SIMSBURY, Conn.-Chubb Corp.'s offer of $850 million to acquire Executive Risk Inc. would bring significant benefits to both organizations, brokers and analysts agree.

The deal would allow Executive Risk to access Chubb's extensive distribution system and broader range of property and casualty insurance products, while Chubb would consolidate its position as a leader in directors and officers liability and executive protection insurance.

The deal would also allow Executive Risk to take advantage of Chubb's substantial capital and buy less reinsurance, therefore increasing profits.

But, as with consolidation in general, policyholders would have fewer insurers to choose from and, with a significant D&O competitor out of the market, insurers could perhaps increase premiums.

"It's a full price for a uniquely compelling strategic fit," according to Ron W. Frank, an analyst at Salomon Smith Barney in New York.

D&O is one of Chubb's most profitable lines of commercial insurance, and the acquisition would substantially increase its share of that market, he said.

Chubb also would be acquiring a profitable company that employs many talented people, Mr. Frank added.

The price offered may be "a little bit rich," but it is still a good deal for Chubb, agreed Michael A. Smith, an analyst at Bear, Stearns & Co. in New York.

"It establishes them in a premier position in the D&O market," he said.

Chubb may also be able to increase the price of its executive protection products, said Charles Ruoff, executive vp at Acordia Inc. in Indianapolis.

"It eliminates a very active competitor and they may attempt to get price increases," he said.

The purchase will strengthen Executive Risk and make it a more attractive security, but on the downside for policyholders it will mean a reduction in competition, agreed John Riley, director of corporate risk management at The Dun & Bradstreet Corp. in New York.

"Always with consolidation you have the trade-off between the strength of an insurer and pricing. It's hard to see anything concrete, but intuitively you know that competition is good for pricing," he said.

Executive Risk would benefit under the deal because policyholders are increasingly looking for insurers with large and secure capital bases, said Fred T. Podolsky, senior vp and director-management liability & professional risk at Willis Corroon Corp. in New York.

"Executive Risk needed a much expanded capital base to compete and grow its operations. They are competing with the likes of Chubb and (American International Group Inc.), which have an incredible amount of surplus behind them," Mr. Podolsky said.

Being part of Chubb would also allow Executive Risk to sell products through Chubb's extensive agency network, he said. Executive Risk writes most of its business from its Simsbury head office, though it also recently opened a few branch offices.

"That lack of branch offices has not hurt them on the East coast but it has hurt them in a lot of other areas like the Midwest and California," Mr. Podolsky said.

The sale to Chubb would also enable Executive Risk to access policyholders who like to buy more than just D&O coverage from one insurer, said Robert V. Deutsch, executive vp and chief financial officer of Executive Risk.

"For example, in order to be successful in securing a piece of business you may need to write the contents coverage for a law firm as well as the D&O," Mr. Deutsch said. Currently, Executive Risk only writes executive protection lines, which in addition to D&O include employment practices and professional liability coverages.

The sale to Chubb would also lead to about a 30% reduction in expenses for a combined Executive Risk/Chubb executive protection unit, he said.

While there would be some reduction in staff, most of the expense reduction would come through eliminating the corporate expenses that Executive Risk incurs as a separate public company, Mr. Deutsch said.

"In two years time we expect there to be more employees than we have now," he said.

Executive Risk's reinsurance costs would also likely be reduced as it would be able to retain more of its risks as part of Chubb, Mr. Deutsch said. Currently, 45% of Executive Risk's premiums are ceded to reinsurers.

Under the terms of the Chubb offer, Executive Risk shareholders would receive 1.235 shares of Chubb common stock for each share. Based on the Feb. 5 closing price of the stock, the last trading day before the deal was announced, Executive Risk shareholders would receive the equivalent of $71.71 a share, which is 63% above that day's closing price. Chubb's stock closed last Friday at $57.63 per share, while Executive Risk shares were at $67.50.

After the deal is closed, which is expected in the second quarter, Chubb's executive protection department would move to Simsbury and the new unit would be called Chubb-Executive Risk. Stephen J. Sills, Executive Risk's president and CEO, would be chairman and CEO of the new unit. Gary J. Tully, the current head of Chubb's executive protection unit, would be president and chief operating officer.

The new unit would offer both Chubb's and Executive Risk's policy forms.

One problem the new unit would face would be merging two different corporate cultures, said Mr. Podolsky of Willis Corroon.

Both companies have developed creative and profitable executive protection business, but Chubb is a more traditional and conservative insurer while Executive Risk has a faster moving and more open working environment, he said.

However, the differences in culture could be circumvented by the decision to run the new unit as a separate entity apart from the Chubb corporate headquarters in New Jersey, said Mr. Ruoff of Acordia.

"I don't think there will be much of an integration problem," he said.

Both Chubb and Executive Risk have felt financial pressures over the past year.

In 1998, Chubb reported a 7.8% decline in profits to $707 million, largely due to losses on its commercial lines. Its executive protection business, however, continued to be profitable, the insurer said.

Executive Risk's stock price plunged after analysts voiced concern that as a specialty executive protection insurer it could suffer significant losses from claims alleging corporate negligence over Year 2000 issues. Over the past year the insurer's stock price went from a high of $75.75 to a low of $35.50.