Fitch spots market fears over pricing

Concern in the US casualty market that pricing hikes are not enough to cover some of the increases in loss costs is causing an element of fear in the market and could mean further upward pressure on rates.

That is what Brian Schneider, senior director in Fitch Ratings’ insurance team, told APCIA Today, arguing that it is a positive for discipline in the market.

Schneider said there’s been some momentum for pricing increases in US casualty on the back of a number of negative trends for insurers, including increases in D&O litigation and much higher jury awards.

As a result, there’s concern in the US casualty market that the pricing isn’t increasing enough to cover some of these challenges, he said.

However, he added, there’s good momentum and an expectation that rate increases will continue in US casualty through this year-end and into 2020.

“It’s important to see that on the reinsurance side rate increases have not been as high as on the primary side and that’s a bit unusual,” Schneider added.

“In most previous cycles reinsurance increases would drive the primary companies to increase their rates. This time it’s the other way round, with insurance rates increasing and helping the reinsurers get higher rates on some of their proportional treaties.

“But on excess of loss, the reinsurers aren’t getting the rate increases they feel that they need to keep pace with loss costs,” he concluded.