Lloyd’s underwriters need to ‘push away from the bar’: Greenberg

European risk managers should probably not expect Chubb underwriters to be chasing them too eagerly for their business this year, based on comments made by the firm’s CEO Evan Greenberg during his presentation of the global insurer's decent first-quarter results this week. The London market will remain particularly low on Chubb’s agenda for now, based on Mr Greenberg’s remarks. Results service Seeking Alpha quoted him as comparing Lloyd’s underwriters to bar-room drunks who want to reform themselves but “just can’t put that glass down and push away from the bar”. Chubb’s strategy following ACE’s takeover of the US insurer has been focused on the middle market, adding ACE’s specialty expertise to Chubb’s mass-distribution capabilities. This is paying dividends in the core US market and other high-growth regions such as Asia-Pacific and Latin America. At the same time, Chubb’s appetite for the kind of specialty and wholesale business that is typically transacted through London has waned as the return is simply inadequate, explained Mr Greenberg. He said the company now has the ability to source the business locally and so does not have to use London to tap capacity on the same level that ACE used to. “Over the last number of years [we have] shrunk our presence in the London market. Can't earn an adequate return. To a large degree, a lot of the underwriters at London and in Lloyds, it's like a barroom with a bunch of drunks who want to reform and they just can't put that glass down and push away from the bar,” he said, according to SeekingAlpha. Mr Greenberg reportedly told analysts during the first-quarter results call that there is simply too much talk and not enough action on disciplined underwriting in London currently, particularly given the poor year that the market as a whole experienced in 2017. “You hear all the talk and all the chatter, and it's in their hands to get out of their own way and do the most fundamental: underwrite the business to an adequate risk-adjusted return and deploy the capital on that basis. And the notion that you have investors and that we can all opine about that [we] will trade 3% money for a 6% return or thereabouts, that's a lousy risk-adjusted return, and ultimately is not a long-term investment thesis, period,” he reportedly said. It seems clear that Chubb’s focus will remain on the US and high-growth regions such as Asia-Pacific and Latin America. Mr Greenberg did not sound too keen about Europe and particularly the UK, which is why Europe’s risk and insurance managers may have to brace themselves for tougher renewal discussions with Chubb than in the past. Mr Greenberg reportedly said that commercial P&C pricing for the business it wrote continues to improve in the US and most territories outside the US. The insurer’s renewal retention rates overall were good and new business, particularly in the US, was up. “In some classes, customer segments and territory, we are seeing a clear direction and momentum in price firming,” he said. But Mr Greenberg said there is still illogical capacity that is holding things back in other markets. “In others, it's more chaotic, as some companies, particularly those with experience in a class, moved for needed rate, while others less experienced were simply lacking leadership and moved for growth at the expense of rate adequacy – a short-term strategy,” he said. Chubb’s US major account retail and E&S wholesale division reported net written premiums up by 3.5%. Excluding merger-related actions, net premiums were up 6%. In US major accounts, rates overall were up 1.9% for the quarter, double what the insurer achieved in the fourth quarter, and by March, they were up 4%. US property rates were up 13% in the quarter, casualty rates and risk management primary casualty were up 1.5%, while in general and specialty casualty, rates were up more than 3%, a big improvement for the insurer. In the first quarter of this year, rates for US major accounts professional lines overall turned positive for “the first time in some time”, said Mr Greenberg. Primary and first access D&O rates were up 2.3%. This is not really what Chubb wants, but it is a move in the right direction, commented Mr Greenberg. In E&S wholesale, rates overall were up 5% for the quarter and improving to 6% in March. Property rates were up 8% in the quarter. Casualty was up 4% and financial lines rates were up 2.5%. The international business was strong for Chubb in Asia and Latin America but not so good in the UK and Europe. Chubb’s Overseas General Insurance operations reported that net written premiums for international retail P&C were up 8.5%, or 2% in constant dollars. Mr Greenberg expects growth to “meaningfully accelerate” from the second quarter onward. Asia-Pacific and Latin America grew 10% and 4% respectively in the quarter. Growth in continental Europe was down 2.5%, while the UK was up 1.5% on a constant dollar basis. Mr Greenberg said that rates in its international retail business varied by line, region and country. Overall, rates were up 1%. This was not a “stellar” result but the best the group has seen in a few years, said Mr Greenberg. Property rates were up 3% and varied between up 12% in Latin America to down 2% in the UK. Financial lines rates were up 1%, ranging between up 4% in the UK and Asia to flat in continental Europe and Latin America. Casualty rates were flat and marine was down, though it varied between up 8% in the UK to down 3% in Asia. “Of the major markets in the world overall, the market that remains most disappointing is the UK in both wholesale and retail, with the exception of D&O, which is beginning to firm like it is in the US, Australia and a few other markets,” said Mr Greenberg, according to SeekingAlpha.

Lloyd’s underwriters need to ‘push away from the bar’: Greenberg

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