William R. Berkley said he still expects to see commercial insurance rates increasing by 8% to 9% by year end.
"The big news is we aren't worried about the cyclical change in the market," Berkley, chairman and chief executive officer of W.R. Berkley, said during the company's second-quarter earnings conference call. He said the company had seen average rates on polices renewed in the second quarter increase by 6%.
"People are parsing over [rates increasing by] 6% or 6.5% or 7%...they are really focusing on the wrong thing. The cycle is changing. The economic activity may have slowed the pace of rate, but rate continues to move up. Whether it moves up by 6% or 6.5% is irrelevant. Our view is unchanged that by the end of the year, we will be looking at 8% to 9% rate increases," Berkley said.
Companies need to focus more on underwriting because investment margins have thinned, and prior-year reserve losses have dwindled, said W. Robert Berkley Jr., president and chief operating officer.
"There are still a few people out there doing stupid things on occasion," William Berkley said. "But there is nothing we can do about that. Most people are much more responsible. It is clear that this is a tough, competitive business. No matter how good an investor you are, you still have to have underwriting expertise."
Eugene G. Ballard, chief financial officer, said it was "another solid quarter for us with significant improvement for both underwriting profit and investment income."
The company posted a 32% increase in second-quarter net income, which rose to $108.8 million from $82.2 million for the same quarter last year. Net premiums written rose 12.6% to $1.19 billion. The combined ratio improved to 98.2.
Earlier this month, W.R. Berkley Corp. launched a managing general underwriter, Berkley Custom Insurance Managers LLC, which will focus on the excess casualty insurance market and underwrite on behalf of W.R. Berkley member insurance companies. Michael P. Fujii, who retired in June as global CEO for Endurance Specialty Holdings Ltd.'s insurance operations, has been named president of the new MGU.