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By DAN REYNOLDS, managing editor of Risk & Insurance®

As he prepares to step down, Robert Hiscox, the chairman of specialty insurer Hiscox, praised his team for making a reasonable profit in a very difficult year and hoped for gradual rate increases. Hiscox, 69, who has led the business since his father died in 1970, announced in February that he will step down about this time next year.

In the company's full-year results reported on Feb. 27, Hiscox and his CEO Bronek Masojada referred to unwise underwriting decisions being made by competitors as they chased business during the soft pricing cycle.

"In the insurance market, we daily walk away from risks where uneducated capacity has plunged into the market at rates which can only lose them money," Hiscox said in the report.

"The curse of the industry is that we sell a product the cost of which is only discovered years later when the claims roll in," he said.

Masojada also referred to foolish pricing on the part of some competitors in the casualty area.

"The account remains profitable: We think that the suicidal competition in the 2012 renewal season will make a turn in pricing inevitable so we are investing in extending our capability in this area," he said.

Although the markets are seeing many areas of rising prices, Hiscox said he hoped those rises would be gradual.

"In an ideal world, rates would bump along at a level at which good underwriters could make money and the bad ones wither and die," Hiscox said.

In its approach to the U.S. business, Hiscox has proven itself to be a conservative player. It saw U.S. revenue decline from $204.45 million in 2010 to $172.72 in 2011, as it withdrew from animal mortality and inland marine business lines in 2010, and the company transferred its technology and media portfolio to its Hiscox London Market.

In its core U.S. businesses of kidnap and ransom, construction, terrorism, media and professional lines, Masojada reported that the company saw premium growth of 29 percent in 2011, however. And he said that the company will continue to invest in its U.S. business in 2012.

Globally, Masojada reported that his company has seen rate increases for reinsurance in catastrophe-impacted countries like Japan, New Zealand and Australia.

Masojada, in line with other insurance executives, pointed to hardening in marine pricing. His company reserved $20 million net for the sinking of the Costa Concordia off the island of Giglio in the Mediterranean, and reported taking a loss on the storm damage to the North Sea oil production and storage unit Maersk Gryphon Alpha.

Masojada praised Hiscox for growing the business from $3.18 million in premiums in 1970 to the $2.64 billion in premium that it now controls, and for his leadership during various periods of crisis for the industry.

"He has done all of this," said Masojada, "with drive, energy, perspicacity, determination, iconoclasm, wit and aplomb."

March 6, 2012

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