Aggressive new litigant tactics threaten liability tail & price adequacy

New lines of attack from litigants are lending a new quality to social inflation pressures with kick-on effects for tail risks, price adequacy and policy terms in key liability insurance lines, the top officer of US insurer  WR Berkley has warned.

“The plaintiff bar is very aggressive,” CEO Robert Berkley told his company’s second quarter earnings call, citing “a variety of new tactics.”

While no liability segment may be immune, problems have been particularly visible in commercial auto and with spill-over effects to general liability and umbrella coverages, he said.

One such tactic is last-minute eleventh hour claims submissions or suits which put insurers under the gun and lengthen the tail on some lines.

Berkley sees “growing evidence that the tail associated with some of these product lines may be extending a little bit, particularly on the occurrence front and, to a certain extent, on certain aspects of the claims-made front,” he said of insights gleaned from his claims team, well ahead of movements visible on reserves.

“Often they are trying to wait until the eleventh hour and create a demand and create a situation optimal for them,” he said of rising signals.

“We are able to keep up appropriately through terms, conditions, attachment points and, of course, pricing, but it is not lost on us that it is a challenging moment and requires one to pay close attention,” Berkley said.

Medical inflation, under-represented in the inflation story to date, is likely to add fuel to the fire in casualty lines in the coming period, Berkley believes.

“One of the things we had waited for and were starting to finally see rearing its head is medical inflation,” Berkley said. “It is our expectation that you are going to see more medical inflation coming through.”

While Berkley principally fears medical inflation for its workers compensation covers, at some 50% of claims costs, the kick-on impacts should be palpable “for all payers,” he warns for casualty covers.

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