William R. Berkley says reserve deficiencies are driving the need for the market to increase rates—and that for some companies, the ability to take corrective actions will decrease.
Prior-year reserve deficits, especially among W.R. Berkley Corp.'s small and midsize competitors, are a “snowball going downhill,” the chairman and CEO said during a third-quarter earnings conference call.
“The abilities [of these companies] to continue on the run will diminish,” Berkley added, predicting solvency issues for some smaller companies.
Berkley's conservative approach to pricing and setting reserves will allow the financial services company to “grow while others are trying to hold their own,” he said. Berkley has recorded 23 straight quarters of positive reserve development.
W.R. Berkley Corp. reports its 2012 third-quarter net income increased 32 percent to $101 million compared to the same period a year ago, thanks to rate increases and positive trends in most lines of business.
Berkley says his company anticipates rate increases into next year. W.R. Berkley achieved an average 7-percent increase on renewed policies in the third quarter—the group's seventh straight quarter of getting rate increases.
W. Robert Berkley, the company's president and COO, added that loss trends and past aggressive pricing are catching up on the marketplace after years when underwriting discipline eroded.
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