George Carrington, Head of International Casualty Specialty Practice
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Inflation is always a major risk factor for the casualty industry. For the past seven years, monetary inflation has been low across most of Europe, and this has helped keep interest rates low. For casualty insurers, this can lead to a challenge, because the key cost-drivers of long-tail liability claims — salaries and wages, pensions and most notably medical care costs — have been growing much faster than monetary inflation.

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Scott Lohman, Managing Director, Financial Intelligence Team
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Standard & Poor’s (S&P) is now performing additional analysis on loss reserves using a product called “Rescue,” which is developed by an outside vendor. Rescue obtains triangles from the company being examined instead of using Schedule P data. This approach offers data for more years for long-tail lines of business.

The in-depth analysis that S&P conducts with Rescue takes longer than the traditional approach (i.e., using Schedule P data), so it won’t use this approach every year. Rather, S&P will adjust total adjusted capital (TAC) to account for any difference between carried reserves and the company estimate.

Eddy Vanbeneden, Managing Direcor
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With casualty reserves, it can be difficult to determine how much is too much. Unlike property reserves, which are mostly for specific known events, casualty reserves have to be sufficient to cover events that may unfold well into the future. A lot can happen in 15 or 20 years, which only serves to compound the uncertainty that casualty carriers face. Further complicating matters, there has been a dearth of viable ways to mitigate the plethora of risks that could converge on a casualty portfolio, leaving risk-bearers to learn that reserves are lacking years after they have accepted a risk.

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