US casualty loss costs have market ‘nervous’

The US casualty market is facing significant headwinds when it comes to claims trends but has yet to reach a tipping point.

That is the view of Christopher Ross, managing director at Guy Carpenter, speaking to APCIA Today in Chicago. “There are so many challenges putting pressure on casualty from social inflation to litigation finance – it is a complex situation which is keeping the cost of claims high.”

“It could become increasingly difficult to provide casualty solutions in some states which highlights the need for tort reform.”

He stresses, however, that he does not feel the market overall has hit a level of crisis just yet. He describes insurers and reinsurers alike as nervous about rising loss costs. This can also be seen in the rise of the excess and surplus lines market, which has increased as a portion of the market from 20% to meaningfully higher in some states.  Insurers are using all the tools in their arsenal to counter these trends and to operate profitably: limits, attachments, pricing, terms and conditions.

“What is the long-term prognosis? It could become increasingly difficult to provide casualty solutions in some states which highlights the need for tort reform.”

He acknowledged that a big question for many at the moment is how profitable business written in recent years will be, given the poor loss development of years 2014 through to 2019. In long tail lines, it is a question of examining granular information, he notes.

He said reinsurers have increasing levels of scrutiny on what they will write and that, as a result, Guy Carpenter is helping reinsurers and insurers better drill down into individual portfolios to maximise continued support. “Granularity is key now to differentiate the results of today vs. prior years. It is better than taking a broad-brush approach,” he said.

“There is just a lot of caution in the market. In some ways, the numbers feel good right now, but you never know what the future will hold. Our clients are being careful and focused as a result, with reinsurance being a key part of their strategies.”

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

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