Chubb to Adjust Underwriting in Northeast Post-Sandy

February 4, 2013

The Chubb Corp., which posted Superstorm Sandy-related pre-tax costs of $882 million in its latest earnings report, said there would be some adjustments to underwriting and pricing in the Northeast region going forward.

Dino Robusto, president of personal lines and claims, said during the earnings conference call last week that as the company examines Sandy in the context of the last several years of increasing weather-related losses, “we recognize the need for additional price increases.”

He said that before Sandy, Chubb has been implementing mid single-digit rate hikes for homeowners in the Northeast. But after Sandy, he said, Chubb plans to file for rate increases of “up to the low teens in some areas in the Northeast.”

“Whenever you get an event as large as Sandy, it is always going to bring some adjustments,” Robusto said. “We always do an after-action review with our claims.”

He said the company will see some narrowing of the underwriting appetite in some coastal regions, based on the state of beaches and the infrastructure available to access certain towns. He said Chubb would probably avoid certain construction characteristics that the company thought compromised the structures’ ability to withstand Sandy.

Further, the recently released flood maps from the Federal Emergency Management Agency that show expanded flood zones in New Jersey and New York will “probably continue to contract some of our appetite,” he said.

Robusto said Chubb will also continue to encourage homeowners to select higher all-peril deductibles. Currently, around 40 percent of the book has deductibles of at least $5,000 or higher. “We would like to see that in more than half of our book,” he said.

On the commercial side, Paul Krump, president of commercial and specialty lines, said the company learned a handful of lessons that will mean some changes going forward. These will include non-renewing a few commercial clients who won’t implement some loss control measures even after getting hit with flood claims in both Irene and Sandy. Chubb is also altering some of its flood aggregations down to neighborhood levels and business districts, Krump said.

Krump also said New York State has a moratorium in place around much of the greater New York City region, which means that, at the moment, the insurer’s ability to non-renew clients, change terms and conditions, or charge a renewal rate hike of more than 9.9 percent in the region is hampered. “All intents and purposes, that will be throughout the first quarter,” he said.

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