Chubb’s CEO Evan G Greenberg believes the commercial insurance market will continue to harden, with rate increases above lost costs for the foreseeable future, but said most of his firm’s business is approaching risk-adjusted rate adequacy.
Speaking on Chubb’s second-quarter earnings call, Mr Greenberg said: “Based on the current market conditions and where I think they’re going over the medium term right now… I think rates will continue to exceed loss costs. We’re exceeding loss costs right now by a reasonable margin.”
He said the insurance industry has been achieving rates in excess of loss costs for just two years and from a position where loss ratios were quite high.
“To achieve a reasonable risk-adjusted return, it [the market] has to continue to achieve rate in excess of loss cost for a prolonged period of time. Interest rates are so low, there’s no joy on the other side,” he said, according to results service Seeking Alpha.
“When I look at the industry overall, I think in many classes, the industry, in aggregate, if I rolled it all together in one big portfolio, needs rate. When I look at it for the Chubb portfolio, most of our business is at or approaching risk-adjusted rate adequacy,” he added.
Mr Greenberg, who is also Chubb’s chairman, said the insurance industry continues to experience, and needed, a “robust” commercial P&C pricing environment in most regions around the world. “Based on what we see today, I’m confident these conditions will continue,” he continued.
Overall rates were up 16% in Chubb’s international business during the second quarter and 13.5% in North America.
Mr Greenberg explained that general international commercial lines loss costs for short-tail classes are trending at about 4%, while long-tail loss costs, excluding workers compensation, are trending at about 6%.
He said rates have been rising in North America for almost four years now and have exceeded lost costs, currently trending at about 5.5%, for around two years.