James River CEO says pricing possibly best he has ever seen

Specialty insurer James River’s CEO Adam Abram has said current pricing is possibly the best he has seen since he joined the industry, a period that includes what is widely acknowledged to be the last true hard market in the early 2000s.

The comments were made as he and senior management colleagues provided a bullish outlook for pricing, submissions and premium flow, in a virtual meeting with Keefe Bruyette & Woods analyst Meyer Shields.

Abram did not put a figure on second quarter rate increases. But Shields reported “his overall tone was positive, describing current pricing as possibly the best he’s seen since entering the industry in the late 1990s, with continuing momentum from 1Q20’s +12.9 percent applying almost across the board”.

That would imply that pricing was better than in the early 2000s in the aftermath of 9/11, a period generally viewed as the last true hard market.

E&S business accounted for 48 percent of Bermuda-based James River’s gross written premiums in the first quarter while specialty admitted insurance accounted for 36 percent and casualty reinsurance 16 percent.

Abram in the KBW meeting said current pricing trends are a response to years of underpricing and sustained low interest rates, as well as the withdrawal of standard commercial insurers from quasi-specialty risks and some E&S markets abandoning entire classes of business.

KBW also reported that Abram said he was “pleasantly surprised” by overall premium volumes being less affected by recession-related headwinds than initially thought. The CEO also noted fronting business growth opportunities, including reinsurers looking to move closer to primary risks without competing directly with their cedents.

In addition, James River management provided an update of the run-off of the Uber book, which was placed into run-off at the turn of the year. The cancellation of all policies issued to Uber, which was James River’s biggest customer, caused E&S gross written premiums to drop 27 percent in the first quarter to $136.2mn.

Abram said the Uber reserves are still holding up and James River is settling claims within the reserve parameters at the end of 2019.

KBW reported that Abram does not expect the first quarter’s rapid settlement pace on the Uber book to be sustained but shutdown-related court and arbitration delays are still making claimants more receptive to its offers.

Abram confirmed that James River has ample capital to support rapid core (excluding commercial auto) E&S growth, which was 37 percent in the first quarter, largely reflecting capital freed up by the Uber non-renewal.

Abram’s positive outlook for pricing comes against a backdrop of E&S carriers and brokers anticipating further hardening in the E&S market, with retail brokers unable to fill placements in a retrenching standard lines market have increasingly relied on wholesale brokers to find surplus lines capacity.

Private equity money has also been flooding into the market. As this publication has reported, two significant start-up and scale-up initiatives are set to bring close to $2bn of capital to the market.

One is the relaunching of StarStone US with $850mn of capital and a management team led by Ed Noonan as chairman and Jeff Consolino as CEO, while a more nascent project involving Dinos Iordanou and Greg Hendrick and up to $1bn of potential start-up capital is also expected to have a significant E&S focus.