In light of hurricanes and earthquakes in the 2017 third quarter that left insured catastrophe losses likely surpassing $100 billion, W.R. Berkley Corp. President and CEO Robert Berkley Jr. said he expects insurers will rethink their current market priorities moving forward.
“Given the level of destruction of capital, give or take $100 billion vaporizing in a short period of time, what will be the response of the marketplace? While it is hard to know what degree of response or what the potentially hardening of the market will be, it is hard for us to imagine that given the amount of capital that has been destroyed, that there will not be a meaningful response,” Berkley said during the carrier’s Oct. 24 Q3 2017 earnings call.
He said that given the level of loss activity, that there could be a “definitive wakeup call to revisit what is an appropriate risk-adjusted return.”
Berkley emphasized that he sees the reinsurance space still being problematic and soft as it has been for years, and that it “maybe requires a large dose of medicine that doesn’t taste very good so you get people to wake up and realize what needs to happen.”
Higher natural catastrophe losses aside, Berkley added that casualty coverage and workers compensation are brighter spots right now for the market. But, he added, workers comp “is seeing some aggressive actions in state ratings bureaus: that could create some problems down the line.
Berkley noted that Q3 was “exceptionally active on the cat front,” but he spent more time at the beginning of the call noting that millions of people affected by the hurricanes and earthquakes and wildfires require concern and sympathy. He also thanked colleagues and employees who have worked “to make sure claimants were looked after,” both as part of their jobs and through volunteer work and donations.
“We as an organization recognize we have a broader obligation to society than just our day-to-day business,” Berkley said.
W.R. Berkley Corp. reported net income of $162 million for Q3, though the number is down from the previous year. High catastrophe losses are to blame for the decline, the carrier said.
Those results translated to $1.26 per diluted share, compared to $220.6 million in net income, or $1.72 per diluted share, during the 2016 third quarter.
W.R. Berkley reported an insurance combined ratio of 95.6, versus 93.2 in the 2016 third quarter. Its reinsurance combined ratio landed at 154.6, a jump from 100.2 over the same period a year ago.
Q3 catastrophe losses on the insurance side came in at $47 million, up from $8.7 million over the same, year-ago period. Reinsurance catastrophe losses hit $72.1 million, a jump from $3.4 million in Q3 2016.
The carrier said that its underwriting results before catastrophe losses are factored in “were relatively stable even as market conditions remained competitive.”
Here are some additional 2017 Q3 result highlights:
- Insurance gross premiums written reached $1.7 billion for the quarter, while net premiums written and premiums earned each surpassed $1.4 billion. In the 2016 third quarter, gross premiums written were above $1.68 billion, and net premiums written/premiums earned were also in the $1.4 billion range.
- For reinsurance, gross premiums written, net premiums written and premiums earned hit $155.6 million, $138.8 million and $147.8 million, respectively, in Q3 2017. That compares to Q3 2016, when gross premiums written were above $180.1 million, net premiums written came close to $163.4 million and premiums earned were at $162.3 million.
- Net premiums written increased for commercial auto and workers compensation, but dipped for short-tail lines and professional liability compared to Q3 2016.
- W.R. Berkley’s net investment income was almost at $147.48 million for Q3, compared to nearly $145.67 million in the 2016 third quarter.
Source: W.R. Berkley Corp.