Chubb cut financial lines/D&O Q4, calls litigation localised problem

Chubb cut back on North American commercial primary and excess casualty for major accounts in the fourth quarter of 2023 in a targeted move to stand away from “naïve hungry capital” on the market still ahead of a painful payday. 

“We know this business extremely we and are trading growth for underwriting income,” CEO Evan Greenberg told analysts during his company’s fourth quarter earnings call. 

Rates continued to decline in financial lines, particularly D&O, Greenberg noted. He cited pure rate down 6.1% and overall pricing down 5.5% for financial lines against loss cost trending up at 5.1%. 

Chubb grew North American commercial P&C net premiums written by 4.4% year on year in Q4, down by 3.0 points on account of the corrective actions, with P&C lines up 6.3% and financial lines down 2.1%. 

Chubb attributed one half of the reduction in premium to increased client risk retentions, then let the other half head out the door on account of pricing and/or terms.

Not everything in casualty is on negative trend, Greenberg insists. Overall loss cost trend in Chubb’s casualty book has been “reasonably steady, though elevated.” Minor changes in loss cost in the larger book have resulted more from changes in the business mix than trend. 

Instead, many problems are visibly localised. “It’s pretty focused and direct,” Greenberg claimed. Litigation is targeting large-cap America, not small and mid-cap entities, following US anti-corporate sentiment and the larger corporate money bags. “Exposure on wheels,” especially larger vehicles in the larger fleets, are at higher risk, both from hungry litigants and America’s incoherent patchwork of liability rules, Greenberg said.  

A reckoning is inevitable in D&O, Greenberg notes, with expectation that the market will return to Chubb when the party is over. 

“There are pockets of the business that are dumb at times and this is one of those moments,” Greenberg said, citing “naive hungry capital” working at the longer-term expense of its own balance sheet.   

“Look at the number of mouths to feed that get on a D&O tower right now,” Greenberg said. “As the losses come, good luck. I wish the brokers well in collecting from each of those players.” 

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