Chubb takes stand on sacrificing market share to maintain underwriting profit

Chubb Ltd. is willing to lose customers if they are not willing to pay higher prices for insurance.

“We sacrifice market share (though not happily) in order to maintain an underwriting profit,” Evan Greenberg, chairman and CEO of Chubb Ltd., wrote in the Swiss-based insurer’s annual report for 2017, recently posted to its website.

“Underwriting discipline is a hallmark and a constant of our company,” wrote Greenberg. Chubb was known as ACE Ltd. until 2016, when ACE completed its acquisition of Warren, N.J.-based The Chubb Corp. for US$28 billion. That acquisition made Chubb the largest publicly-traded P&C insurer in the world, reports Chubb, which reported $36 billion in gross premiums written in 2017.

Unlike some of its industry peers, Chubb made an underwriting profit in 2017, reporting a combined ratio of 94.7%, up from 88.8% in 2016. This, despite the impact of three North Atlantic hurricanes (Harvey, Irma and Maria) in August through October of 2017.

In 2017 Q3, Chubb “began to achieve flat–to–modestly-positive rate change, but we paid a price in terms of new business and the retention of some customers as the market simply didn’t follow along,” Greenberg wrote.

Asked to elaborate by Canadian Underwriter, a company spokesperson declined to comment further, but suggested company officials may go into more detail on April 25 at Chubb’s Q1 earnings conference.

Greenberg’s comments come within weeks of some major Canadian P&C insurers – Intact and Aviva among them – reporting they are raising auto insurance rates in Canada.

Intact recently said it is “prepared to lose market share” in personal auto if customers take their business elsewhere instead of paying higher premiums.

“Frankly, our industry has been operating with inadequate pricing for too long,” Greenberg wrote in Chubb’s annual report. “Steadily rising loss costs and a more difficult risk environment in some areas added to the industry’s deteriorating results.”

With the massive losses to the industry from the hurricanes, prices started firming in some areas, Greenberg wrote. The P&C industry “may now may be in a transition market where rates move in a meaningful and positive direction over time — although not in all classes and territories,” he added.

Industry wide, insured losses from natural catastrophes are estimated at more than US$135 billion for 2017, Greenberg noted.

Chubb reported its pre–tax net catastrophe losses were US$2.7 billion in 2017, compared to US$1.1 billion in 2016.

Those numbers were released in February but Chubb tweeted April 5 that it posted the full annual report on its website.

“There was no crying or hand–wringing around here — the losses were within our risk management expectations, and insuring risk, including catastrophe risk, is the business we’re in,” Greenberg noted.