Insurance institute urges Korean insurers to build specialty expertise before overseas M&As

Report on major types and implications of UK insurance M&A

Why Zurich paid $10.9 billion for Beazley

Swiss insurer Zurich Insurance Group's agreement to acquire Beazley, a UK insurer specializing in cyber insurance, is valued at about 8.1 billion pounds ($10.9 billion). Analysts say the deal secures specialty insurance capabilities for Zurich's medium- to long-term growth strategy.

Analysts also note that the deal gives Zurich a foothold in Lloyd's, the UK-based platform whose global reinsurance network spans more than 200 regions.

This suggests South Korea's major insurers should weigh specialty expertise and market-entry strategies -- rather than simply expanding scale -- when considering investments in overseas insurers.

According to a report titled "Major Types and Implications of UK Insurance M&A: An Analysis of Zurich's Acquisition of Beazley," released by the Korea Insurance Research Institute on Friday, Zurich finalized the deal to acquire Beazley shares at 1,310 pence in cash per share plus a 25 pence dividend. That represents a premium of about 60 percent over Beazley's closing share price just before negotiations began.

Beazley started out as a Lloyd's syndicate in 1986 and has since grown into a leader in cyber insurance. Last year, specialty risks -- including cyber insurance (19 percent), marine and other MAP lines (16 percent), and art -- accounted for more than half of its $6.1 billion in premium income.

Beazley also manages seven Lloyd's syndicates. Lloyd's holds about 80 insurance licenses and a global network capable of underwriting reinsurance in more than 200 regions. With this acquisition, Zurich has also gained access to Lloyd's market distribution network.

Zurich expects the acquisition to boost its specialty insurance premium income from $9 billion to $15 billion, raising the share of specialty insurance within its overall non-life portfolio from 20 percent to 29 percent.

On this, Researcher Moon Hye-jung said, "The Zurich-Beazley deal shows that major global insurers are treating specialty insurance capabilities and market access as strategic assets to secure new areas of growth." She explained that the deal was not aimed at simply expanding premium volume, but at securing specialized underwriting capabilities -- the ability to assess, price and underwrite complex specialty risks such as cyber and marine coverage -- along with access to the Lloyd's market.

Moon stressed, "Korean insurers also need to design their market-entry strategies around which specialized capabilities to internalize, and to what extent, when entering overseas specialty insurance markets."

Meanwhile, Samsung Fire is also considering acquiring the remaining stake in Canopius, a specialty insurer in the UK's Lloyd's market. Samsung Fire has invested a total of 1.2 trillion won ($897 million) across three rounds in 2019, 2020 and 2025 to secure a 40 percent stake in Canopius. Canopius ranks among the top five insurers in the Lloyd's market, with a return on equity in the 20 percent range. In the first half of this year, Samsung Fire's equity-method investment gains from Canopius jumped 247.6 percent to 168.5 billion won.

killpass@heraldcorp.com