Specialty Market ‘Particularly Attractive’; Reason to Pause Elsewhere: Berkley CEO

W.R. Berkley CEO W. Robert Berkley Jr. said he’s still got eyes on the specialty market but maintains a cautious, more disciplined outlook on some lines of business, such as professional liability—especially public D&O.

“The specialty market in general continues to be particularly attractive,” said Berkley on a call with analysts to discuss fourth-quarter earnings. “I would highlight E&S [excess & surplus] especially. I don’t think that party is over. When we are looking at the submission flow, we continue to be quite encouraged.”

Berkley added that the insurer is paying close attention to the primary property insurance market as it relates to E&S in commercial lines. Also, the opportunity for rate on high-net-worth accounts written on nonadmitted paper is “creating meaningful opportunity,” he said.

The company recorded fourth-quarter growth of 12 percent in net premiums written to about $2.7 billion versus about $2.4 billion in Q4 2022. Asked if the 12 percent growth could be a benchmark for future results, Berkley said it depends on market conditions, but currently there are opportunities.

“Do I think the 12 percent number is a reasonable number to use? Yes,” Berkley said. “Do I think it’s possible to be better than that? It certainly is possible.”

Overall rate increases excluding workers compensation were about 8 percent for both Q4 and full year. Recent growth has overall been more on rate rather than exposure, said the executive, and while the company is “comfortably exceeding any reasonable assumption around loss cost trend,” the ability to get rate is not the same across all lines of business.

While there are areas of professional liability that remain attractive, particularly nonstandard, there are some lines that “should be giving anyone who’s responsible and disciplined real reason to pause,” Berkley said. He reiterated the “free fall” in public D&O, for instance.

Here, Berkley said rates went up but are coming back down.

“We have a view as to what rate adequacy is,” he said. “And ultimately, while we’re sorry to see [business] go—if it goes, it goes.”

Berkley also called out medical professional liability, specifically hospitals, where there has been a lack of discipline for a couple years, he said. Another area is architect and engineers, where on larger accounts the market is “willing to do things we don’t think make sense.”

Social Inflation

In speaking about the broad casualty market, Berkley said social inflation continues to be a big driver. “It’s alive and well,” he said.”

“We’ve sort of been standing on our head and jumping up and down, talking about social inflation, for many years,” Berkley said. “We started pushing on rate pretty early and it’s been good to see, more recently, people showing up to the party and recognizing what the loss trend is—what it means for loss cost and taking action.”

Berkley said the reinsurance market is realizing what the liability market is facing and may begin to focus on some of the liability, which will introduce discipline to the casualty marketplace.