On market current movement in the insurance industry:
William R Berkley:
We are seeing lots of movement in the market. A number of our large competitors are acting more seriously as when they look at their pricing, and we’re not having this vicious competition which seemed to be a lack of knowledge. But there still is on occasion this strange price cutting that’s taking place, and it’s hard to understand why – it’s almost like a random behavior. There are some companies that are still being quite aggressive, stretching for volume. I don’t think that’s going to change. I think that the big issue that people are focusing on is change in frequency and the potential of deflation. That’s giving people hope that lower prices will be rewarded. Our own exposure numbers and experience have told us that frequency has stopped going down for the past 18 months, and while it’s not dramatically increasing it’s certainly stopped going down and is slightly increasing but not significantly. But definitely the time where we could benefit from dramatic improvements in frequency seem to have come to an end.
As to deflation – we think people are making some bad assumptions about those issues. Number one, clearly medical costs are not going to be deflating. We just think, and that represents a very large part of the costs of our claims in the aggregate, and I think people aren’t considering that with enough weight. In addition to that we’re really not expecting significant deflation. We actually think you’ll be in slightly inflation by the time we get to the end of the year, and things will be picking up. Not a worry about great inflation, but I wouldn’t want to make a bet on deflation. So we believe those optimistic assumptions probably don’t warrant the kind of price cutting that’s taking place, and we’ve clearly stated our position where the industry is running at probably a 110 combined ratio at the moment. And we’ve consistently run eight to ten points better than the industry, and that’s where we’re booking at – roughly 100 combined ratio. We think we’re probably being cautious and conservative as Rob said, but we’re more comfortable in that issue than otherwise because the risk of ultimate inflation when we have a long tail line as a business is more significant and more concerning than otherwise.