Reinsurance capital underpins the casualty marketplace by paying claims and shaping coverage. In the opening session at the 2018 Advisen Casualty Insights Conference, reinsurance executives discussed the factors driving reinsurance appetite in the casualty sector.
- Joseph Cellura, President, North American Casualty Division, Allied World (Moderator)
- M. Steven Levy, President and CEO, Reinsurance Division, Munich Reinsurance America, Inc.
- Keith Wolfe, President U.S. P&C, Swiss Re
The North American casualty reinsurance market has experienced growth driven primarily by their clients desire to grow their business. Demand has increased and reinsurers are expanding their appetite into casualty – the most growth is around quota share reinsurance.
Longevity of a reinsurance partner for long-tail lines is very important. Cedants need a partner who is going to be around for years so they are there to pay on claims. When choosing a reinsurance partner, it is important to look for financial strength and commitment to the business.
Casualty rates have been on a decline over the past three years. Loss trends are outpacing rate improvements. Commercial auto is barely keeping pace with loss trends, with underwriting losses are approaching 113%.
For commercial auto, distracted driving seems to be the largest cause of losses. The industry is also still trying to figure out technology in the vehicles, which has not been perfected. Reinsurers are investing heavily in InsureTech to help mitigate claims and predictive analytics to help quantify loss-cost savings.
General liability losses are approaching 110%. The risk of loss-cause trends worsening is very real. We are seeing increasing frequency in large events and high-profile claims. If these make it to court, there is typically animosity towards the corporations involved in litigation. A large amount of lawsuits are aimed at the companies with deep pockets.
Old offenders like asbestos and construction defects are still there, but we are seeing an uptick in traumatic brain injuries and wildfires. There is also a lot of risk related to opioid lawsuits, since the industry provides liability insurance for everyone involved in one way or another.
To analyze risk and make this business safer, reinsurers are investing significantly to prepare for emerging risks. They are investing heavily in learning the impacts of climate change and utilizing data analytics for forward-looking modeling. They are working diligently to gain a strategic view of what will happen with the market.