After a number of years of shrinking its reinsurance underwriting book, global re/insurer Chubb is ready to expand its activities in the reinsurance space now the pricing is adequate, according to CEO Evan Greenberg.
Chubb has been pulling back on reinsurance in recent years, finding the pricing less than attractive for its Chubb Tempest Re division, particularly in catastrophe exposed regions and other shorter-tailed lines where the pressure on pricing has been greatest.
At the same time, Chubb has increasingly leaned on third-party capital to hedge its book, particularly via its ABR Re, total-return focused reinsurance entity that it partnered with Blackrock to launch and which has become an increasingly large source of protection for the company.
Now, though, with the reinsurance market having turned, firmed and now well on its way to hardening broadly, Chubb is increasing its appetite for underwriting reinsurance, according to its CEO.
Speaking during the re/insurers second-quarter earnings call recently, Evan Greenberg explained that, “We are more active in our reinsurance business, it is a greater growth area for Chubb now.”
Adding that, “We have, like our E&S business and particularly in London where we have been disciplined, shrunk for a number of years because we weren’t getting paid to take the risk.
“We are getting paid more adequately to take risk in a number of classes now and that is growing by the quarter.”
There’s a chance Chubb could need to buy more protection for itself as a result, or offload more risk into the third-party capitalised ABR Re, in order to manage its PML’s during the current growth opportunity it sees.
Chubb will likely utilise reinsurance capacity from whatever sources it finds most efficient, including ABR Re, which as an owned reinsurer that Chubb can earn fees back from as well, is particularly efficient and also long-term, given the lack of liquidity we understand to be available to investors in the vehicle.
Greenberg said, “We buy reinsurance fundamentally to be able to provide limits of liability beyond what we’re what we want to expose our balance sheet to. We buy it for protection of volatility where it makes sense.
“So we do it for fundamental business purposes and we buy reinsurance in a manner where we measure the risk/reward and the proper risk-adjusted pricing. That’s what we’re willing to pay for protection.”
But for now the company is focusing on the growth opportunities that the hardening of rates provides.
“We’re leaning into that. And our reinsurance business, from what we can tell today, will continue to expand as we go forward,” Greenberg stated.