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High-net-worth personal lines writers vie for share of evolving market

Incumbent providers and new market participants alike claimed to have gained traction in the high-net-worth personal lines business following the completion of two transactions that were expected to alter the competitive landscape.

Nine months prior to ACE Ltd.'s January 2016 acquisition of Chubb Corp. in the blockbuster deal that resulted in the creation of Chubb Ltd., ACE had acquired renewal rights to the high-net-worth-focused personal lines business of Fireman's Fund Insurance Co. In tandem, the deals positioned the acquirer to emerge as the market leader in the high-net-worth space, but they also led new and existing competitors to target potential dislocation from the effective consolidation of five prominent players — ACE, Chubb, Fireman's Fund, American International Group Inc. and the upstart Privilege Underwriters Reciprocal Exchange — down to three.

Executives at National General Holdings Corp., one of several companies seeking to take advantage of the perceived opportunities, explained their rationale for entering the market during a recent investor day.

"Brokers went from being $10 million [in premium volume] with three carriers to $30 million with one," said Andrew McGuire, senior vice president of NatGen Premier during the event. "They needed to diversify because they can't really only offer one product."

The new Premier Client product was live in nine states as of mid-May, and National General President and CEO Barry Karfunkel said he believes it could become "a significant business for us in the future ... given the market dislocation."

Other carriers that have stepped up their efforts in the high-net-worth business or established a new market presence include the likes of Cincinnati Financial Corp., Ironshore Inc., Central Mutual Insurance Co., and Nationwide Mutual Insurance Co. W. R. Berkley Corp. said it intends to launch its Berkley One-branded high-net-worth product offering later in 2017.

But disclosures and commentary from the more established providers suggest they, too, hold upbeat outlooks.

Chubb reported that North America personal property and casualty gross premiums written increased to $1.15 billion in the first quarter of 2017 from $974 million in the year-earlier period as it benefited from increases in rates and exposure units as well as what Chairman and CEO Evan Greenberg characterized as "quite strong" retention levels.

"[W]e're optimistic about the growth potential over time of our U.S. high net worth customer business, a $5 billion franchise, tapping what is a large and underserved market," wrote Greenberg in the company's annual report. "We estimate that less than 20% of a $40 billion market in the U.S. is properly insured."

Among its U.S.-domiciled P&C subsidiaries, Chubb's 2016 homeowners direct premiums written increased to $2.70 billion from a pro forma $2.49 billion in 2015. Private auto direct premiums written rose to $706.4 million from $644.2 million. Their first-quarter 2017 homeowners writings increased to $575.1 million from $541.6 million in the year-earlier period.

Chubb said about 70% of the segment's 2016 earned premiums came from the homeowners business, but it also provides coverage for automobiles and collector cars, valuable articles, personal and excess liability, travel, and recreational marine.

Two U.S. units of AIG that have indicated in product filings that they underwrite high-net-worth associated with the AIG Private Client Group program, AIG Property Casualty Co. and, in select markets, Commerce & Industry Insurance Co., have also grown homeowners and private auto writings. On a combined basis, their 2016 homeowners and private auto direct premiums written rose to $774.6 million and $229.6 million, respectively, from $708.1 million and $211.3 million in 2015. AIG Property Casualty's homeowners business volume totaled $181.2 million in the first quarter of 2017, up from $172 million in the year-earlier period.

Privilege Underwriters Reciprocal Exchange reported homeowners and private auto direct premiums written of $378.9 million and $141.5 million in 2016, up from $297.6 million and $108.4 million in 2015. Its first-quarter 2017 homeowners direct premiums written surged to $94.4 million from $75.6 million in the year-earlier period. The company said in its 2016 annual statement that it "anticipates continued growth and diversification of its book," and President and CEO Ross Buchmueller wrote in his annual letter that "[t]he stars are aligning for another great year."