Property rates lag reinsurance cost spike; a hard ‘23 assured: Berkley

The US property market failed to price the spectrum of spiking reinsurance costs into primary market property policies in the fourth quarter, setting the industry up for a bit of catch-up whiplash on rates during 2023, the president and CEO of property/casualty insurer  WR Berkley has declared.

“We were a little bit disappointed by the lack of discipline,” Robert Berkley said during a Q4 earnings call co-hosted with his CFO Richard Baio.

“Everybody knows that reinsurance costs are going up,” Robert Berkley told his company’s Q4 earnings call. “You would think that as soon as that became apparent, one needs to start to factor that into how you price your product.”

The upshot: the market may play catch-up in 2023. “The property market from our perspective is poised for material hardening.” The pricing discipline that “seems like it is arriving” is something “we are going to see more and more as we make our way through 2023.”

Despite WR Berkley’s headline association with liability, property is capable of making a major entrance on the Berkley radar screen when terms look right. “It would be a mistake to think we do not have the skills and the appetite for property when we think it makes sense, when we believe it is a good risk-adjusted return.”

The lag in pricing between primary property and their reinsurance backers may have tempted Berkley into the property reinsurance space, although the move is tempered by concerns about earnings volatility.

“We saw it as an opportunity, but I don't think you should assume it is reshaping our book of business as an organization,” one of the officials said during the Q&A.  “We put more than a toe in the water, but not more than a foot.”

Property reinsurance could provide continued opportunity for Berkley to dabble in property cat.

“We are going to see what kind of opportunities there are in the first quarter and the balance of the year, particularly as there are some shortfalls in certain market participant covers.”

Berkley had signalled already in September that it might be lured back into property cat reinsurance as pricing appeared headed towards adequacy. The CEO had avoided commitment, but spoken to a "better than average chance that you will see us expand our presence, because we think we will get paid for it.”

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