Chubb CEO Greenberg: Some Financial Lines Underwriting Practices ‘Simply Dumb’

According to Chubb CEO Evan G. Greenberg, the insurance industry’s underwriting practices for a number of financial lines are “simply dumb.”

In a call with analysts to discuss Chubb’s earnings for the first quarter, Greenberg said rates for financial lines continue to decline—at a slower pace compared with the recent past—and Chubb continues “trading growth for underwriting margin and income where we need to.”

North America rates and pricing were down 3% and 2.7%, respectively, for financial lines while Chubb trends loss costs at slightly over 5%, he added.

Related: Chubb Records 13.3% Uptick in Q1 Net Income on Underwriting

Evan Greenberg

Greenberg said the trends are often different for major accounts versus middle-market accounts, but for public D&O “there is dumb behavior” no matter the size.

For nonprofit D&O, Greenberg said Chubb is the largest writer of the business. Therefore, he told analysts, “We know what the experience is—what the real exposures are—where losses are coming from” while he described some cohorts in “important pockets” of the market as “irrational, dumb.”

Due to increased competition in the sector, Fitch Ratings recently said soft market conditions in U.S. D&O are anticipated again in 2024.

Additionally, there are what Greenberg called “naive” players in the employment practices liability market that “don’t understand the trends and the exposures.”

“It’s not simply wage and hour. Now technology impacts it,” he said. “There are those who have no idea what’s catching up to them. You have legal changes that are occurring at the federal level that are impacting financial lines. You can see it, and it’s coming.”

Because the lines of business are claims made, each “reveals its secrets quickly” and Greenberg said Chubb has “a lot of opportunity in a lot of places.” However, in other areas, Greenberg said the insurer is “just not going to follow people off the cliff.”

Asked by an analyst to identify undisciplined underwriters in the market, Greenberg said, “Next question.”


Long-Tail Reserves

Prompted for detail on approximately $95 million of unfavorable reserves on North America commercial long-tail lines during the first quarter, Greenberg said the action was not taken in response to any one period, but spread out from 2016 forward.

Greenberg said the reserves were mostly for large-account excess casualty—trucking, logistics companies, and large fleets. “It’s the business we’ve been addressing in terms of rate and underwriting actions,” he said.

“The development was not a surprise,” Greenberg added, “because we continually track actual versus expected activity for all product lines and we had continued to observe higher than expected loss activity for this business.”

Baltimore Bridge Accident

“Yeah, of course we had exposure,” Greenberg said of the cargo ship that crashed into the Francis Scott Key Bridge in Baltimore late last month.

“The exposure is within what we would contemplate, and there is nothing outsized to us,” he added. “Another unfortunate claim. That’s all there is to it.”