Speaking to The Insurer TV, Gallagher described Hudson as “a specialty casualty and property insurer”. The business, he explained, “is more casualty than property, and the property tends not to be catastrophe focused”.
Pricing in many of the lines of business that Hudson operates in has “sky-rocketed”, Gallagher said, although others remain “very steady”, with the executive highlighting surety as being “highly competitive”.
“This is, I would describe as ‘an underwriter’s market’,” said Gallagher.
“Pricing is such that if you focus on coverage, and you focus on risk selection, you can make money and make a good profit,” he explained.
“It’s not a market where just going out there and writing business is going to guarantee you an underwriting margin,” Gallagher added.
Reflecting on the hard market at the start of his career in the mid-1980s, Gallagher said pricing “was going up by a factor of 10”.
“There were people who were extremely weak underwriters who made a fortune. This is not that market.
“If you’re not focused on coverage and risk selection, pricing will not carry you through to a profitable underwriting result, in my view,” he said.
“There’s still plenty of risk out there for those who are naïve or who don’t understand the risk they’re taking on,” Gallagher added.
More rate needed in commercial auto
Hudson has been active in the commercial auto space for almost 20 years, and in that time Gallagher said Hudson’s appetite for the business “has waxed and waned”. Last year, the sector accounted for 16 percent of Hudson’s $1.9bn gross premiums written, equal to some $304mn.
Given the impact of social inflation on commercial auto and how it has driven both the frequency and severity of claims, insurers have for several years pushed through price rises and tightened terms and conditions to help manage the costs.
But Gallagher said more is still needed.
“I think that commercial auto rate increases will continue,” Gallagher said.
“They will continue, I believe, because we’re really just treading water in the sense of perhaps we’ve gotten to the rate level we need – we think we have – but social inflation continues to grow, and we don’t see that abating.
“Commercial auto is something where rate increases should continue, [and] rate increases will continue if we’re going to write the business,” Gallagher said.
As the executive noted, Hudson remains committed to the commercial auto market for now, but warned further changes may be needed for it to remain involved.
“[In commercial auto], we think that where we are is a good place, but it’s not sustainable as we see it unless we continue to get incremental rate increases every year to keep up with the ongoing [loss] trend.”