WR Berkley hires Chubb pair to launch Asian insurance operation

The move comes on the back of a decent first quarter and full-year 2015 set of results, during which executive chairman William Berkley said the insurer would take advantage of recent consolidation in the market to grasp opportunities. Mr Berkley wrote in his letter to shareholders, however, that any further expansion would not be short-term opportunism but a long-term play. This new Asian insurance unit will offer specialty commercial insurance coverages to customers in north Asia and southeast Asia through offices in Hong Kong and Singapore respectively, once regulatory approvals have been received.hideShasi Gangadharan has been named chief executive officer and Aaron Yip has been appointed chief operating officer. The appointments are effective immediately. Mr Gangadharan has more than 25 years’ experience in the property casualty insurance industry, mainly focused on financial and casualty lines, in the Asia-Pacific and Middle East regions. He joins from Chubb where he was vice-president, Chubb specialty insurance manager, Asia-Pacific zone. Mr Yip has more than 20 years’ experience in the specialty commercial property casualty insurance industry. He also joins from Chubb, where he served as chief executive officer (CEO) for the Greater China region. W Robert Berkley Jr, CEO and president of WR Berkley Corporation, said: “We are excited to establish a general insurance practice in Asia that will complement our existing reinsurance presence. Both Shasi and Aaron have extensive local market experience that will enable us to develop a superior offering of products and services tailored to the specific needs of clients in the region.” Executive chairman Mr Berkley, meanwhile, hinted that the group would take advantage of significant change underway at a number of the insurer’s leading rivals as the market experiences a period of intense competition, consolidation and restructuring. In his letter to shareholders, published along with the group’s 2015 results, Mr Berkley wrote: “In general, 2015 benefited from a lack of catastrophic losses and a continued low level of inflation. The domestic property casualty industry had one of its best years in the past 20. “Yet, several large insurers recorded meaningful reserve charges, while consolidation continued among both mid-size and small companies. “Additionally, several global players continued rearranging the deck chairs to find their optimal position. This type of environment provides tremendous opportunities for a stable enterprise – and it is the type of environment in which the company has excelled.” Mr Berkley was also keen to stress, however, that, while the insurer may be taking advantage of dislocation in the market, it is not a short-term opportunistic player that will be here today and gone tomorrow. “Much of the company’s long-term success is a reflection of our recognition that the property casualty business is a long-term business. Short-term profitability can be misleading and, at times, may even be inaccurate, especially in an environment with less predictability than usual,” explained Mr Berkley. “We are required to price our product before we know the actual cost, so the quality of our earnings is a reflection of the accuracy of our loss cost estimates. Implicit in these estimates are assumptions about inflation and other variables. We have a rigorous process for establishing accurate reserves,” he continued. “In managing our business each day, we attempt to examine not just the profitability but also the inherent risk and volatility or predictability of the business we underwrite. All returns are not created equal and one needs to be conscious of the risk embedded in achieving those returns,” explained Mr Berkley. He said he believes that increased risk, including volatility, means the insurer has to obtain higher returns. It therefore avoids entering businesses where the return might be extremely attractive for one year and negative in the subsequent year. “Our preference is to expand where the marginal returns are equal to or greater than our existing return,” he said. “As such, we recognise that growth is a desirable goal but not axiomatic with success. As responsible stewards of our shareholders’ capital, we are diligent in evaluating the best times and places to grow. This drives decisions regarding whether to use capital or return it to shareholders in the form of stock buybacks or dividends. We do not believe the size of an enterprise in and of itself should be the driving force in measuring success,” Mr Berkley promised shareholders. He said that WR Berkley’s strategy seems “quite simple” and is based on real economics, not on accounting. Hence the decision to build organically, as in the case of the new Asia business, rather than via acquisitions, in most cases. “Acquisitions oftentimes have a more immediate impact on reported earnings but inherently bring about questions of balance sheet risk and cultural fit. We are constantly on the lookout for new specialty opportunities that allow us to decommoditise the product. “Projects that require expertise and attract customers who are willing to pay a premium to the commodity-based price in order to obtain a better designed product or a better quality of service are particularly attractive,” said Mr Berkley. “Having more satisfied customers leads to a more profitable business. When you build such an enterprise, costs generally result in modest losses for the first few years of the startup. But the real economic return is far greater than would be achieved from an acquisition. Of our 51 operating units, we started all but seven,” he continued. “We continue to invest in such startup ventures and the current year was no exception. We started six new companies or divisions and we have several new ventures on the horizon. While building in a controlled way drives up our expenses in the short run, it creates internal growth for the future and long-term value,” he added. WR Berkley reported a net profit of $119.5m for the first quarter of this year, against $118.3m for the same period last year. The group wrote gross written premiums of $1.96bn in the first three months of 2016, compared with $1.85bn last year. Net premiums written were up 9% to $1.66bn. The combined ratio was 93% and pre-tax return on equity was 15.2%.

WR Berkley hires Chubb pair to launch Asian insurance operation

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