Improvements in nonlife insurance trading conditions are manifesting themselves in terms and conditions, as well as pricing, according to Zurich Insurance Group AG CFO George Quinn.
Several insurance and reinsurance company CEOs have spoken about price improvements in most nonlife insurance lines, with one exception being U.S. workers' compensation. The insurance rises are triggering reinsurance price increases and prompting upbeat comments about improving nonlife profitability.
Speaking to analysts about Zurich's first-half 2019 earnings on Aug. 8, Quinn said there was a "whole shift taking place" in terms and conditions, which is harder to observe than rate increases but could mean a benefit to Zurich that lasts longer than the typical 12-month duration of policies.
Quinn said examples of the shift included the moving up of attachment points, which govern how much loss a client has to suffer before insurance payouts are triggered, a reduction in line sizes and more business being conducted through wholesale channels, where Quinn said "rate is probably even stronger." He also noted "significant changes" in the deductibles for U.S. commercial auto insurance.
He added: "There is a whole series of factors and features that I think are very helpful from a terms and conditions perspective."
As well as improving terms and conditions, Quinn said he had seen an acceleration of price increases for North American business in the second quarter of 2019. When discussing Zurich's first-quarter earnings in May, Quinn said price increases across North American business lines were just over 4% during that quarter. He told analysts Aug. 8 that "we are getting close to 7[%] for all lines of business."
He said that on the margins, this would take some business that Zurich had previously rejected and "tip it into places where we would write it." He added: "Certainly the improved profitability in the market overall will increase the opportunity for us in commercial."
Zurich's profit attributable to shareholders increased by 14% to $2.04 billion in the first half of 2019 from $1.79 billion in the first half of 2018. Business operating profit was up 16% to $2.82 billion from $2.42 billion. Zurich CEO Mario Greco said the operating profit had reached its "highest level in the past decade." He said the improvement seen in the nonlife accident year combined ratio, excluding catastrophe claims, showed that the actions the company has taken to improve the business were the right ones.