Analysts at Jefferies have noted that US social inflation has continued in 2020, amidst the uncertainty of COVID-19 and the extremely active Atlantic hurricane season.
Social inflation has, say analysts, resulted in persistent eroding of reserving buffers and is also driving casualty insurance prices.
Recent data shows that securities class actions and associated claims remain heightened, while D&O insurance prices are up by more than 74% year-on-year. Analysts at Jefferies state that Swiss Re appears to be the most exposed within its coverage universe.
US social inflation continues to threaten reserves and with 176 cases filed so far this year, analysts warn that 2020 is shaping up to be another tough year for casualty insurers.
Data shows that during the first-half of 2020, more cases were seen than were witnessed annually prior to 2015, confirming that social inflation continues unabated, ultimately diminishing hopes that COVID-19 related US court closures could slow the pace of legal claims.
Jefferies claim that data points such as these suggest that it’s possible that large corporate casualty reserves are found to be deficient at FY2020, just as they were at FY2019.
Historically, Swiss Re has been the most exposed and as at FY2019, the reinsurer found itself to be the most exposed to casualty reserving trends amongst its coverage (although AXA also had some exposure through XL and Allianz via AGCS).
However, analysts do stress that pricing provides somewhat of an offset, stating that the partial offset to these near term pressures is that D&O insurance prices have continued to rise, by +74.4% year-on-year according to Aon Benfield’s data.
According to Jefferies, this means that prices are up by 216% from their lows in 2017, though they are still some 42% lower than their highs in the last casualty crisis of 2003.
