W.R. Berkley CEO Says Insurer Isn’t Going to Chase D&O Market ‘Down the Drain’

W.R. Berkley Corp. President and CEO Robert Berkley said the insurer is not going to follow the directors and officers market “down the drain.”

During a call with analysts to discuss first quarter earnings, Berkley said the D&O marketplace, especially for large accounts, has been “in a state of free fall as far as rate adequacy or pricing.”

Berkely said there have been a lot of new entrants into the D&O market because “there’s not a lot of barriers to entry to getting into that space.”

However, the additional supply is not being met by demand. “We have seen a dramatic reduction in IPOs,” Berkley said. “We’ve just seen a dramatic reduction in a lot of the activity that would drive D&O purchasing.”

This, according to Berkley, includes transactional liability. M&A activity “has fallen off a cliff,” he said.

“The reality is that the demand has been reduced and the supply has increased, and that has led to an unattractive, competitive environment from our perspective,” Berkley said.

First quarter net income at W.R. Berkley was about $294.1 million compared to $590.6 million a year ago during the same period. The company’s Q1 consolidated combined ratio was 90.6 from 87.8 a year ago. Results included Q1 catastrophe losses of about $48 million and prior year reserve development of about $24 million. Underwriting income was $234 million during the first three months of 2023.

Berkley said the average rate increase, excluding workers’ compensation, was about 8.3% in Q1 but the insurer remains somewhat cautious, considering an observation the CEO made several times during the call — that product lines are distinct from one another in terms of where each is in the rate cycle.

“We are focused on underwriting margin,” he said. “We are sensitive to social inflation. We see the claims the industry is facing every day … the trajectory is quite steep. And we don’t want to get caught flat-footed.” The company is “not going to expose the capital unless we believe the rate is adequate,” Berkley added.

Property insurance rates are in the “early stages of meaningful firming,” Berkley said. He called the momentum for rate in January “disappointing” but said April included “meaningful traction as far as rate goes.”

“I think you’re going to see us writing some more property,” Berkley told analysts.