Chubb chief executive Evan Greenberg has warned that soft insurance-market conditions are spreading into casualty lines central to Bermuda’s commercial insurance sector, even as claims costs keep climbing.

The warning is particularly relevant to the island’s excess-casualty and large commercial-risk market. Chubb has a large Bermuda presence through Chubb Bermuda and Chubb Tempest Re.

“There is zero evidence across the industry that loss costs have abated,” Mr Greenberg told analysts on an earnings call yesterday. “They’re not accelerating, but they’re increasing at a steady rate. Don’t confuse the two.”

Chubb estimated that annual loss-cost inflation in the United States was running at between 6 and 7 per cent in primary casualty and between 9.5 and 12 per cent in excess casualty.

The figures indicate the level of rate increases insurers may need just to keep up with the rising cost of claims and protect their underwriting margins.

Mr Greenberg said the soft market is spreading beyond property into more casualty classes, particularly excess-and-surplus lines.

His comments came during Chubb’s second-quarter earnings call, when the company reported a nearly 15 per cent increase in core operating income. The results were previously reported by The Royal Gazette.

Chubb reduced the amount of major-account and excess-and-surplus property business it wrote as competition drove down prices.

Rates on the property business accepted by Chubb fell 10.5 per cent, while pricing in shared and layered major and speciality property declined 12 per cent.

Market pricing on business that Chubb rejected or surrendered had fallen by about 40 per cent, according to Mr Greenberg.

Chubb also increased its use of reinsurance. Ceded premiums in its North American commercial insurance operation rose by more than 20 per cent, with the company buying additional protection in property and financial lines.

“If there’s a hungry market, at times irrationally, it makes sense to us to feed the hungry,” Mr Greenberg said.

The reinsurance market favours buyers, he said, with strong competition among reinsurers allowing primary carriers like Chubb to buy more protection.

Mr Greenberg rejected the suggestion that Chubb could respond by expanding or acquiring a larger reinsurance platform itself, saying such a move made “zero sense”.

“Our playbook goes in the other direction,” he said.