciate, as the company reported both continuing performance improvements for the Smart Tracker and also very strong investor demand.

Earlier in 2022, Beazley said the Smart Tracker was “significantly oversubscribed by third party capital”.

This morning Beazley said it has been granted ‘in principle’ approval from Lloyd’s to transition its Smart Tracker Special Purpose Arrangement (SPA) 5623 to a full syndicate, from the 1st January 2023, subject to Lloyd’s agreement of the Syndicate business plan and final approval.

So as from January 2023, Beazley’s Syndicate 5623 will exclusively underwrite business accepted by Beazley’s Smart Tracker.

The Smart Tracker has been profitable for all closed years of account to date, Beazley said.

From January 2023, all business will be written directly into Syndicate 5623 (rather than being accepted into Beazley Syndicate 3623 and then reinsured to SPA 5623), and the Smart Tracker’s underwriting appetite will remain unchanged.

Will Roscoe, the manager of the Smart Tracker since 2019, has now been appointed Active Underwriter of Syndicate 5623.

Adrian Cox, CEO of Beazley commented, “The Beazley Smart Tracker’s innovative ‘follow’ model, is designed with operational efficiency and rigorous underwriting at its core, reducing the traditional duplication of costs and improving efficiency for brokers and clients.

“Its success demonstrates broker, client and third party investor support of this new underwriting approach, which I’m delighted has been recognised by Lloyd’s’ support of our plan to transition the Smart Tracker from an SPA into a full syndicate from next year.”

As a route for accessing returns from the Lloyd’s market, the Smart Tracker has proved to be an attractive one for investors.

As a follower of broker facilities, the deployment of its capacity is also efficient and lower-cost, so it is a competitive source of underwriting capital for Beazley to deploy, which can also help to enhance its returns.

The expenses for the Smart Tracker will no doubt rise, but as a market-facing syndicate able to write directly from broker facilities that may balance-out any change in expense load.

It will be interesting to see how Beazley grows the structure now, as well as whether it becomes a user of one of Lloyd’s London bridge ILS structures as a way to bring in outside investor capital.

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