Social inflation wasn’t the only factor that pushed the loss severity on the U.S. casualty book of Everest Group Ltd. up high enough to prompt a $1.7 billion loss reserve charge, the CEO said earlier this week.

Related article: Everest Group Boosts Casualty Loss Reserves $1.7B

A day after Everest announced the charge in a media statement, Jim Williamson, Everest president and chief executive officer, described misguided underwriting choices that were impacting profitability and driving unfavorable loss development, and remediation actions that started well before the reserve hit to its balance sheet. Among the more unique actions is one he refers to as a “one renewal standard.”

“That means we will return every casualty account to target profitability in one renewal, or we will get off the account. Period,” Williamson said during a presentation to investment analysts, later explaining strategic pivots put in place late last year, which involve nonrenewing problematic classes of business and pushing rates up well above assumed loss trend of roughly 12 percent.

Williamson began his remarks acknowledging the general problems of social inflation and legal system abuse, briefly describing early attorney involvement in liability claims and tactics used by plaintiffs lawyers to influence juries. “Many insurance and reinsurance carriers have been affected by this trend, and Everest is no exception.”

“However, it’s important to acknowledge clearly that our underwriting choices contributed significantly to these results,” he said, focusing the bulk of his presentation on corrections of internal problems.

He cited a high concentration in casualty, with casualty gross written premiums reaching 45 percent of Everest’s North American insurance book in 2022, “coupled with the willingness to write classes like real estate, habitation, and sports and entertainment, [which] magnified the impact of social inflation.”

“It’s important to acknowledge clearly that our underwriting choices contributed significantly to these results,” Everest CEO Williamson said.

Transformation of the casualty book is an immediate priority, said Williamson, who also described efforts to balance the insurance portfolio with short-tail and specialty lines. He said he expects account-by-account remediation work in casualty to be completed before the end of 2025 and that, once done, Everest’s target objective is to deliver a mid-teens total shareholder return over the cycle.

Work in Progress

Beyond account-by-account fixes, steps toward remediation began in 2023, when a string of leadership changes started to take shape with the hires of a new chief underwriting officer and chief actuary, Williamson said. Those “accelerated aggressively” in March of 2024, when Williamson took over the insurance division. Key divisional leaders were replaced and Everest continued to bolster talent across U.S. casualty lines throughout the year.

“The people that are making these decisions, in particular in casualty, are world-class individuals. I have recruited many of these people myself. I’ve worked with some of them for well over a decade. They know what good looks like and that’s the only thing we’re willing to put on our book,” he told an analyst asking about changes in risk appetite.

“We are not fooling around here in terms of getting this portfolio to world-class results, and we’re not taking our time when we get after it,” he said.

“It’s really hard to overstate the intensity of the pivot we’re making,” Williamson told the analyst, going on to provide some specific examples of changes to the book.

Previously, he said, Everest was not only writing real estate, “but writing large real estate accounts on a guaranteed cost basis, which is a recipe for experiencing the full effect of social inflation and then magnifying it.” Today, the company is instead “writing marquee loss-sensitive accounts” in industries other than real estate, such as manufacturing, technology and life sciences, highly engineered construction, and food services.

“These are best-in-class accounts with major brokers. We’re writing loss-sensitive general liability programs. We may be offering up to $10 million of excess, but we’re not necessarily doing it as a lead umbrella. We’re participating a little higher up in the tower or outside of the attritional loss.”

“Most importantly, we’re now also consistently writing a chunk of the property program, which would not have been happening in the past. We’re much more attached across lines of business in our regional offices than we ever have been…We’ll write some property as a part of that solution. We’ll write a cyber line…We might write surety. We’ll write credit and political risk, financial lines, etc…”

“We’re getting a rounded account—not just writing the casualty.”

“It’s really hard to overstate the intensity of the pivot we’re making…We are not fooling around here in terms of getting this portfolio to world-class results, and we’re not taking our time when we get after it.”

Jim Williamson, Everest Group Ltd.

Williamson said a cultural change involved with providing direction to Everest’s teams underpins all of this. “The entire casualty team understands with crystal clarity that I have zero interest in writing any business that does not meet our target return profile. And for these larger loss-sensitive accounts, you’re loss rating each and every account. You have actuarial involvement in that process. If it doesn’t meet our return profile, we don’t write it,” he said, also referencing very robust price targets that Everest leaders have set for all lines of business.

“Literally the day that I took over the business, I was giving direction to some of the teams to start shedding their portfolios—in some cases decisively, meaning a near exit or an exit of the businesses that they were participating in,” he said.

What About Brokers?

Williamson said the collection of actions will complement additional moves the company has been making to strengthen its value proposition to brokers and clients—redefining roles at the regional level, putting underwriters closer to distribution, enhancing service levels and deepening expertise. But an analyst questioned whether the decisive “one renewal strategy” would alienate brokers.

“My appetite to lose money is zero, and as we approach this process, we’re just not willing to continue to write business that’s underpriced,” he stated firmly, beginning his response.

He also noted that Everest does business with leading global brokers who are sophisticated. “They know that our portfolio has underperformed in the past. I’m not getting an argument from them that we can’t continue to do what we’ve been doing or that the accounts that we are willing to retain need 50 points of rate.”

“We’ve had a very successful new-business pipeline writing the type of quality business that I’ve been talking about, and it’s with the same brokers,” he added. “When you add our insurance and our reinsurance business with the top three brokers, we are a major, major market for them…So, they’re clearly willing to continue to support Everest,” he said, stating that he has gotten support from the leadership teams of large brokers throughout the remediation process so far.

“Is there going to be an individual broker at one of those companies that’s upset that we walked away from an account because they wouldn’t take a 50 percent rate increase? I’m sure that’s happening, but it’s not slowing us down, and it’s not changing our fortitude and our commitment to turn this portfolio around before the end of 2025,” Williamson said.

Another analyst suggested that a changing competitive landscape for casualty business could derail Everest’s “one renewal” efforts. Offering his interpretation of commentary from other insurance executives, the analyst said “it sounds like the market’s generally more competitive than I think people would’ve guessed even a month or two ago even for casualty. It doesn’t sound like rates are going up quite as much as we were thinking or hoping.”

Williamson disagreed with the assessment. “There’s no sign that I’ve seen that anyone’s giving up on the need to drive higher casualty rates,” he countered.