Renewals set for different dynamics in property and casualty: Hartwig

While the dynamic between insurers and reinsurers is one of broad equilibrium at the moment, further price increases are likely in the year-end renewal with any adjustments much more pronounced on casualty lines. 

That is the view of Robert Hartwig, director of the Center for Risk and Uncertainty Management at the Darla Moore School of Business, University of South Carolina, who offered a preview to APCIA Today of some of the likely topics of a conference session on October 7 titled “Current trends in reinsurance”.

“The 1/1 2025 property reinsurance renewals are decidedly mixed,” Hartwig said. “The session will focus on the current state of property and casualty reinsurance markets, its recovery from the capital shocks of recent years and the outlook for reinsurance and insurance-linked securities (ILS) markets in 2025 and beyond.”

Commenting on the property side he said that, on balance, the consensus among market participants (brokers, reinsurers and insurers) seems to be converging on price increases in the low single digits. But he stressed that these views emerged before Hurricane Helene, which could have the impact of reminding reinsurers of the need for maintaining discipline, “therefore nudging renewals a bit higher”. 

“A further a big hurricane loss would probably serve as a stark reminder that reinsurers will need to maintain discipline in terms of price and higher attachment points in 2025 and beyond. Hurricane Helene is a subtle reminder of that fact,” he added. 

That said, there are other forces at play. “The easing of inflationary pressures will benefit insurance and reinsurers alike and, of course, insurance buyers,” he said.

Casualty is different

The casualty market, however, has a very different dynamic. Hartwig said casualty lines (excluding workers’ compensation) and casualty reinsurance remain a persistent challenge with an immediate solution. At the heart of the problem is the legal system. 

“Trial lawyers have inordinate influence in many state legislatures in the US.”

“Legal system abuse in the US remains rampant and efforts to rein in jury awards (including so-called ‘nuclear’ verdicts) along with efforts to require disclose of third party litigation funding have met with only limited success,” he said. 

“The trial bar is the best organised and funded special interest group in America today, and the best connected politically. Trial lawyers have inordinate influence in many state legislatures in the US, and zealously protect their own interests.”

Hartwig said the effects of this can be seen in many insurance markets—he cites rising commercial auto liability claim severities, large products liability judgments and escalating medical professional liability awards.

In addition to the market conditions in property and casualty, the session will discuss the increasing importance of catastrophe bonds and ILS in general. “We’ve seen record issuance of cat bonds in recent years and expectations are for ILS to grow rapidly over the next decade,” he concluded. 

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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