Greenberg says P&C rates have ‘reaccelerated’

“World-class” underwriting results with an 86.3% combined ratio, record net investment income and life income that more than doubled, found Chubb CEO Evan Greenberg in a buoyant mood as he reported first quarter 2022 results that saw net income hit by higher-than-average catastrophe losses. But risk managers in North America and worldwide will not be overjoyed to hear Greenberg’s bullish analysis of rating trends during his call with analysts to discuss the results. “North America P&C rate and price increases reaccelerated in the quarter; it was a world standout performance that I expect will continue,” he told analysts, according to results reporting service Seeking Alpha. Chubb reported consolidated net written premiums up over 16.5% in the quarter on a published basis, or over 18% in constant dollars. This comprised 11% growth in its P&C business globally. P&C premium growth in the quarter was balanced and broad based. North America, Europe and Asia all produced double-digit growth. Greenberg explained that in North America, commercial premiums were up almost 12%, or 6.2% excluding Agriculture. Adjusted for the impact of one-off loss portfolio transfers in its major accounts division, year-over-year North America regular commercial flow grew 7.6%, “representative of the minimum rate growth we expect for the balance of the year”, said Greenberg. This is, of course, not an evenly balanced cycle, with some lines such as property and cyber on the up and others such as D&O and other financial lines heading in the other direction. “By the way, the 7.6% is broken down as 10% growth in P&C and minus 2% growth in financial lines,” noted Greenberg. The Chubb CEO said that the insurer’s major accounts and specialty division grew 6.3% in Q1. The contrast between financial and other lines was again evident, as Greenberg explained that the overall figures included 11.4% growth for P&C, but minus 7% for financial risks. Premiums were up 6.5% in the group’s middle market and small commercial business. Renewal retention for its retail commercial businesses was 97%. The international general Insurance operations grew net premiums by 10% in constant dollars or 6% after FX impact, with commercial up 10.8% and consumer up over 8.5%. Greenberg said that growth was led by its fast-growing Asia-Pacific region, with premiums up over 18.5%. Commercial lines were up about 15% and consumer lines up over 22%. Europe produced overall growth of over 10%. “In terms of the commercial P&C rate environment, rate and price increases reaccelerated. Pricing for total North America commercial P&C, which includes rate of 6.4% and exposure change of 4.5%, increased 11.2% against a loss cost trend of 6.7%,” said Greenberg. “Pricing for commercial property and casualty, excluding financial lines and workers’ comp, was up 16.9%. Property pricing was up 27%, with rates up 16.4% and exposure change of 9.1%. Casualty pricing was up 9.9%, which includes 7.4% of rate and 2.3% of exposure,” he added. Workers’ compensation and professional lines business remain the most attractive for buyers, according to Greenberg. “As I said last quarter, for professional lines and workers’ comp, which includes risk management, the competitive environment is aggressive and rates have continued to decline in recognition of favourable experience. In the quarter, rates and pricing for North America, financial lines and aggregate, were down about 2%, and in workers’ comp, which includes both primary comp and risk management, pricing was up 6.4%, with rates down 0.5% and exposure up about 6.8%,” he explained. “Internationally, we continued to achieve improved rate to exposure across our commercial portfolio. In our international retail business, pricing was up about 8%, with rates up 4.8%, and exposure change of about 2.9%,” added Greenberg. He warned analysts about over generalising about pricing trends in professional and financial lines. He said that the arrival of naïve capacity is part of the problem in the public D&O market. He sees this as an increasingly risky area in which Chubb will clearly tread with care moving forward. “When I look at professional lines… you have to unpack it between financial lines, between professional liability, and there are all kinds of classes in D&O, both private and public D&O. In the public D&O market there are a lot of players with no data and no experience, and capacity [is provided] by those who don't seem to have their eye on the ball. And there's an area where I think the market is overshooting the mark… it's not an area that I think is devoid of risk, particularly as you look forward, everything from recession and volatility in financial markets to climate change and claims of greenwashing and all of that,” he said. On cyber, Greenberg said that there is currently “a lot of noise” in around catastrophe exposures and definitions of war. In his view, war is a misnomer and should rather be described as “hostile actions by nation states”. Greenberg said that ransomware losses are picking up after a relatively quiet period. “Ransomware frequency of loss and severity is picking up; it was temporarily down. Cyber pricing and underwriting has responded to the external environment, I think, reasonably well. And, if it maintains discipline, then I'm not concerned,” he said.

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