...to drive it just as those more show-stopping big-bang moments. Finding a problem to solve is a key driver of innovation and for the London insurance market, the ultimate challenge is how to significantly improve efficiency and competitiveness without diluting the core offering of writing the large and complex risks that other markets find difficult.
Responding to this issue, Beazley launched the Smart Tracker in 2018; understood to be the market’s first follow-only special purpose syndicate, using data provided by brokers to write market facilities business more efficiently.
The Beazley Smart Tracker aims to provide cost-efficient insurance solutions for clients and brokers, and access to lower volatility, market average returns for investors. It has attracted steady growth and much interest across the London market. Its approach – to split out follow capacity in order to reduce the duplication of costs and improve efficiency for lead syndicates – has also been adopted within the Lloyd’s Blueprint, launched in 2019.[1] It’s an approach that encourages wider collaboration and accordance across the market.
Lead underwriter of the Beazley Smart Tracker Will Roscoe explains more about the Smart Tracker and its contribution to challenging norms within the London market.
What is the Smart Tracker and how does it work?
The Beazley Smart Tracker (also known as special purpose arrangement 5623) underwrites London market broker portfolios, line slips and consortia using a more efficient, lower cost model. Business is accepted into Beazley’s Syndicate 3623 and ceded back to SPA 5623.
Supported by Beazley actuaries, we write business with high-quality data that enables us to credibly assess the historic and future performance of broker facilities. The aim is to provide investors with a lower volatility portfolio that will ‘track’ or beat the Lloyd’s market average underwriting result, and return consistent profitability over time. The Smart Tracker is a pure ‘follow’ syndicate that always follows a trusted Lloyd’s syndicate.
What has been the market’s response?
Brokers have been very supportive and we are working closely with various firms to structure new facilities. The Smart Tracker relies entirely on brokers providing a pipeline of new and renewal business. The majority of business currently comes via the larger global firms that tend to have access to data of sufficient quality and granularity, which is a critical ingredient in underwriting portfolios. The response from investors has been positive and interest has been increasing year on year.
What are the benefits of this model?
Clients benefit from pre-agreed, guaranteed capacity, which means they can expect speedier confirmation at the point of placement. Brokers get certainty from placing business behind approved leaders, quickly and efficiently. It allows them to focus on new business production and other value-add activities.
Beazley benefits from access to a broad range of business that we might not always see in the open market. For investors, it aims to offer consistent and lower volatility returns.
How does the Smart Tracker interact with other Beazley syndicates?
The Smart Tracker is a distinct business within Beazley with separate governance however we are keen to support facilities and consortia led by Beazley syndicates 623/2623.
We discuss new business opportunities with other Beazley underwriters as we recognise they have years of specialist knowledge that we can tap into. This is particularly important for the underwriting of a facility where we may wish to exclude certain sub-classes, or tailor limits.
What business does the Smart Tracker write?
The Smart Tracker writes a well-diversified portfolio of risk that includes property, casualty, marine and terrorism. The appetite closely aligns with Beazley’s wider offering.
As well as facilities, we have supported a number of London market consortia. We follow several different insurers, as well as Beazley syndicates 623/2623.
We are sometimes asked within the market if Beazley underwriters from 623/2623 compete with us for business, which is certainly not the case. We see ourselves as complementary to these syndicates and we often write business alongside them. Another misconception is that we only support business led by Beazley underwriters when in fact we work with multiple well-established insurers and we’re very keen to support them.
What’s different about the Smart Tracker?
The Smart Tracker is the first follow-only syndicate to use alternative capital to write whole market facilities. Others firms have launched automated syndicates that use follow-only capacity and, recently, we also invested in another follow syndicate concept that will also provide cost-effective capacity for selected approved leaders using a data-enabled algorithm.
It’s in all our interests in the London insurance market to promote follow capacity models and the more insurers writing these facilities alongside the Smart Tracker, the more meaningful this will be to buyers.
Can you see the follow-only model becoming an established part of the market?
The Lloyd’s Blueprint published last year demonstrated there is wider interest in this lead v. follow model as part of the solution to reducing costs. And there is a huge opportunity to modernise how risk is syndicated. I can imagine a model emerging in which Lloyd’s insurers are segmented into expert leaders (such as Beazley syndicate 623/2623) and followers (such as the Smart Tracker) with capacity provided by alternative capital using low touch underwriting and minimum referral required.
What is the plan to grow the Smart Tracker?
Scale is our goal, as it will enable us to further reduce the cost of writing this business in the market. We plan to support large ‘cross-class’ facilities and grow our participation on these in a measured way over the next five years.
Of course we need brokers to support by building a pipeline of new facilities, and expanding the amount of business they cede to facilities. Our long term aspiration is to grow the syndicate to $1bn in gross written premium.
The Smart Tracker model may prove to be a key element of the ambitious transformation programme that will protect the future of the London insurance market and help retain its position as a world leader in years to come.
About the author:
Will is head of alternative portfolio underwriting at Beazley. This includes being the lead underwriter for Beazley’s Smart Tracker special purpose syndicate 5623, setting its strategy and working with brokers to create new facilities. He was previously head of broker relations for the UK and Europe, managing Beazley's corporate relationships with brokers within the London and European insurance markets, supports underwriting and business development and provides analytical data for our broker partners.
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