World casualty insurance coverage market “arrange for fulfillment” in coming years

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“Looking ahead to the next phase of the market cycle, the reinsurance market has responded with reinvigorated product offerings that allow our clients to execute their plans from a position of strength and prepare all parties for success in the years to come.”

The casualty insurance industry has taken many corrective actions in recent years – and it has hardened significantly in response to deteriorating loss ratios in many liability lines, particularly those in commercial vehicles, general liability, roofing, and finance.

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One of the main drivers of the hardening of the market in all liability lines is social inflation – a term used by insurers to describe the rising cost of insurance claims, which results from things like increasing litigation, expanded liability definitions, more plaintiff-friendly legal decisions and larger compensations surrendered jury awards. This is particularly problematic in the US market, but similar trends can be seen in Australia and Europe.

“Rate [correction] is only part of the story as airlines have made other significant changes to counteract the dynamics of social inflation, “said Ross. “The first is capacity reductions. One clear tool to control damage severity is to reduce the capacity offered, and the insurance industry has done so, particularly in the liability and financial lines of business.

“In connection with the improved pricing structure already described, the overall portfolio rate on lines has improved significantly, especially with high excess shifts. To put it simply: hauliers now receive a higher premium per imaging unit than in previous years. “

Many airlines have also begun increasing their deductibles for loss-bearing liability lines, and insurers have begun to adjust their risk appetite and pay more attention to latent, severe, and systemic risks. At the same time, insurers also use risk management services to improve the risk profile of their customers and reduce the risks to their profits.

“The combined effect of all of these measures has created positive momentum for the second half of 2021-2022,” commented Ross. “But concerns remain – and these concerns speak for everyone” [to continued] Market discipline for rate increases and for an additional focus on the underwriting strategies implemented to ensure continued profitability in 2022 and beyond. “

Continue reading: Can you fill market gaps with E&S solutions?

The past few years have also highlighted the need for solutions across all liability portfolios, said Ross, who added that Guy Carpenter is “uniquely positioned” to help clients do this.

“The first action point is to identify, measure and manage the aggregation of the liability portfolio,” he said. “The multi-year nature of damage accumulation can put pressure on both the returns and the return on investment of very serious events. Rating agencies and regulators are also increasingly focusing on how carriers navigate this environment.

“Guy Carpenter has proactively introduced portfolio tools and improved accident modeling techniques that examine, track and model the aggregation of accident portfolios. Our tool suite, in conjunction with our financial models such as Benchmark, MetaRisk and MetaRisk Reserve, gives us unique insights into the design and implementation of legacy transactions to protect previous accident years as well as future-oriented solutions to maximize retention risk and profit during unwanted volatility will.”

The study of various reinsurance structures, such as B. Adverse Development Covers and Loss Portfolio Transfers, on the go-forward portfolio is “invaluable,” said Ross, to ensure that opportunities for profit are seized while providing adequate volatility protection.

“After all, we all know that we are operating and executing these transactions in an ever-changing reinsurance market,” added Ross. “The engagement between all parties was remarkable at this unprecedented time. With a view to the renewals at the end of the year, we expect this positive dynamic to continue and lead to an orderly renewal phase with sufficient capacities to support the cedants’ reinsurance strategies.

“Reinsurers will continue to focus on last year’s claims development, but by focusing more on the rate increases they have made so far, outlining profit expectations for 2022 and highlighting the evidence of underwriting risk management measures, cedants will be best positioned for favorable results.” Linking the reinsurance strategy with business success is becoming more and more important. And this focus shapes the market development and our continuous reaction. ”

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