Casualty reinsurance capacity tightened at the recent January renewals against a backdrop of heightened litigation costs, more generous jury verdicts, and shifting attitudes in the US, according to Guy Carpenter.
Analysts noted that many reinsurers were forced to adopt more cautious underwriting positions at 1/1 due to higher loss cost trends, increased frequency of severity, and loss development beyond expectations.
These factors resulted in a tightening of capacity for some select segments of the casualty market, and in particular for the US liability market.
Guy Carpenter reported that pressure has now begun to spread beyond US commercial auto and into other liability classes, with prior year loss development increasingly impacting directors and officers, medical professional, and general liability.
The broker sees higher loss cost expectations and weakened balance sheet reserves, arriving after years of competitive pricing and benign claims activity, as the main driving forces behind firming market conditions.
As a result, excess of loss programs at the January renewals saw rates typically up in the single-digit range for non-loss-impacted programs, and much higher for loss-impacted programs.
A firming liability environment was also realized in several regions outside of US, as the deteriorating performance begins to filter into the wider reinsurance market.