WR Berkley eyes exposure growth after compounding rate rises

Repeated rate increases in certain segments of its portfolio mean WR Berkley is once again looking for exposure growth as the US specialty insurer becomes increasingly comfortable with the pricing and margin being achieved.

In its first quarter 2021 results, WR Berkley reported that average rate increases during the period excluding workers compensation were 12.8 percent.

“There is a meaningful tailwind that exists in the commercial lines marketplace,” Robert Berkley, president and CEO of WR Berkley, said on a call with analysts to discuss his company’s first quarter 2021 results.

“Certainly, this organisation is benefiting from that…Not only is the growth and market conditions attractive, I think what’s even more encouraging is that there is a growing amount of evidence that that the momentum is going to grow from here and there is a fair amount of runway still before us.

“So again, I think that bodes well for not just how we see the coming quarters unfold, but quite frankly, the next several years,” the executive said.

The rate improvements, which in some major product lines are now in their third consecutive year and in excess of loss cost trends, are such that WR Berkley is now looking to increase the amount of exposure on its books.

“There are parts of the portfolio where rate adequacy has gotten to the point where we are so encouraged by the available margin that we are more interested in pushing harder on the exposure growth and not as preoccupied in pushing harder on the rate front,” Berkley said.

“We view that as a real plus,” the executive added.

Berkley would not give details on which parts of the company’s book he and his colleagues believe are now rate adequate, other than to say “it is a growing percentage” of the portfolio.

The executive would also not provide specifics on where the business might grow, other than to say “we grow where the margins are”.

“We are pretty comfortable with certain product lines and what the available margin is, and we are starting to push on that,” Berkley told analysts.

“We grow where the opportunity is, and we are not shy or scared or intimidated to let the business go when we don’t think it is a good use of capital,” Berkley added.

The executive pointed to its workers compensation, primary insurance professional liability and reinsurance portfolio writings as examples of its underwriting discipline.

“We are in the business of managing capital, and we are going to deploy it where we think it makes sense…We have our eyes wide open,” he said.

The company increased its net premiums written in Q1 2021 to $2.1bn, up 11.1 percent year on year. Insurance NPW increased by 9.9 percent compared with the prior year period to $1.74bn in Q1 2021, while reinsurance and monoline excess NPW totalled $310.2mn for 2021’s first quarter, an increase of 18.2 percent.

“We are focused on growing the business in areas at times that we think that the margin is there. And obviously, the reinsurance marketplace is going through a significant transition,” Berkley said regarding the top line growth.

“Our [reinsurance] colleagues that have through discipline shrank the portfolio considerably, are now finding it to be a marketplace that is much more attractive, hence, the growth,” he added.

E&S momentum continues

Berkley said the company continues to see more business entering the excess and surplus lines space from the admitted market.

“Our submission flow is gaining momentum, partly because of the economy, but partly because I think the standard market continues to revisit their appetite,” the executive said.

Berkley said part of the continued flow of business to E&S carriers has been the admitted market itself looking for more rate, as well the move to “weeding out” their portfolios and “revisiting what their appetite should be”.

“That is creating opportunity for the specialty market, in particular, the E&S carriers, and we’re certainly in the middle of that,” he said.

Another potential source of E&S growth will arise as the economy begins to open up, Berkley suggested.

Small businesses that were forced to close during the pandemic may now reopen or their owners will start something entirely new.

“New businesses tend to find their insurance coverage in the specialty, and in particular, the E&S market,” said Berkley.

With the economy opening back up, “I think that you’re going to see great opportunity in the top line,” Berkley stated.