Economic recovery glitches and nat cat volatility merit continued push on rates, says The Hanover CEO
Insurance rates should press further forward across a slew of business lines as glitches in the post-pandemic economic recovery and nat cat drivers call out to insurers for a further push on prices, the chief executive officer of The Hanover Insurance Group John Roche (pictured) told the third quarter earnings call.
“The pricing environment continues to be robust in our markets,” Roche said.
“We expect the firm market to continue as the drivers of rate increases are not showing any signs of slowing down,” he said, citing weather patterns, claim inflation and a reheating of litigation. “We will be seeking additional rates in many lines of business.”
Comments follow word that Hanover enjoyed a 6.9 percent annual rise in Q3 rates in core commercial lines, including some 8 percent in specialty, and a 2.1 percent increase in personal lines as it managed an 8.4 percent annual increase in net premiums written in the quarter. Natural catastrophe losses spoiled that gain to render a notable year-on-year decline by the bottom line.
The bumps and bruises in the 2021 economic recovery factor heavily into Hanover calculus on rate hikes in commercial lines. Factories at high capacity utilisation, suffering labor shortages, commodity and input price inflation and supply chain problems all speak to risks and exposure worthy of better pricing, officials suggested.
Property may show the whims of weather, litigation and the macroeconomic conditions - with each quarter putting a new sub-sector on the top of the outlier loss cost list (middle market in Q3) – but “it remains a good business for us, it just requires that we keep pushing on the rate.”
The pending closing of the litigation lag could also merit attention amongst cost-side price drivers. “We are assuming that social inflation is still there; it hasn’t gone away,” Roche said. “The courts are clearly opening up.”
Automotive could enjoy a similar impact from macroeconomic drivers, although Hanover officials insist that to-date they have more comfort for a “measured” response in personal lines given very mild claim frequency throughout automotive.
In its just released Q3 financial statements, the insurer saw its net profits plummet almost 71 percent to $34 million, compared with $118.9 million in the prior-year quarter. Results were dragged down by “considerable” catastrophe losses despite its chief executive claiming “strong, sustained growth” in all business segments, management had claimed.
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
