The insurance market has become one of “haves” and “have-nots,” and the former will be in position to enjoy an “excellent next few years,” says William R. Berkley.
The CEO of W.R. Berkley, during a conference call on first-quarter earnings, says well-positioned companies have more sophisticated managers to realize a market environment of low investment yields and less prior-year reserve development will put a lot of pressure on underwriting profitability.
“They have to make it up,” Berkley says. “Nothing I see is going to change that through next year.”
The chief executive says pressure on rates will increase by the end of 2013, and his son, COO W. Robert Berkley, tells analysts that although the fundamentals are there to predict continued rate increases, it would be speculative to assume overall double-digit rate increases sometime this year.
Nevertheless, throughout the insurance market, the “sense of urgency is on the rise,” evidenced in part by an increase in submission into the excess and surplus market, the younger Berkley explains.
Carriers are beginning to leave volatile segments of the market they entered without properly planning, adds the CEO.
The insurer sees higher rate increases for new business than for renewal business, which is the opposite of a trend stated by some competitors. Robert Berkley this is explained by W.R. Berkley underwriting philosophy.
He says many carriers had engaged in “buying market share”—giving accounts a good price at the start with an objective of raising rates at renewal.
“That doesn’t resonate with us,” he continues. “You should charge more for risk.”
And riskier accounts are not the ones being renewed, because you should know that risk better than you know new risk, he adds.
W.R. Berkley’s first-quarter net income was about $116.6 million compared to $135.3 a year ago.
First-quarter net premiums increased 14.4 percent to about $1.38 billion.
Investment income fell to $135.9 million from $157.6 million during the first quarter last year. First-quarter net investment gains dropped to about $20 million from $43.5 million in 2012.
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