Chubb adds more inflation to loss cost outlook; rates hold pace for now
US P&C insurer Chubb has upped its outlook for loss cost growth to 6.5 percent as inflation refuses to abate and continues to press up against the adequacy of current market pricing, Chubb CEO Evan Greenberg has said.
“While the level of rate increases is moderating, the vast majority of our portfolio is achieving favourable risk adjusted returns and additional rate is therefore required primarily to keep pace with loss costs, which are hardly benign,” Greenberg told his company’s Q2 earnings call.
Chubb thus increased their loss cost call in North America to 6.5 percent in anticipation of rising costs, Greenberg said of what he assures investors is pure outlook, not catch-up accounting. “The actual trends we are observing at this time are lower.”
Greenberg speaks to a short-tail loss trend up half a tick to 7 percent, long-tail excluding workers comp up half a tick to 6.5 percent and first-dollar workers comp somewhere between 4 percent and 4.5 percent.
Rates to date have kept ahead of the pace. Greenberg compares his 6.5 percent loss cost outlook to the latest pricing gains at 10.5 percent and assures that rates “have achieved adequacy in most all our portfolio”.Increased competition has begun to crowd the market in acknowledgement of the largely adequate pricing being taken, Greenberg claimed.
“I think the market is, on the one hand, becoming more competitive as companies rationally want to grow in what is an adequately rated environment. On the other hand, I see, it can have a sense of the kind of reactions companies are having to loss cost and inflation,” Greenberg said of the evolving market balance.
“The market is rational to me at this time,” he said. “The market is reasonably disciplined and, I suspect, will remain so given not only the spectre of loss cost inflation, but the presence of other risk exposures, such as climate change, the war in Ukraine, the litigation environment, cyber and the overall cost of reinsurance.
“Plenty of reminders to managements to get paid for the exposures underwritten.”
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