The backdrop to casualty reinsurance renewals at January 1, 2020 was more difficult, as heightened litigation costs, more generous jury verdicts and shifting attitudes in the United States forced reinsurers to adopt more cautious underwriting positions. Higher loss cost trends, increased frequency of severity and loss development beyond reinsurers’ expectations led to market tightening in specific areas in some select segments, and in particular for the US liability market. While above expected loss emergence has so far been prevalent in the United States primary market, some reinsurers are also experiencing similar adverse results.
• Pressure was once again particularly acute in the US commercial auto market, but prior year loss development can now be seen in other liability classes, including directors and officers, medical professional and general liability.
• Higher loss cost expectations and weakened balance sheet reserves, arriving after years of competitive pricing and benign claims activity, are the driving forces behind the firming market conditions.
• As a result, excess of loss programs at January 1, 2020 saw rates typically up in the single-digit range for non-loss-impacted programs. Loss-impacted programs often saw more pronounced pricing pressure.
• Ceding commissions for proportional business varied by performance, but in general, commission levels remained stable as reinsurers benefited from significantly higher rates on underlying business, often exceeding original projections.
• A firming liability environment was also realized in several regions outside the United States. This is a result of deteriorating performance beginning to filter into the reinsurance market.
