Property the best priced business in the world. Conditions to endure: Chubb CEO Greenberg

Property underwriting is “the best-priced business in the world right now” and, as long as Chubb is getting paid adequately, its CEO Evan Greenberg said that the company is ready to take greater catastrophe concentration and volatility.

Writing in the Chubb annual letter to shareholders, Evan Greenberg explained that Chubb has become increasingly property and catastrophe exposure levered.

He highlighted that Chubb has no aversion to taking on more property catastrophe risk, as long as the pricing remains adequate to do so.

Greenberg also highlighted some of the market dynamics that have changed and helped to enhance his firm’s appetite for property catastrophe risk, with even alternative capital deserving of a rare mention.

He noted that Chubb, like other insurers, has “become more CAT-levered by writing more property insurance business” but urged his shareholders to focus on the calendar year combined ratio, which he called “the best measure for investors,” while also explaining that “Volatility of margin and income is a feature of a company in the risk business.”

In 2023, Chubb’s combined ratio, despite the addition of more catastrophe exposure through property underwriting growth, was at a record low.

“At our core, we are an underwriting company, dedicated to the art and science of taking risk. We have outperformed the industry in the craft of risk-taking for 20 years, and last year was no exception. We once again achieved industry-leading underwriting profitability with $5.5 billion in underwriting income and a record combined ratio of 86.5%, which is a real trick given our size and global breadth and speaks to our management, culture, and underwriting governance processes,” Greenberg wrote in the letter.

Explaining why Chubb has been expanding its property business and so catastrophe exposure, Greenberg said, “Property insurance has been a growth opportunity for us given favorable risk-reward underwriting conditions globally.”

But he also noted why conditions are so much more favourable, highlighting, “With the growing impact of climate change, its related costs and volatility; reinsurers charging appropriately for risk and, in large part, passing all but the CAT tail risk back to primary companies; and the cost of money no longer zero, thus keeping alternative capital honest, favorable property insurance underwriting conditions in most areas of the world should endure.”

Greenberg has rarely referenced alternative capital in his commentary on the market over the years, so this is a notable mention.

It’s also notable that the Chubb CEO feels property underwriting conditions should “endure” and that he highlights reinsurers “charging appropriately,” which should help to encourage more discipline on price in the reinsurance sector.

Greenberg did caution though that, “Inadequacy in property pricing shows up quickly,” which is perhaps his warning to the re/insurance market to remain focused on keeping prices adequate for the risks it assumes.

While, from the Chubb perspective, as long as market conditions remain conducive, it seems further growth in property and catastrophe exposure are likely.

“Our company has become more property- and CAT exposure-levered. Property business is the best-priced business in the world right now, and as long as we are paid adequately, we have the balance sheet to take greater concentration and volatility in earnings from property,” Greenberg said.