The president of Travelers says the increased severity ofweather events is forcing the company to increase rate over thelong term, regardless of whether or not the climate ischanging.
|Speaking yesterday during the Bank of America Merrill LynchInsurance Conference in New York, Travelers' President and ChiefFinancial Officer Brian W. MacLean said the company is pushing forrate increases across its commercial, personal andfinancial-professional books of business.
|MacLean said the company has been successful in its quest forrate, but Travelers' catastrophe experience continues to worsen inthe commercial and homeowners lines.
|He underscored the need for rate saying that industry data showsthe insurance industry had a 30-year period, beginning in 1950, ofabout 1 percent of premium catastrophe loss. During a 20-yearperiod beginning in the 1980s, the figure rose to roughly 3.5percent.Over the last three years, it has jumped to 7.3 percent,MacLean says.
|“You may be, and some of you people probably are, [saying],'This is just the normal volatility of Mother Nature,'” saidMacLean. “We don't know. We're not meteorologists. We don't ascribeto that belief though. In the business we are in, we have tobelieve that this is a pattern and it will have some sustainabilityto it. So we have to take action.”
|The fourth quarter for Travelers was the strongest month forrate gain in the past few years, and “we are encouraged that 2013is off to a good start,” he said.
|MacLean says Travelers will not say how much it believes ratesneed to increase, nor will the company set targets.
|“We know market conditions can change,” he said.
|But he said homeowners has been a challenge for the companybecause of weather severity. Since 2007, MacLean said the companypushed rate increases of 6 to 8 percent, driven by wind, hail andcatastrophe losses.
|On the commercial side, which accounts for 54 percent ofTravelers total book of business, MacLean said rate “reacheddangerously low levels” by 2010 and the company felt the “need tomove the needle.”
|“They have been rising ever since,” said MacLean.
|Travelers is not satisfied with its auto-insurance returns, dueto higher severity losses driven by bodily injury.
|MacLean said rate increases jumped from the low-singlepercentile two years ago to around 9 points of price change in thefourth quarter in this line.
|“That's a fairly significant increase, and we think the productwarrants it,” he said.
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