Florida risk helped ruin Uber for insurer James River (updated)

James River group

07/11/2019 15:33

(Updates headline, adds details about Florida risks and Uber
business lines.)
    By Suzanne Barlyn
    Nov 7 (Reuters) - A Bermuda-based insurer that recently
severed ties with an Uber Technologies Inc  UBER.N  affiliate
said on Thursday the risk of providing driver ride-hailing
coverage had become too great and that it had mispriced policies
during its initial years on the account.
    James River Group Holdings Ltd  JRVR.O  said on Oct. 8 it
would cut ties with a unit of Uber, its largest client, and
cancel all related policies as of Dec. 31 this year.
    Florida was an "outsized contributor" to the insurer's Uber
problems, especially in 2016, given a large number of uninsured
and underinsured motorists, said James River Chief Financial
Officer Sarah Doran in a call on Thursday with analysts to
discuss its third-quarter financial results.
    The insurer cut back on its exposure to Uber's Florida
market in 2017, Doran said.     
    James River boosted its cash reserves by a total of $57
million during the 2019 third quarter. Of that, $50 million was
for 2016 and 2017 losses stemming from its Uber account, the
insurer said.
    James River late Wednesday said it withdrew $1.2 billion in
funds held as collateral in a trust created by an Uber affiliate
to cover current and future claims. 
    Insurance is one of the largest expenses for ride-share
companies, an issue that many analysts cite as a risk for the
ride-share industry's profitability.  
    "In Uber, we wrote a new type of risk that originally seemed
to be highly profitable," J. Adam Abram, James River executive
chairman and chief executive officer, said in the Thursday call.
    But the nature of that risk changed as Uber rapidly expanded
into new regions, added tens of thousands of drivers, and moved
into other business lines, Abram said. Uber's businesses now
include food delivery and freight.
    "Candidly, in some years, we mispriced the risk," Abram
said.
    James River's poor results for its Uber account in 2016 and
2017 spurred it to negotiate a "substantial pricing increase"
for 2018 and charge similar rates for 2019, Abram said.
    James River bought reinsurance for a third of the Uber
account in 2019, but does not expect profits on the account for
2018 and 2019 to offset earlier losses, Abram said.
    A new California law designed to limit the use of "gig"
workers ultimately swayed James River to cancel the Uber
account, despite coverage now being "well-priced," Abram said.
    The law, which goes into effect on Jan. 1, 2020, spells out
when companies must treat "gig economy" contract workers, such
as ride-hailing drivers, as employees. "We believe (it) will
adversely alter the claims profile for ride-share companies,"
Abram said.
    James River expects to process about 18,500 Uber-related
claims while winding down the account, Abram said.

 (Reporting by Suzanne Barlyn; Editing by Bernadette Baum and
Jonathan Oatis)
 ((Suzanne.Barlyn@thomsonreuters.com; 646-223-8550; Reuters
Messaging: suzanne.barlyn.thomsonreuters.com@reuters.net))