Liberty Mutual's chief executive said the insurance industry needs to review its underwriting in the Midwest and charge more for its homeowners coverage there, declaring that part of the nation a catastrophe zone.
Speaking last week during the Boston-based company's conference call with analysts, Edmund F. Kelly, chairman, president and CEO, said while the company performed well overall, the “one area of concern is the Midwest.”
He said the company is witnessing the most rate activity there due to increased storm activity and mounting losses.
“As we look at the Midwest we cannot think but [to believe] that the industry is in the same denial it was in Florida five or six years ago,” Mr. Kelly suggested.
“I think it is about time that people start looking at what is going on there. The level of cat activity, I don't know whether the reinsurers are blind to it or not, but it is now a high cat area. Hurricane Ike was a Midwest hurricane. Whether it is tornadoes, ice storms, whatever, the Midwest is underpriced for homeowners and we need more rate there,” he said.
The carrier performed well in the fourth quarter and year-end, reporting a profit for both periods, though the end of year numbers saw a slight decline from the previous year (see NU Online, “Liberty Mutual Sees 12% Net Income Increase In 4Q,” March 6).
He said all the company's filings have been for rate increases this year and 55 requests for the direct writer were approved. The independent agency arm has received 75 approvals and its newly acquired Safeco unit received 112 approvals.
Mr. Kelly said the company is very pleased with the performance of its relationship with the GEICO platform where Liberty is underwriting homeowners insurance in four states. The company has seen direct written premium of $11.7 million. He said the business is split between 50 percent for rental, 40 percent dwelling and 10 percent condominium.
“So far, the quality of business and loss experience has been very, very good,” said Mr. Kelly.
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