By Chris Munro

Jan 27 - (The Insurer) - WR Berkley CEO Rob Berkley believes the casualty reinsurance markets needs “more discipline” and “to charge more” as the executive voiced his disappointment at the sector’s to-date slow response to social inflation.

The liability market “continues to be plagued by social inflation”, Berkley told analysts during a call to discuss his firm’s Q4 and full year earnings.

“The combination of an emboldened plaintiff bar along with, quite frankly, the jet fuel that they have in their back pocket, otherwise known as litigation funding, continues to just up the game,” Berkley stated, although he noted that social inflation does not apply to all lines equally.

While Berkley said social inflation “is certainly prevalent in most places within the liability space”, it is most impactful in those segments where there is actual physical injury to someone.

“By example, the type of awards that are coming out related to auto liability or med mal and the inflation that we are seeing in those types of claims is far more than what we would be seeing in the D&O space or what we would be seeing in the accountants’ liability space,” he noted.

In light of these issues, Berkley voiced his disapproval at what he perceives to be reinsurers’ slow response to these issues.

“One of the things that's been both surprising and, quite frankly, a bit disappointing to me, has been how slow or sluggish the reinsurance market has been to respond to social inflation,” he said.

WRB’s “suspicion” is that “a gradual groundswell” is building in response, and discipline will enter the casualty reinsurance market over the coming months and years, said Berkley.

“That will create an opportunity for our colleagues in the reinsurance space,” the executive said.

Casualty re NPW dips

During the fourth quarter of 2024, WRB’s insurance net premiums written $(NPW.SI)$ increased 9.9 percent year on year to over $2.6bn, and “with growth in all lines of business”, explained the company’s CFO Richard Baio.

WRB’s reinsurance and monoline excess NPW fell to $316.6mn in Q4 2024, down from the prior year period’s $335.0mn.

Casualty reinsurance NPW fell 15.3 percent to $170.7mn. Monoline excess NPW increased 13.9 percent to $40.2mn, and property reinsurance NPW increased 7.8 percent to $105.7mn.

The decrease in WRB’s casualty reinsurance writings reflects the company’s view that market conditions in that segment are “concerning”.

“We just don't think that the [casualty reinsurance] market is exercising the discipline and, quite frankly, is expecting an appropriate risk-adjusted return,” said Berkley.

“We will participate where we think it makes sense…We can only control what we can control. We can't control the market. We can control our behavior,” the executive stated.

“We are seeing opportunities in much of the market today. We think we have great colleagues with great expertise. They understand how to separate the wheat from the chaff, and I think we're in a pretty good place,” he added.

“The casualty reinsurance market needs more discipline, and they need to charge more, whether that be adjusting ceding commissions or on an XoL basis,” he said.

“I think there's a disconnect, no different than if you go back a few years ago, before the reinsurance market woke up [and] there was a disconnect between property primary and property reinsurance,” he declared.

Property insurance tailwind remains

Berkley said it remains unclear what the impact of the California wildfires will be on the property insurance market, but for now, there remains a tailwind in the sector, albeit one that is slowing.

“We think that there is still an opportunity, generally speaking, in property,” said Berkley.

“We'll have to see what the impact is of the California fires, whether that changes the appetite of some but yes…for property insurance, there is still a tailwind, but it is clearly diminished from what it was yesterday.

“It has not become a headwind or eroding to the extent that the reinsurance market has on the property front,” he said.

According to Berkley, in the property reinsurance and retro markets, “it is clear that at 1.1, there was no tailwind to be found”.

“In fact, it was quite to the contrary - there was a growing headwind,” Berkley said.

At 1 January, Berkley said WRB’s property catastrophe renewal risk adjusted rate was down around 15 percent, and its retro book saw similar.

However, despite those decreases, Berkley said margin remains in the property reinsurance market.

“The property market we believe is clearly under pressure. You could see that clear as day at 1.1, but we think that there continues to be margin in the business, and for the moment, it's adequately priced.

“So we are going to continue to ride that property horse as long as we can, until we reach a conclusion that it no longer makes sense. And then you will see us go from an offensive posture to a defensive posture.”